OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CARNEGIE GROUP, INC.
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA PLC
AT
$5.00 PER SHARE NET
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least a majority of all issued and outstanding
Shares on a fully diluted basis. See Introduction and Section 13.
THE BOARD OF DIRECTORS OF CARNEGIE GROUP, INC., BY THE UNANIMOUS VOTE OF ALL
DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF CARNEGIE GROUP, INC. AND ITS STOCKHOLDERS, HAS APPROVED THE
OFFER, THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT THE HOLDERS OF
SHARES OF CARNEGIE GROUP, INC. ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any holder of Shares desiring to tender all or any portion of such Shares
should either (i) complete and sign the enclosed Letter of Transmittal (or
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificates representing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3 or (ii) request such holder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such holder. Any holder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such holder desires to tender such
Shares.
A holder who desires to tender Shares and whose certificates representing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Dealer Manager or to the Information Agent at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Holders of Shares may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
October 7, 1998
TABLE OF CONTENTS
PAGE
----
INTRODUCTION............................................................. 1
1. Terms of the Offer................................................. 2
2. Acceptance for Payment and Payment for Shares...................... 4
3. Procedure for Accepting the Offer and Tendering Shares............. 5
4. Withdrawal Rights.................................................. 8
5. Certain Federal Income Tax Consequences............................ 8
6. Price Range of the Shares; Dividends............................... 9
7. Effect of the Offer on the Market for the Shares; Stock Quotation;
Exchange Act Registration; Margin Regulations..................... 10
8. Certain Information Concerning the Company......................... 11
9. Certain Information Concerning Purchaser, Parent and Logica plc.... 13
10. Background of the Offer; Contacts with the Company................. 17
Purpose of the Offer and Merger; The Merger Agreement and the
11. Tender Agreements.................................................. 19
12. Source and Amount of Funds......................................... 31
13. Certain Conditions of the Offer.................................... 31
14. Dividends and Distributions........................................ 33
15. Certain Legal Matters.............................................. 33
16. Fees and Expenses.................................................. 35
17. Miscellaneous...................................................... 35
Annex I--Information with Respect to Directors
and Executive Officers of Purchaser and Parent.................... I-1
Annex II--Information with Respect to Directors
and Executive Officers of Logica plc.............................. II-1
i
To the Holders of Common Stock of Carnegie Group, Inc.:
INTRODUCTION
Logica Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Logica Inc., a Delaware corporation ("Parent"), hereby
offers to purchase all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of Carnegie Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of not less than $5.00 per Share, net to the
seller in cash without interest (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").
Parent has formed Purchaser in connection with the Offer and the Merger
Agreement (as such term is hereinafter defined). Parent is a wholly owned
subsidiary of Logica plc, a public limited company organized under the laws of
England ("Logica plc" and, together with its subsidiaries, "Logica"). For
information concerning Purchaser, Parent and Logica plc, see Section 9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 30, 1998 (the "Merger Agreement"), by and among the Company,
Parent and Purchaser. Pursuant to the Merger Agreement, and subject to the
terms and conditions thereof, Purchaser will be merged with and into the
Company (the "Merger"). At the effective time of the Merger (the "Effective
Time"), (i) each Share not beneficially owned by Parent, Purchaser or any
other direct or indirect subsidiary of Parent immediately prior thereto (other
than those Shares held in the treasury of the Company and Shares held by
holders who perfect any appraisal rights that they may have under Delaware
law) will be canceled and retired and be converted into the right to receive
in cash an amount per Share equal to the highest price per Share paid by
Purchaser pursuant to the Offer, without interest thereon (the "Merger
Consideration"), and (ii) the Company will become a wholly owned subsidiary of
Parent. For a discussion of the terms of the Merger Agreement, see Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY THE
UNANIMOUS VOTE OF ALL DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS
APPROVED THE OFFER, THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT
THE COMPANY'S HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
THE COMPANY BOARD HAS RECEIVED THE OPINIONS OF UPDATA CAPITAL, INC.
("UPDATA") AND PARKER/HUNTER INCORPORATED ("PARKER/HUNTER"), THE COMPANY'S
FINANCIAL ADVISORS, THAT THE CASH CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR TO
SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. COPIES OF THE OPINIONS OF
UPDATA AND PARKER/HUNTER ARE CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-
9"), WHICH IS BEING MAILED TO HOLDERS OF SHARES CONTEMPORANEOUSLY HEREWITH,
AND HOLDERS OF SHARES ARE URGED TO READ THE OPINIONS IN THEIR ENTIRETY FOR A
DESCRIPTION OF THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND PROCEDURES
FOLLOWED BY UPDATA AND PARKER/HUNTER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON
A FULLY DILUTED BASIS (THE "MINIMUM SHARE CONDITION"). SEE SECTION 13 FOR
OTHER CONDITIONS OF THE OFFER. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Company has represented to Parent and Purchaser that (i) as of October
1, 1998, there were 6,556,424 Shares issued and outstanding, and, since
October 1, 1998, no additional Shares have been issued other than pursuant to
the exercise of Options outstanding on October 1, 1998, and (ii) as of the
date hereof, there are 1,563,876 Shares issuable upon the exercise of
outstanding stock options granted pursuant to the Company's employee stock
option plans (the "Options").
1
Pursuant to the Merger Agreement, immediately prior to the Effective Time,
the Company will take all necessary actions so that each Option which is
outstanding (whether or not exercisable) and which has not been exercised or
canceled prior thereto will be surrendered to Parent and will be forthwith
canceled. Upon cancellation, the holder of an Option will be entitled to
receive in settlement thereof a payment from the Company equal to the product
of (i) the total number of Shares subject to such Option and (ii) the excess,
if any, of the Merger Consideration over the exercise price per Share subject
to such Option. See Section 11.
Based on the foregoing, Purchaser believes that approximately 4,060,151
Shares must be validly tendered and not withdrawn prior to the expiration of
the Offer in order for the Minimum Share Condition to be satisfied.
Promptly after the purchase of Shares pursuant to the Offer and if required
by Delaware law, the Company has agreed to convene a meeting of its
stockholders to consider and vote upon the approval of the Merger. At such
meeting, Purchaser and Parent have agreed that all of the Shares then
beneficially owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Delaware
General Corporation Law (the "DGCL"), the affirmative vote of the holders of a
majority of the Shares is required to approve the Merger. If the Minimum Share
Condition is satisfied, Purchaser will own a majority of the Shares and,
accordingly, will have sufficient voting power to effect the approval of the
Merger by holders of Shares without the affirmative vote of any other such
holder.
At the Company's request, Purchaser is forwarding with the Offer the
Company's letter to holders of Shares (the "Letter to Holders") and its
Schedule 14D-9 filed by the Company pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each of which includes information
concerning the position of the Company Board with respect to the Offer and the
Merger. The Schedule 14D-9 also contains certain information pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder (the "Rule 14f-1
Information"), which is being furnished in connection with the possible
designation by Parent, in accordance with the Merger Agreement, of persons to
be elected or appointed to the Company Board. Neither Parent nor Purchaser
assumes any responsibility for the accuracy or completeness of the Letter to
Holders, the Schedule 14D-9 or the Rule 14f-1 Information (other than
information provided by Parent or Purchaser). See Section 11.
Tendering holders will not be obligated to pay brokerage commissions or,
except as set forth in Instruction 7 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by Purchaser pursuant to the Offer. However,
certain tendering holders or other payees who fail to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the
gross proceeds payable to such holders or other payees pursuant to the Offer.
See Section 3. Purchaser will pay all charges and expenses of ChaseMellon
Shareholder Services, L.L.C. (the "Depositary"), Donaldson, Lufkin & Jenrette
Securities Corporation, as Dealer Manager (in such capacity, the "Dealer
Manager"), and D.F. King & Co., Inc. (the "Information Agent") incurred in
connection with the Offer. See Section 16.
The directors and executive officers of the Company who beneficially own
Shares have agreed pursuant to Tender Agreements dated September 30, 1998 to
tender all such Shares pursuant to the Offer. As of the date hereof, such
directors and executive officers beneficially owned an aggregate of 1,200,976
Shares, representing approximately 18.3% of the outstanding Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH HOLDERS OF SHARES ARE URGED TO READ CAREFULLY
BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), Purchaser will accept for payment
and thereby purchase, all Shares validly tendered prior to the Expiration Date
and not properly withdrawn as permitted by Section 4. The term "Expiration
Date" shall mean 12:00 midnight, New York City
2
time, on Wednesday, November 4, 1998, unless and until Purchaser, in its sole
discretion (but subject to the terms of the Merger Agreement), shall have
extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by Purchaser, shall expire. For purposes of this Offer, the
term "business day" shall have the meaning set forth in Rule 14d-1(c)(6)
promulgated under the Exchange Act.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM SHARE CONDITION
AND THE SATISFACTION OF THE OTHER CONDITIONS SET FORTH IN SECTION 13.
Purchaser expressly reserves the right, in its sole discretion, at any time
or from time to time, to modify the terms and conditions of the Offer in
accordance with the terms of the Merger Agreement by giving oral or written
notice of such modification to the Depositary. If the conditions of the Offer
are not satisfied prior to the Expiration Date, Purchaser, subject to the
terms of the Merger Agreement, may (i) decline to accept for payment, or
purchase or pay for, any of the Shares tendered and terminate the Offer, (ii)
extend the Offer and retain the Shares (subject to withdrawal rights as set
forth in Section 4) which have been tendered during the period for which the
Offer is extended, or (iii) waive any one or more of the conditions of or
otherwise amend the Offer. There can be no assurance that Purchaser will
exercise its right to extend the Offer or waive any of the conditions of the
Offer.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser also expressly reserves the right, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time or from time to time, to (i) delay acceptance for
payment of or, regardless of whether such Shares were theretofore accepted for
payment, payment for any Shares pending receipt of any regulatory or
governmental approvals specified in Section 15 or in order to comply, in whole
or in part, with any applicable law, (ii) terminate the Offer and not accept
for payment or pay for any Shares, upon the occurrence of any of the
conditions specified in Section 13, and (iii) waive any condition or otherwise
amend the Offer in any respect, in each case by giving oral or written notice
of such delay, termination, waiver or amendment to the Depositary. As set
forth in the Merger Agreement, Purchaser has agreed that it will not amend the
Offer to decrease the Offer Price, to change the consideration offered to
holders of Shares into a form other than cash, to change (other than to waive)
the Minimum Share Condition or the other conditions set forth in the Merger
Agreement, or to reduce the maximum number of Shares to be purchased in the
Offer. See Section 13.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer, and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the preceding paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 13 without extending
the period of time during which the Offer is open.
Purchaser expressly reserves the right, at any time or from time to time, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement) to extend for any reason the period during which the Offer is open,
including by reason of the occurrence of any of the conditions specified in
Section 13, by giving oral or written notice of such extension to the
Depositary. During any extension of the Offer, all Shares previously tendered
and not withdrawn will remain subject to the Offer and subject to the right of
the tendering holder to withdraw such holder's Shares. See Section 4.
Any extension, delay in acceptance for payment or payment, termination,
waiver or amendment will be followed as promptly as practicable by public
announcement thereof, and such announcement in the case of an extension will
be issued no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the
manner in which Purchaser may choose to make any public announcement, subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange
Act, which require that material changes be promptly disseminated to holders
of Shares), Purchaser will have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
3
Subject to the terms and conditions of the Merger Agreement, if Purchaser
makes a material change in the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer,
Purchaser will extend the Offer and disseminate additional tender offer
materials to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the Offer, other than a change in
price or a change in percentage of securities sought (other than increases of
not more than two percent of the outstanding Shares), will depend upon the
facts and circumstances, including the materiality of the changes. With
respect to a change in price or, subject to certain limitations, a change in
the percentage of securities sought, a minimum period of ten business days
from the date of such change is generally required to allow for adequate
dissemination to securityholders. Accordingly, subject to the terms and
conditions of the Merger Agreement, if, prior to the Expiration Date,
Purchaser increases (other than increases of not more than two percent of the
outstanding Shares) or decreases the number of Shares being sought, or
increases or decreases the consideration offered pursuant to the Offer, and,
if, at the time notice of any such increase or decrease in the number of
Shares being sought or such increase or decrease in the consideration being
offered is first published, sent or given to holders of such Shares, the Offer
is scheduled to expire at any time earlier than the period ending on the tenth
business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business-day period.
Pursuant to the Merger Agreement, the Company has agreed to furnish promptly
to Purchaser a list of names and addresses of all record holders of Shares and
a security position listing of Shares held in stock depositories, each as of a
recent date, and to promptly furnish Purchaser with such additional
information, including updated lists of shareholders, mailing labels and
security position listings, and such other assistance as Purchaser or its
agents may reasonably request. This Offer to Purchase and the related Letter
of Transmittal will be mailed by Purchaser to record holders of Shares and
will be furnished to brokers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment and thereby purchase, and will pay for,
Shares validly tendered prior to the Expiration Date (and not withdrawn
pursuant to Section 4) as soon as practicable after the latest of (i) the
Expiration Date, and (ii) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of all conditions to the Offer. See
Sections 13 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation (a "Book-Entry Confirmation") of the book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company, (the "Book-Entry Transfer Facility"), pursuant to the procedures set
forth in Section 3, (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or
an Agent's Message (as such term is hereinafter defined), and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering holders at different times if delivery of Shares and other
required documents occur at different times. UNDER NO CIRCUMSTANCES WILL
INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN
MAKING SUCH PAYMENT.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered prior to the
Expiration Date and not withdrawn pursuant to Section 4 if, as and when
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering holders of
Shares for purposes of receiving payments from Purchaser and transmitting such
payments to the tendering holders whose Shares have been accepted for payment.
4
If Purchaser is delayed in its acceptance for payment or payment for Shares
or is unable to accept for payment or pay for Shares tendered pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, subject to Rule 14e-1(c) promulgated under the
Exchange Act, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering holders of Shares are
entitled to withdrawal rights as set forth in Section 4. Purchaser will pay
any stock transfer taxes incident to the transfer and sale to it or its order
of Shares pursuant to the Offer, except as otherwise provided in Instruction 7
to the Letter of Transmittal, as well as charges and expenses of the
Depositary.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates representing
more Shares than are tendered are submitted to the Depositary, certificates
for such unpurchased or untendered Shares will be returned, without expense to
the tendering holder (or, in the case of Shares tendered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility pursuant to the procedures set forth in Section 3, such
Shares will be credited to an account maintained within such Book-Entry
Transfer Facility), as soon as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration
offered to holders of Shares pursuant to the Offer, such increased
consideration will be paid to all holders whose Shares are purchased pursuant
to the Offer whether or not such Shares have been tendered prior to such
increase in consideration.
Purchaser reserves the right, in its sole discretion, to transfer or assign
to one or more of its affiliates, in whole or in part, the right to purchase
Shares tendered pursuant to the Offer. Any such transfer or assignment will
not relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering holders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender of Shares. For Shares to be validly tendered pursuant to the
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message, and any other required documents,
must be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase and either (i) certificates for such
Shares must be received by the Depositary, together with the Letter of
Transmittal (or facsimile thereof), at such address, or such Shares must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation received by the Depositary, in each case prior
to the Expiration Date, or (ii) the guaranteed delivery procedure set forth
below must be complied with.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
in accordance with such Book-Entry Transfer Facility's procedure for such
transfer. Although delivery of Shares may be effected through book-entry
transfer at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message, and any other required documents,
must, in any case, be transmitted to, and received by, the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the guaranteed delivery procedure, as described
below, must be complied with. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer
5
Facility tendering the Shares that such participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that Purchaser may
enforce such agreement against the participant.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank or trust company having an
office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution") which is a participant in an
approved Signature Guarantee Medallion Program, unless the Shares tendered
thereby are tendered (i) by a registered holder of such Shares who has not
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal, or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a certificate for Shares is registered in the name of a person other than
the signatory of the Letter of Transmittal, or if payment is to be made, or a
certificate for Shares not accepted for payment or not tendered is to be
returned, to a person other than the registered holder, then such certificate
for Shares must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on such certificate for Shares, with the signatures on such
certificate or stock powers guaranteed by an Eligible Institution which is a
participant in an approved Signature Guarantee Medallion Program, as provided
in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a holder of Shares desires to tender such Shares
pursuant to the Offer and such holder's certificates evidencing such Shares
are not immediately available, or if the procedure for book-entry transfer
cannot be completed on a timely basis, or such holder cannot deliver the
certificates and all other required documents to the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered if all of the
following guaranteed delivery procedures are complied with:
(i) such tender is made by or through an Eligible Institution; and
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser herewith, is received
by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all physically delivered Shares in proper form
for transfer, or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer
Facility, as described above, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), any
required signature guarantees, or an Agent's Message, and any other
required documents are received by the Depositary within three
National Association of Securities Dealers, Inc. Automated Quotation
System (the "Nasdaq Stock Market") trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a signature guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or of a Book-Entry Confirmation relating to such
Shares, (ii) either a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent's Message, and (iii) any other required documents.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER OF
SHARES, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
6
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Appointment as Proxy. BY EXECUTING A LETTER OF TRANSMITTAL OR BY CAUSING THE
TRANSMISSION OF AN AGENT'S MESSAGE AS SET FORTH ABOVE, A TENDERING HOLDER OF
SHARES IRREVOCABLY APPOINTS DESIGNEES OF PURCHASER AS HIS PROXIES, WITH FULL
POWER OF SUBSTITUTION IN THE MANNER SET FORTH IN THE LETTER OF TRANSMITTAL, TO
THE FULL EXTENT OF SUCH HOLDER'S RIGHTS WITH RESPECT TO THE SHARES TENDERED BY
SUCH HOLDER AND ACCEPTED FOR PAYMENT BY PURCHASER AND WITH RESPECT TO ANY AND
ALL OTHER SHARES OR OTHER SECURITIES ISSUED OR ISSUABLE IN RESPECT OF SUCH
SHARES ON OR AFTER THE DATE OF THE MERGER AGREEMENT. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Shares for payment. Upon such appointment, all prior proxies given by such
holder (with respect to such Shares and such other Shares and securities) will
be revoked, without further action, and no subsequent proxies may be given nor
any subsequent written consent executed by such holder (and, if given or
executed, will not be deemed effective). Purchaser's designees will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such holder as they in their sole
discretion may deem proper at any annual or special meeting of holders of
Shares or any adjournment or postponement thereof, by written consent in lieu
of such meeting or otherwise. Purchaser reserves the right to require that, in
order for Shares to be validly tendered, immediately upon the acceptance for
payment of such Shares, Purchaser must be able to exercise full voting rights
with respect to such Shares.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole
discretion, which determination shall be final and binding on all parties.
Purchaser reserves the absolute right to reject any and all tenders determined
by it not to be in proper form or the acceptance for payment of which may, in
the opinion of the Purchaser's counsel, be unlawful. Purchaser also reserves
the absolute right to waive or amend any of the conditions of the Offer
(subject to the terms and conditions of the Merger Agreement) or any defect or
irregularity in the tender of any Shares of any holder, whether or not similar
defects or irregularities are waived in the case of other holders of Shares.
No tender of Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived. None of Parent, Purchaser,
Logica plc, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or shall incur any liability for failure to give any
such notification. Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and instructions thereto) will
be final and binding.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering holder's acceptance of the terms and conditions
of the Offer, as well as the tendering holder's representation and warranty
that (i) such holder owns the Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4.
The acceptance for payment of Shares by Purchaser pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering holder and Purchaser upon the terms and subject to the conditions of
the Offer.
Backup Federal Tax Withholding. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A TENDERING HOLDER OF
SHARES MUST PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH HOLDER IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED AS PART OF THE LETTER OF TRANSMITTAL. IF A HOLDER OF SHARES DOES NOT
PROVIDE SUCH HOLDER'S CORRECT TIN OR FAILS TO PROVIDE THE CERTIFICATIONS
DESCRIBED ABOVE, THE INTERNAL REVENUE SERVICE (THE "IRS") MAY IMPOSE A PENALTY
ON SUCH HOLDER AND THE PAYMENT OF CASH TO SUCH HOLDER PURSUANT TO THE OFFER
MAY BE SUBJECT TO BACKUP WITHHOLDING OF 31%. ALL HOLDERS SURRENDERING SHARES
PURSUANT TO THE OFFER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND THE
SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL TO PROVIDE
THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING
(UNLESS AN APPLICABLE EXEMPTION
7
EXISTS AND IS PROVED IN A MANNER SATISFACTORY TO PURCHASER AND THE
DEPOSITARY). CERTAIN HOLDERS OF SHARES (INCLUDING, AMONG OTHERS, ALL
CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS AND ENTITIES) ARE NOT SUBJECT TO
BACKUP WITHHOLDING. SEE SECTION 5 AND INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Except as otherwise stated in this Section 4, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer,
may also be withdrawn at any time after December 5, 1998. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to the Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering holders are entitled
to, and duly exercise, withdrawal rights as described in this Section 4. Any
such delay will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the names
in which the certificates evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
tendering holder must also submit the serial numbers shown on the particular
certificates representing the Shares to be withdrawn and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution which
is a participant in an approved Signature Guarantee Medallion Program, except
in the case of Shares tendered for the account of the Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer
set forth in Section 3, any notice of withdrawal must also specify the name
and number of the account at the appropriate Book-Entry Transfer Facility to
be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding on all parties. None of Parent,
Purchaser, Logica plc, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give such notification.
Any Shares properly withdrawn will be deemed not to have been validly
tendered for purposes of the Offer, but may be retendered at any subsequent
time prior to the Expiration Date by again following one of the procedures
described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer (or pursuant to the Merger) will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. In
general, for federal income tax purposes, a holder of Shares will recognize
gain or loss upon such exchange equal to the difference between such holder's
adjusted tax basis in the Shares sold in the Offer and the amount of cash
received in exchange therefor. Such gain or loss generally will be capital
gain or loss for federal income tax purposes if the Shares were held as
capital assets.
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
maximum marginal federal income tax rate applicable to net capital gain (the
excess of net long-term capital gain over net short-term capital loss)
recognized by individuals is 20%; for corporate taxpayers, the maximum
marginal federal income tax rate applicable to net capital gain is 35%. Excess
short-term and long-term capital losses may be deducted by a noncorporate
taxpayer against ordinary income only in an amount not to exceed $3,000 in any
year; capital losses are deductible by corporations only against capital
gains.
8
The foregoing discussion may not apply to Shares acquired by a holder
pursuant to an employee stock plan or otherwise as compensation, to holders
who are not citizens or residents of the United States or to other categories
of holders subject to special treatment under federal income tax laws, such as
dealers in securities, banks, insurance companies and tax-exempt entities.
A holder of Shares (other than certain exempt holders) who tenders Shares
may be subject to 31% backup federal income tax withholding unless the holder
provides such holder's TIN and certifies that such TIN is correct or properly
certifies that such holder is awaiting a TIN. A holder of Shares who does not
furnish such holder's TIN may be subject to a penalty imposed by the IRS. Each
holder should complete and sign the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding. See Section 3.
If backup withholding applies, the payor is required to withhold 31% from
payments. This is not an additional tax; the amount of the backup withholding
can be credited against the tax liability of the person subject to the backup
withholding. If backup withholding results in an overpayment of tax, a refund
can be obtained upon filing an income tax return.
THE FOREGOING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
OFFER IS INCLUDED FOR GENERAL INFORMATION ONLY. DUE TO THE INDIVIDUAL NATURE
OF TAX CONSEQUENCES, HOLDERS OF SHARES ARE STRONGLY URGED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECTS OF APPLICABLE
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN THE TAX LAWS UNDER
THE CODE.
6. PRICE RANGE OF THE SHARES; DIVIDENDS. The Shares are traded and are
reported in the Nasdaq National Market under the symbol "CGIX". The following
table sets forth, for the periods indicated, the high and low sales quotations
per Share for which such quotations were reported by the Nasdaq National
Market.
PRICE
---------------
HIGH LOW
------- -------
YEAR ENDED DECEMBER 31, 1996
First Quarter................................................ $10 1/4 $ 6 5/8
Second Quarter............................................... 10 3/4 8 1/4
Third Quarter................................................ 8 3/4 5
Fourth Quarter............................................... 8 1/2 5 1/4
YEAR ENDED DECEMBER 31, 1997
First Quarter................................................ $ 7 3/4 $ 5 3/8
Second Quarter............................................... 7 3/4 5
Third Quarter................................................ 8 6 1/2
Fourth Quarter............................................... 8 2 13/16
YEAR ENDED DECEMBER 31, 1998
First Quarter................................................ $ 4 $ 2 3/4
Second Quarter............................................... 4 15/32 3 1/8
Third Quarter................................................ 3 3/4 1 1/2
Fourth Quarter (through October 5, 1998)..................... 4 11/16 4 1/16
On September 30, 1998, the last full trading day prior to the date of the
first public announcement of the Purchaser's intention to commence the Offer
and the last full trading day prior to the commencement of the Offer, the last
reported high and low sales quotations per Share on the Nasdaq National Market
were $2 3/4 and $2 9/16, respectively. Holders of Shares are urged to obtain a
current market quotation for the Shares.
According to the Company's Annual Report on Form 10-K filed for the fiscal
year ended December 31, 1997 (the "1997 10-K"), the Company has never declared
or paid cash dividends and has no intention to pay any cash dividends in the
foreseeable future.
9
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. Purchaser currently anticipates
that, as a result of the purchase of Shares pursuant to the Offer, the number
of Shares that might otherwise trade publicly, and the number of holders of
those Shares, will be substantially reduced. This could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Quotation. Depending upon the subsequent aggregate market value and
price per Share of any Shares not purchased pursuant to the Offer and the
aggregate number of outstanding Shares following consummation of the Offer,
the Shares may no longer qualify for inclusion on the Nasdaq National Market.
According to guidelines published by the NASD, the NASD requires that, to
continue to be designated for inclusion in the Nasdaq National Market, an
issuer must comply with all of the requirements under one of two maintenance
standards. Under the first maintenance standard, an issuer must have (i) at
least 750,000 publicly held shares with a market value of at least $5,000,000,
held by at least 400 shareholders of round lots, (ii) net tangible assets of
at least $4,000,000, (iii) shares with a minimum bid price of $1.00, and (iv)
at least two registered and active market makers. Under the second maintenance
standard, an issuer must have (i) at least 1,100,000 publicly held shares with
a market value of at least $15,000,000, held by at least 400 shareholders of
round lots, (ii) a market capitalization of at least $50 million or total
assets and total revenue of at least $50 million each for the most recently
completed fiscal year or two of the last three most recently completed fiscal
years, (iii) shares with a minimum bid price of $5.00, and (iv) at least four
registered and active market makers.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, price and other quotations regarding the shares are no longer
reported by the Nasdaq National Market, the market for the Shares could be
adversely affected. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of Shares and/or the aggregate market value of the Shares remaining at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act as described below, and other factors. Neither Parent,
Purchaser nor Logica plc can predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or the marketability of the Shares or whether
it would cause future market prices to be greater or less, on a per share
basis, than the Merger Consideration.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission at any time at which the Shares are not listed on a
national securities exchange or there are fewer than 300 holders of record of
the Shares. The termination of the registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the requirement of
furnishing a proxy statement in connection with meetings of holders of Shares,
the short-swing profit recovery provisions of Section 16(b) and the
requirements of Rule 13e-3 with respect to "going private" transactions, no
longer applicable with respect to the Shares or the Company, as the case may
be. Furthermore, the ability of "affiliates" of the Company and persons
holding "restricted securities" of the Company to dispose of such securities
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act"), may be impaired or even eliminated.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for reporting on the Nasdaq Stock Market or
for continued inclusion on the Federal Reserve Board's (as such term is
hereinafter defined) list of margin securities. Parent, Purchaser and Logica
plc intend to seek to cause the Company to terminate registration of the
Shares under the Exchange Act as soon after consummation of the Offer as the
requirements for such termination of registration are met.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among
other things, of allowing brokers to extend credit on the collateral of such
Shares. Depending upon factors similar to those described above regarding
market quotations, it is possible that the Shares might no longer constitute
"margin securities" for purposes of the Federal Reserve Board's margin
regulations and, therefore,
10
might become ineligible as collateral for margin loans made by brokers. In
addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon
publicly available documents and records on file with the Commission and other
publicly available information and is qualified in its entirety by reference
thereto. Although neither Parent, Purchaser nor Logica plc has any knowledge
that would indicate that any statements contained herein based on such
documents and records are untrue, each of Parent, Purchaser and Logica plc
disclaims any and all responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information
but which are unknown to Parent, Purchaser or Logica plc as of the date of
this Offer to Purchase.
The Company is a Delaware corporation with its principal executive offices
located at Five PPG Place, Pittsburgh, PA 15222. According to the Company's
1997 10-K, the Company provides business and technical consulting,
client/server and Internet-based custom software development, third-party
package implementation and systems integration services with a focus on two
business areas in the information technology professional services
marketplace: customer interaction and logistics, planning and scheduling.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Certain information as of particular dates concerning the Company's directors
and officers, their compensation, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons
in transactions with the Company is required to be disclosed in proxy
statements distributed to holders of Shares and filed with the Commission.
Such reports, proxy statements and other information should be available for
inspection at the Public Reference Facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available
for inspection at the Commission's regional offices located at 500 West
Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center, 13th
Floor, New York, NY 10048. Copies of such materials should be obtainable by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
This Web site can be accessed at http://www.sec.gov. Such materials should
also be available for inspection at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
Selected Summary Financial Information. Set forth below is certain selected
historical consolidated financial information relating to the Company and its
subsidiaries, which has been excerpted or derived from information contained
in the 1997 10-K and the Company's Quarterly Reports on Form 10-Q for the six
month periods ended June 30, 1998 and June 30, 1997, as filed by the Company
with the Commission. More comprehensive financial information is included in
such reports and other documents filed by the Company with the Commission. The
financial information set forth below is qualified in its entirety by
reference to such reports and other documents and all the financial statements
and related notes contained therein.
11
CARNEGIE GROUP, INC. AND SUBSIDIARIES
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
SIX MONTHS FISCAL YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT
INFORMATION
Total Revenues........ $16,160,150 $14,989,925 $29,406,261 $28,409,048 $25,650,308
Total Costs and
Expenses............. 18,229,987 13,818,288 29,954,868 26,108,632 22,803,188
Income (loss) before
income taxes......... (1,786,901) 1,510,058 181,959 2,927,943 2,849,103
Net income (loss)..... (2,060,379) 909,756 109,592 3,360,156 4,676,029
Basic earnings (loss)
per share............ (0.32) 0.14 0.02 0.54 0.99
BALANCE SHEET (AT END OF
PERIOD)
Working Capital....... $13,711,567 $20,690,884 $18,794,981 $19,793,418 $16,139,276
Total Assets.......... 27,411,668 30,438,785 29,590,804 28,489,255 24,988,635
Total Liabilities..... 5,455,313 5,732,135 5,520,724 4,850,887 5,259,444
Stockholders' Equity.. 21,956,355 24,706,650 24,070,080 23,638,368 19,729,191
Financial Projections. In the course of the discussions between Logica and
the Company that led to the execution of the Merger Agreement, the Company
provided Logica with certain information which Logica believes is not publicly
available. Such information included projections of the Company's fiscal 1998
and fiscal 1999 operating performance. The Company does not as a matter of
course make public either estimates of its annual results prior to the
completion of its audit or projections as to future performance or earnings,
and such estimated and projected information set forth below are included in
this Offer to Purchase only because the information was provided to Logica.
CARNEGIE GROUP, INC. AND SUBSIDIARIES
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDING
-----------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- -----------------
(ESTIMATED) (ESTIMATED)
(UNAUDITED) (UNAUDITED)
Total Revenues.............................. $33,560 $40,000
Total Costs and Expenses.................... 32,110 35,850
Income (loss) before income taxes........... (452) 4,710
Net income (loss)........................... (1,304) 2,738
Basic earnings (loss) per share............. (0.19) 0.37
The Company's 1998 and 1999 projections referred to in the table above (the
"1998 Projections" and "1999 Projections," respectively) were developed by the
Company's management and were predicated on management's assumptions with
respect to certain macroeconomic conditions and operating expenses for fiscal
1998 and fiscal 1999, without giving effect to the Offer, the Merger or to any
action to be taken by Logica or the Company, as the surviving corporation of
the Merger, after the Effective Time. For purposes of calculating earnings per
Share shown in the table above for fiscal 1998 and fiscal 1999, the Company
assumed that there were outstanding 6,909,000 and 7,400,000 Shares,
respectively.
The 1998 Projections and 1999 Projections were prepared by the Company's
management in the ordinary course of the Company's quarterly forecasting
process. The Company informed Logica that the 1998 Projections take into
account revenue backlog at June 30, 1998 and assume a normal rate of
conversion of the Company's current pipeline opportunities to deliver revenue
for the balance of the year. The 1998 Projections also assume the continuation
of the Company's business with existing key customers at similar levels.
12
The Company informed Logica that the 1999 Projections assume: (i) a revenue
growth rate of 20% over fiscal 1998 based on the continued expansion of
business with existing customers, the acquisition by the Company of accounts
with new customers, an increase in business from the Company's strategic
alliance program and inflationary increases in billing rates, (ii) unchanged
overhead costs, with the exception of sales and marketing costs, which were
assumed to generally rise in line with the increase in revenue, (iii) no
significant changes in the level of research and development or capital
expenditures, and (iv) the surplus facilities in Pittsburgh would be subleased
by the end of fiscal 1998.
The foregoing information was not prepared with a view toward complying with
published guidelines of the Commission regarding projections or forecasts or
with the American Institute of Certified Public Accountants Guide for
Prospective Financial Statements. While presented with numerical specificity,
the projections necessarily reflect numerous assumptions (not all of which
were stated in the projections and not all of which were provided to Parent),
including assumptions with respect to industry performance, general business
and economic conditions and the availability and cost of capital, many of
which are inherently uncertain and/or beyond the Company's control.
Accordingly, the foregoing projections are not necessarily indicative of
future performance of the Company, which may be significantly more favorable
or less favorable than as set forth above. Although the projections were one
of many factors considered, they were not material to the decision of Logica
plc, Parent and Purchaser to proceed with the Offer. The inclusion of this
information should not be regarded as an indication that Logica plc, Parent,
Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, the financial
advisor to Parent (in such capacity, "DLJ"), or anyone who received the
information considered it a reliable predictor of future events, and this
information should not be relied on as such. Because the foregoing projections
are inherently subject to uncertainty, none of Parent, Purchaser, Logica plc,
DLJ, the Company or anyone to whom the information was provided assumes any
responsibility for the validity, reasonableness, accuracy or reliability of
such information, and the Company has made no representations to Parent,
Purchaser or Logica plc regarding any such information.
9. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT AND LOGICA PLC. Founded
in the United Kingdom in 1969, Logica plc is a leading international computer
consultancy, systems integration and software company. The mission of Logica
plc and its subsidiaries, including Parent, is to help leading organizations
worldwide achieve their business objectives through the use of information
technology by providing an all-embracing service from consultancy through
systems development, design and integration to applications management,
support and end user training. Logica plc provides information technology
services concentrating on (a) the marketing, design, production, integration
and maintenance of custom built software and associated hardware systems; (b)
consultancy, applications management and project management in the field of
information technology; and (c) the design, development, implementation and
marketing of software products and the re-usable elements of applications
software called systems kernels. Logica's customers are global organizations
who view information technology as a mission-critical element of their own
business and key to their success and market differentiation. With a workforce
of approximately 6,500 employees from offices in 23 countries worldwide,
Logica's customer base covers a wide range of market sectors including
finance, telecommunications, energy and utilities, industry, civil government,
defense, transport and space.
None of Logica plc, Parent or Purchaser is subject to the information filing
requirements of the Exchange Act, and, accordingly, none of Logica plc, Parent
or Purchaser files reports or other information with the Commission relating
to its business, financial condition or other matters. Set forth below is
certain selected consolidated financial information relating to Logica for the
fiscal years ended June 30, 1998, 1997 and 1996. The selected consolidated
financial information is denominated in pounds sterling and prepared in
accordance with generally accepted accounting principles in the United Kingdom
("UK GAAP"). UK GAAP differs in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP"). Immediately
following the summary consolidated financial information of Logica plc and its
subsidiaries set forth below is a brief summary of certain differences between
UK GAAP and US GAAP. Logica has not examined whether adjustments necessary to
conform its Financial Statements to US GAAP would be material.
13
The financial statements of Logica for the fiscal years ended June 30, 1998,
1997 and 1996 (the "Financial Statements") have been filed with the Commission
as Exhibit (a)(9) to the Schedule 14D-1 and are incorporated herein by
reference. The Financial Statements may be inspected at the Commission's
public reference facilities in Washington, D.C., and copies thereof may be
obtained from such facilities upon payment of the Commission's customary
charges, in the manner set forth in Section 8 above, under "Available
Information" (although they will not be available at the regional offices of
the Commission). Set forth below is certain summary financial information
excerpted or derived from the Financial Statements of Logica. Such summary
information is qualified in its entirety by reference to the Financial
Statements and all the financial information and related notes contained
therein.
LOGICA PLC AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF POUNDS STERLING(1), EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED JUNE 30,
--------------------------------------
1998 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
INCOME STATEMENT DATA
Amounts in accordance with UK GAAP
Turnover.............................. 472,957 338,465 284,810
Operating Profit...................... 39,643 27,669 23,638
Profit on ordinary activities before
interest............................. 40,358 28,182 24,162
Profit on ordinary activities before
Taxation............................. 41,825 28,148 24,710
Profit attributable to shareholders... 29,971 19,333 16,580
PER SHARE DATA
Amounts in accordance with UK GAAP
Earnings per ordinary share -
pence(2)............................ 42.3 31.0 27.1
BALANCE SHEET DATA (AT END OF PERIOD)
Amounts in accordance with UK GAAP
Net current assets.................... 49,543 42,226 41,139
Total assets.......................... 236,363 154,903 127,989
Total liabilities..................... (153,488) (91,666) (57,649)
Shareholders' funds................... 82,875 63,237 70,340
- --------
(1) Logica plc publishes its consolidated financial statements in Pounds
Sterling. The United States Dollar exchange rate based on the London
closing mid-rates for Pounds Sterling to Dollars, expressed in $1 per
(Pounds)1, for the fiscal dates indicated, are as follows and are based on
published financial sources:
YEAR
END YEAR YEAR YEAR
RATE HIGH LOW AVERAGE
------ ------ ------ -------
Fiscal Year ended 6/30/96....................... 1.5537 1.6074 1.4965 1.5470
Fiscal Year ended 6/30/97....................... 1.6641 1.7114 1.5375 1.6147
Fiscal Year ended 6/30/98....................... 1.6686 1.7064 1.5782 1.6466
(2) The weighted average number of shares outstanding during the fiscal years
ended June 30, 1996, 1997 and 1998 were 61,263,881, 63,844,408 and
70,829,354, respectively.
Certain Differences Between UK GAAP and US GAAP. UK GAAP differs in certain
significant respects from US GAAP. The principal differences, which management
of Logica plc believes may have a material impact on Logica, are summarized
below. Given the inherent differences between UK GAAP and US GAAP, the
financial statements presented under UK GAAP are not presented fairly, in all
material respects, under US
14
GAAP. Logica has not quantified these differences, nor prepared consolidated
financial statements under US GAAP, nor undertaken a reconciliation of UK GAAP
and US GAAP financial statements. Had Logica undertaken any such
quantification or preparation or reconciliation, other potentially significant
accounting and disclosure differences might have come to their attention,
which are not identified below. Accordingly, Logica can provide no assurance
that the identified differences in the summary below represent all the
principal differences relating to Logica. Further, no attempt has been made to
identify future differences between UK GAAP and US GAAP as the result of
prescribed changes in accounting standards. Regulatory bodies that promulgate
UK GAAP and US GAAP have significant ongoing projects that could affect future
comparisons such as this one. Finally, no attempt has been made to identify
all future differences between UK GAAP and US GAAP that may affect the
financial statements as a result of transactions or events that may occur in
the future. Although UK GAAP differs in certain significant respects from US
GAAP, Logica believes that the differences are not material to a decision by a
holder of Shares whether to sell, tender or hold any Shares because the Offer
is for cash and any such difference would not affect the ability of Logica to
pay for the Shares to be acquired pursuant to the Offer. In this regard, as
set forth in the Financial Statements, Logica has sufficient funds in its
working capital accounts and existing lines of credit to pay for the Shares to
be acquired pursuant to the Offer and the Merger.
Software Revenue Recognition. It is the policy of Logica to recognize
revenue on the sale of software products to customers on a milestone basis as
follows: 40% on receipt of order from the customer; 40% on delivery to the
customer; and 20% on final customer acceptance. Under US GAAP, if the sale of
software requires significant production, modification or customization then
the entire arrangement must be accounted for under contract accounting. Under
contract accounting, four criteria must be satisfied before revenue can be
recognized: (i) persuasive evidence that an arrangement exists; (ii) delivery
has occurred; (iii) the vendor's fee is fixed or determinable; and (iv)
collectibility is probable.
Software Development Costs. It is the policy of Logica to write off software
development costs in the year in which they are incurred unless they are to be
reimbursed by third parties. Under US GAAP, costs associated with the
development of software products to be sold or otherwise marketed should be
capitalized subsequent to the establishment of technological feasibility up
until the product's general release. These costs should then be amortized over
the estimated economic life of the software product.
Goodwill and US Purchase Accounting. Under US GAAP and UK GAAP, purchase
consideration in respect of subsidiaries acquired is allocated on the basis of
appraised values to the various net assets of the subsidiaries at the dates of
acquisition and any net balance is treated as goodwill. However, US GAAP also
requires value to be assigned to any separately identifiable intangible
assets--which would be amortized over their estimated useful lives not to
exceed 40 years--and to acquired in-process research and development which
would be written off to the profit and loss account in the period of the
acquisition. If part of the purchase consideration is contingent on a future
event, then under UK GAAP an estimate of the amount is included as part of the
cost at the date of acquisition. This estimate is revised each year until the
eventual outcome is certain. Under US GAAP, this cost is not recognized until
the contingency is resolved or the amount is determinable. US GAAP requires
goodwill to be recognized as an asset and amortized over its estimated useful
life not to exceed 40 years. Under UK GAAP, for the years ended through June
30, 1998, goodwill may be written off directly against reserves. For the year
ending June 30, 1999 onwards, UK GAAP requires goodwill and any separately
unidentifiable intangible assets to be recognized as an asset and amortized
over its estimated useful life. There is a rebuttable presumption this does
not exceed 20 years. This presumption can be rebutted and a useful life can be
regarded as infinite, but only in certain rare circumstances. Under
transitional arrangements, goodwill previously eliminated against reserves may
be reinstated as a prior year adjustment, or remain eliminated against
reserves.
Deferred Taxation. Under UK GAAP, no provision is made for deferred taxation
if there is reasonable evidence that such deferred taxation will not be
payable in the foreseeable future. Deferred tax assets are generally not
recognized under UK GAAP unless they are expected to be recovered in the
foreseeable future or, if relating to losses, where recovery can be assumed
beyond reasonable doubt (usually one year from the balance
15
sheet date). Under US GAAP, deferred tax assets and liabilities are recognized
in full and any net deferred tax assets are then assessed for probable
recoverability. As long as it is more likely than not that sufficient future
taxable income will be available to utilize the deferred tax assets, no
valuation allowance is provided.
Other Post-retirement Benefits. In respect of other post-retirement benefit
obligations, US GAAP applies the principles of accounting for pensions which
requires the present value of the benefit obligation to be determined using a
current market discount rate and the plan assets to be valued on a market or
market-related basis. UK GAAP permits the benefit obligation to be discounted
at a long-term risk-adjusted rate and the plan assets to be valued on an
actuarial basis.
In addition to the difference in discount rates, the amortization procedure
under US GAAP applies a corridor approach for recognizing gains and losses in
the determination of periodic pension expense. Under UK GAAP, actuarial gains
and losses are amortized normally over the expected remaining service lives
without such corridor approach. Additionally, for UK funding and accounting
purposes, it is satisfactory to carry out actuarial valuation on a three-year
interval, whereas annual valuations are required under US GAAP.
Cash Flow Statements. The definition of "cash flow" differs between UK and
US GAAP. Cash flow under UK GAAP represents increases or decreases in "cash,"
which is comprised of cash in hand and repayable on demand and overdrafts.
Under US GAAP, cash flow represents increases or decreases in "cash and cash
equivalents," which include short term highly liquid investments with original
maturities of less than 90 days, and exclude overdrafts.
There are also certain differences in classification of items within the
cash flow statement between UK and US GAAP. Under UK GAAP, cash flows are
presented in the following categories: (i) operating activities; (ii) returns
on investments and servicing of finance; (iii) taxation; (iv) capital
expenditure and financial investment; (v) acquisitions and disposals; (vi)
equity dividends paid; (vii) management of liquid resources; and (viii)
financing. Under US GAAP, cash flows are segregated into operating, investing
and financing activities.
Cash flows from taxation, returns on investments and servicing of finance
would be, with the exception of any interest paid but capitalized, included as
operating activities under US GAAP. The payment of any dividends would be
included under financing activities and any capitalized interest would be
included under investing activities for US GAAP purposes. Additionally, under
US GAAP cash flows from the purchase and sale of tangible fixed assets and the
sale of debt and equity investments would be shown within investing
activities.
Earnings Per Share. Under UK GAAP, earnings per share is determined based
upon the weighted average number of shares of ordinary stock in issue during
the respective periods, and a fully diluted calculation is provided only if
materially different from the undiluted amount. In addition, the average
number of shares issued in prior years is restated to reflect the bonus
element of any rights issue of shares in the current year. Under US GAAP, the
calculation of net income per share includes the dilutive effect of the
assumed exercise of certain outstanding share options.
Current Assets and Liabilities. Current assets under UK GAAP include amounts
which fall due after more than one year. Under US GAAP such assets would be
reclassified as non-current assets. Provisions for liabilities and charges
under UK GAAP include amounts due within one year, which would be reclassified
to current liabilities under US GAAP.
Classification of Leases. Differences can arise upon the determination of
whether a lease is a finance lease or an operating lease. Under UK GAAP, a
lease is classified as a finance lease when the lessee has substantially all
the risks and rewards associated with the ownership of the asset, other than
the legal title. Under US GAAP, one of the following four criteria must be met
to classify a lease as a capital lease; (i) the lease transfers ownership of
the property to the lessee by the end of the lease term, (ii) the lease
contains a bargain purchase option, (iii) the lease term is equal to 75% or
more of the estimated economic life of the leased property or (iv) the present
value at the beginning of the lease term of the minimum lease payments equals
or exceeds 90% of the fair value of the leased property.
16
Ordinary Dividends. Under UK GAAP, final ordinary dividends are provided for
in the fiscal year in respect of which they are recommended by the board of
directors for approval by the shareholders. Under US GAAP, such dividends are
not provided for until declared by the board of directors.
Accounting for Associates. Under US and UK GAAP, the equity method of
accounting is used to account for associates. However, under US GAAP, the
investor presents its share of the associate's profits and losses at a post-
tax level whereas under UK GAAP the investor's share of the associate's
profits and losses are presented pre-tax with its share of the associate's tax
shown separately.
Employee Stock Compensation. Under US GAAP, entities have a choice of
methods for determining the costs of benefits arising from employee stock
compensation plans, being either the "intrinsic value" method or a fair value
method. Under the "intrinsic value" method, compensation cost is the
difference between the market price of the stock at the measurement date and
the price to be contributed by the employee. Under the fair value method,
compensation cost is based on the estimated fair value of the option at date
of grant using an option pricing model which considers: the stock price at
grant date, the exercise price and expected life of the option, expected price
volatility, expected dividend yield and a risk-free interest rate. Under UK
GAAP, except for options issued under Inland Revenue approved employee save as
you earn (SAYE) schemes, compensation cost is the difference between the
market value of the shares at the date of grant of the conditional award less
any contribution that the employee is required to make.
Employee Share Option Plans (ESOPs). Under US GAAP, shares purchased by, and
held within an ESOP are shown at cost as a debit balance within equity and
described as "unearned ESOP shares." For ESOP shares which are committed to be
released to compensate employees, the sponsoring company recognizes a
compensation cost equal to the fair value of the shares. Under UK GAAP, where,
generally, the ESOP shares are held for the continuing benefit of the
sponsoring company's business, they are classified as "own shares" within
fixed assets; otherwise they are classified as "own shares" within current
assets. Cost is written down to residual amount (the option proceeds) over the
employee's service period.
Holiday Pay. US GAAP requires that provision for employee's future absences
(i.e. holiday pay) shall be made on an accrual basis if (i) the employee's
right to receive compensation for future absence is due to past service, (ii)
the obligation accumulates, (iii) the payment is probable and (iv) the amount
can be reasonably estimated. There are no formal rules under UK GAAP and
either the accrual or cash method is used in practice.
Except as set forth in this Offer to Purchase, none of Purchaser, Parent,
Logica plc or, to the best knowledge of Purchaser, Parent and Logica plc, any
of the persons listed on Annexes I and II, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, none of Purchaser, Parent, Logica plc or, to the best knowledge of
Purchaser, Parent, and Logica plc, any of the persons listed on Annexes I and
II, has had, since September 30, 1995, any business relationships or
transactions with the Company or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase since September 30, 1995, there
have been no contacts, negotiations or transactions between Purchaser, Parent,
Logica plc, or their subsidiaries or, to the best knowledge of Purchaser,
Parent and Logica plc, any of the persons listed on Annexes I and II, and the
Company or its affiliates, concerning a merger, consolidation or acquisition,
tender offer or other acquisition of securities, election of directors or a
sale or other transfer of a material amount of assets. Except as set forth in
this Offer to Purchase, none of Purchaser, Parent, Logica plc, or, to the best
knowledge of Purchaser, Parent, or Logica plc, any of the persons listed on
Annexes I and II, beneficially owns any shares or has effected any
transactions in the Shares in the past 60 days.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. On May 26, 1998,
Thomas Miranda, the Vice President--Customer Contact Solutions of the
Communications Division of Parent, Mike Maloney, the
17
Executive Vice President of the Communications Division of Parent, and Dennis
Yablonsky, the President and Chief Executive Officer of the Company, met to
discuss a possible working partnership between Logica and the Company that
would enhance the ability of both companies to better serve their clients. In
the course of such discussions, Logica became more informed about the Company
and its management, facilities and technical abilities and became interested
in a more formal partnership arrangement with the Company. As a result of the
May 26 meeting, Logica believed that exploring a potential business
combination with the Company would be attractive to both Logica and the
Company.
On July 1, 1998, Mario Anid, the Corporate Development Director and a member
of the Executive Committee of Logica plc, Corey Torrence, the President and
Chief Executive Officer of Parent, and Mr. Maloney met with Mr. Yablonsky,
John Manzetti, the Executive Vice President and Chief Financial Officer of the
Company, and a representative of the Company's financial advisors, to discuss
the potential benefits of a business combination between Logica and the
Company. During July and August of 1998, similar discussions continued between
representatives of Logica and the Company for the purpose of further exploring
a possible strategic transaction. These discussions focused primarily on
topics relating to business integration, ongoing business strategy and
financial matters.
At a meeting held on August 19, 1998, Messrs. Anid, Torrence, Yablonsky and
Manzetti discussed possible structures for a transaction. At that meeting,
Logica indicated that it was willing to proceed by means of a cash tender
offer for all of the outstanding Shares. Logica also indicated that its
preliminary evaluation of an offer price was in the range of $5.50 to $5.75
per Share.
On August 25, 1998, Mr. Manzetti telephoned Mr. Anid and indicated that a
third party had expressed an interest in a potential stock transaction with
the Company at a value of $6.00 per Share. Mr. Manzetti informed Mr. Anid of
his view that the Company Board would look more favorably on a cash offer of
$6.00 per Share than on any potential stock transaction at that price. The
Company Board met later on August 25 to discuss the status of the discussions
between Logica and the Company. Mr. Manzetti telephoned Mr. Anid after the
Board meeting and indicated that the Company Board was interested in
continuing discussions with Logica if Logica would consider a $6.00 per Share
cash price. Shortly thereafter, Mr. Anid informed the Company that, subject to
negotiation of acceptable documentation and the completion of satisfactory due
diligence, Logica was prepared to agree to a price of $6.00 per Share.
On August 27, 1998, Logica and the Company entered into a confidentiality
agreement (the "Confidentiality Agreement"), which provides generally that
each of the parties and their respective representatives will keep
confidential any non-public information furnished to them in connection with
the mutual consideration of a potential transaction involving the acquisition
of the Company by Parent. In addition, the Confidentiality Agreement
prohibited, with certain exceptions, the Company or any of its representatives
from participating in negotiations with any party other than Parent with
respect to a merger, consolidation, business combination, sale of all or
substantially all assets, tender offer or other similar transaction involving
the Company, until September 22, 1998 (the "Exclusivity Period"). The
Confidentiality Agreement also provided that, with certain exceptions, until
the date that is the earlier of six months from the date of the
Confidentiality Agreement or the date on which the Company and Parent entered
into a definitive agreement concerning a transaction between the companies,
neither Parent nor any of its representatives would, among other things,
acquire any securities of the Company or seek to effect a tender offer, merger
or other business combination transaction involving the Company.
On September 1, 1998, Logica plc entered into an agreement regarding the
engagement of DLJ as exclusive financial advisor to Logica plc in connection
with the evaluation of a potential strategic transaction with the Company.
On September 1, 1998, representatives of Logica, together with its legal and
financial advisors, met in Pittsburgh, Pennsylvania to commence a more
detailed investigation of the business, operations and facilities of the
Company. Thereafter, the Company provided Logica with certain nonpublic
information about the Company's business, operations and prospects, including
fiscal 1998 and 1999 financial projections prepared by
18
the Company's management. Legal counsel for Logica also commenced preparation
of the Merger Agreement and a draft was circulated among the parties. During
the remainder of September 1998, the parties, with the assistance of their
respective legal counsel and financial advisors, conducted extensive
negotiations with respect to the terms of the Merger Agreement, the Tender
Agreements and related documentation.
On September 15, 1998, Mr. Anid met with Messrs. Yablonsky and Manzetti to
discuss certain matters relating to the proposed transaction. In these
discussions, Mr. Anid indicated that, as a result of Logica's due diligence
review and recent adverse market conditions, Logica was reducing its offer
price from $6.00 per Share to $5.00 per Share. At the meeting, Messrs. Anid,
Yablonsky and Manzetti also discussed the willingness of Messrs. Yablonsky and
Manzetti to forego certain severance benefits to which they were contractually
entitled in exchange for entering into employment agreements with the Parent
following the Merger.
Following the September 15 meeting, Logica and the Company, with the
assistance of their respective legal counsel and financial advisors, continued
negotiations of the terms of the Merger Agreement and related documentation.
During this period, Logica also negotiated with Messrs. Yablonsky, Manzetti,
Bruce Russell, the Senior Vice President of the Company, and Raymond
Kalustyan, the Vice President--Business Development of the Company, concerning
their willingness to forego certain severance benefits to which they otherwise
would be contractually entitled following the execution of the Merger
Agreement. In exchange for foregoing such amounts, Logica proposed that these
individuals would enter into at will employment agreements (the "Employment
Agreements") pursuant to which these individuals would (i) initially maintain
their existing salaries, (ii) be entitled to bonus payments if certain
performance criteria were achieved, (iii) receive options to acquire ordinary
shares of Logica plc and (iv) receive certain severance benefits (which were
less than those to which they were entitled under their existing severance
agreements) if their employment was terminated during certain periods.
On September 17, 1998, Mr. Yablonsky telephoned Mr. Anid and indicated that,
following numerous discussions with the Company's legal and financial
advisors, the Company was willing to agree to a price of $5.00 per Share if
the parties could agree on the other unresolved terms of the Merger Agreement
and related documentation.
On September 22, 1998, Logica and the Company entered into an amendment to
the Confidentiality Agreement to extend the Exclusivity Period to September
30, 1998.
On September 25, 1998, the Board of Directors of Logica plc met to discuss,
among other things, the terms of the proposed acquisition of the Company.
After considering and discussing such terms at length, the Board of Directors
of Logica plc approved the Merger and the Offer and the execution of the
related documentation, including the Merger Agreement.
Thereafter, the parties continued negotiating the final terms of the Merger
Agreement and related documentation. At a meeting held on September 28, 1998,
the Company Board met to consider the status of the negotiations and at a
meeting held on September 29, 1998, the Company Board approved the Merger and
the Offer and the execution of the related documentation, including the Merger
Agreement. On the evening of September 30, 1998, the Merger Agreement was
executed by the parties thereto, the Tender Agreements were executed by the
Management Stockholders (as hereinafter defined) and the Employment Agreements
were executed by Messrs. Yablonsky, Manzetti, Russell and Kalustyan.
11. PURPOSE OF THE OFFER AND MERGER; THE MERGER AGREEMENT AND THE TENDER
AGREEMENTS.
The Purpose of the Offer. The purpose of the Offer and the Merger is for
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer and the Merger Agreement are intended to increase the likelihood
that the Merger will be effected as promptly as practicable. The purpose of
the Merger is to acquire all outstanding Shares not tendered and purchased
pursuant to the Offer.
The Merger Agreement. The Merger Agreement provides for the commencement of
the Offer as promptly as practicable after the date of the Merger Agreement,
but in any event not later than five business days following
19
the public announcement of the Offer. The obligation of Parent to cause
Purchaser to commence the Offer and to accept for payment any Shares tendered
pursuant to the Offer is subject to the satisfaction of certain conditions,
which are described in Section 13.
The Merger. The Merger Agreement provides that, as soon as practicable
following fulfillment or waiver of the conditions described below under
"Conditions to the Merger," Purchaser will be merged with and into the
Company, which will be the surviving corporation in the Merger (the "Surviving
Corporation") and each then-outstanding Share not owned by Parent, Purchaser
or any other direct or indirect subsidiary of Parent (other than those Shares
held in the treasury of the Company and Shares held by holders who perfect any
appraisal rights that they may have under the DGCL) will be canceled and
retired and be converted into a right to receive the Merger Consideration.
Vote Required to Approve Merger. Under the DGCL, the Merger requires the
approval of the holders of at least a majority of outstanding Shares. If the
Minimum Share Condition is satisfied, Purchaser will own a majority of the
Shares and, accordingly, will have sufficient voting power to effect the
approval of the Merger by holders of Shares without the affirmative vote of
any other such holder.
The Company has agreed in the Merger Agreement to take all action necessary
in accordance with applicable law and its Restated Certificate of
Incorporation and Amended and Restated By-Laws to convene a meeting of its
stockholders promptly after the purchase of Shares pursuant to the Offer to
consider and vote upon the approval of the Merger, if such stockholder
approval is required by applicable law. Parent and Purchaser have agreed in
the Merger Agreement that, at any such meeting, all of the Shares then
beneficially owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Merger
Agreement, subject to the applicable fiduciary duties of the Company Board,
the Company will recommend that the Company's stockholders approve the Merger
if such stockholder approval is required.
Conditions to the Merger. The Merger Agreement provides that the obligations
of the Company, Parent and Purchaser to consummate the Merger are subject to
the satisfaction of the following conditions: (i) the stockholders of the
Company will have duly approved the Merger and adopted the Merger Agreement,
if and as required by applicable law; (ii) Purchaser will have accepted for
payment and purchased all Shares validly tendered and not withdrawn pursuant
to the Offer and such Shares will satisfy the Minimum Share Condition; (iii)
all necessary approvals, authorizations and consents of any governmental or
regulatory entity required to consummate the Merger will have been obtained
and remain in full force and effect, and all waiting periods relating to such
approvals, authorizations and consents will have expired or been terminated;
(iv) the consummation of the Merger will not be precluded by any preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission or any statute, rule, regulation or executive order
promulgated or enacted, by any governmental authority which would make the
consummation of the Merger illegal or otherwise prevent the consummation of
the Merger; and (v) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (collectively, the "HSR Act") will have expired or been
terminated.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger may be abandoned, notwithstanding any prior approval of the
Merger Agreement or of the Merger by the stockholders of the Company, (i) by
the mutual consent of the Parent or Purchaser and the Company; (ii) by Parent
and Purchaser, on the one hand, or the Company, on the other hand, if the
Offer is terminated, withdrawn or expires pursuant to its terms without any
Shares having been purchased thereunder, provided, however, that the right to
terminate the Merger Agreement pursuant to this clause will not be available
(a) to any party if such party materially breaches the Merger Agreement, or
(b) if an order, decree or ruling or any action (which order, decree, ruling
or other action the Company, Parent and Purchaser will use their best efforts
to lift) by any Governmental Entity (as such term is defined in the Merger
Agreement) permanently restrains, enjoins or otherwise prohibits the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger; (iii) by the Company, (a) if (I) Parent or Purchaser fails to commence
the Offer on or prior to five business days following the date of
20
the initial public announcement of the Offer, or (II) Parent or Purchaser will
not have purchased Shares pursuant to the Offer by December 31, 1998, or (III)
the Offer will have been terminated without Parent or Purchaser having
purchased any Shares in the Offer, (b) in connection with the Company entering
into a definitive agreement to effect a Superior Proposal (as such term is
hereinafter defined), provided, however, that written notice will have been
provided by the Company to Parent not later than 12:00 noon two business days
in advance of any date the Company intends to exercise its termination rights
and enter into such agreement (which notice will specify proposed terms of
such agreement and the identity of the persons making such proposal), and
provided further, however, that the Company, prior to any such termination,
will have made payment to Parent of all Termination Fee and Parent Expenses
(as such terms are hereinafter defined), or (c) if Parent or Purchaser
breaches in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach cannot be or has not been cured within 15 days after the giving
of written notice to Parent or Purchaser, except, in any case, for breaches
which are not reasonably likely to affect adversely Parent's or Purchaser's
ability to consummate the Offer or the Merger, provided, however, that no cure
period will be applicable under any circumstances to (iii)(a) above; (iv) by
Parent and Purchaser, if (a) prior to the commencement of the Offer, due to an
occurrence that if occurring after the commencement of the Offer would result
in a failure to satisfy any of the offer conditions set forth in the Merger
Agreement, under circumstances in which such failure could not reasonably be
expected to be cured within 15 days after the giving of written notice by
Parent or Purchaser, Parent or Purchaser fails to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer, (b) prior to the purchase of Shares pursuant to the
Offer, the Company breaches any representation, warranty, covenant or other
agreement contained in the Merger Agreement which breach (I) cannot be or has
not been cured within 15 days after the giving of written notice to the
Company, and (II) would give rise to the failure of an offer condition set
forth in paragraph (c) or (e) of Annex A of the Merger Agreement; or (c) prior
to the purchase of Shares pursuant to the Offer, Parent or Purchaser is
entitled to terminate the Offer as a result of (I) an occurrence that would
result in a failure to satisfy any of the offer conditions set forth in the
Merger Agreement, or (II) in the case of the offer conditions set forth in
paragraphs (c) and (e) of Annex A of the Merger Agreement, the failure of any
such condition under circumstances in which such failure could not reasonably
be expected to be cured within 15 days after the giving of written notice to
the Company.
Other Offers. The Company has agreed in the Merger Agreement that except as
explicitly permitted under the Merger Agreement, the Company will not (and
will cause each of its subsidiaries not to), directly or indirectly, and will
not authorize or permit any of the respective officers, directors, employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing non-public information), or take any
other action to facilitate, any inquiries or the making of any proposal or
offer that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as such term is hereinafter defined), or participate in
any discussions or negotiations regarding an Acquisition Proposal.
Notwithstanding anything contained in the Merger Agreement, the Company will
not be prohibited by the Merger Agreement from (i) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited written Acquisition Proposal that would
reasonably likely lead to a Superior Proposal if, and only to the extent that,
(a) the Company Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that the failure to take
such action could reasonably be expected to be a breach of the Company Board's
fiduciary duties under applicable law and (b) prior to furnishing such non-
public information to, or entering into discussions or negotiations with, such
person or entity, the Company receives from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such person or entity than the terms contained in the
Confidentiality Agreement; (ii) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer; (iii) making such
disclosure to the Company's stockholders, as in the good faith judgment of the
Company Board, after consultation with and based upon the advice of
independent legal counsel is required by applicable law; or (iv) withdrawing
or modifying its recommendations, consents or approvals with respect to the
Offer, the Merger Agreement and the Merger, approving or recommending an
Acquisition Proposal
21
to its stockholders or causing the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other agreement with respect
to an Acquisition Proposal (except for the Confidentiality Agreement) if there
is a Superior Proposal outstanding and the Company Board, after consultation
with and based upon the advice of independent legal counsel, determines in
good faith that the failure to take such action could reasonably be expected
to be a breach of the Company Board's fiduciary duties under applicable law.
The Company has agreed in the Merger Agreement that it will promptly (but in
any event within one day) advise Parent orally and in writing of any
Acquisition Proposal (including amendments or proposed amendments) or any
inquiry regarding the making of an Acquisition Proposal including any request
for information, the material terms and conditions of such request,
Acquisition Proposal or inquiry. In addition, the Company has agreed that it
will promptly (but in any event within one day) keep Parent fully informed of
the status and details (including amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
For purposes of the Merger Agreement, the term "Acquisition Proposal" shall
mean any proposed or actual (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any
assets of the Company or any of its subsidiaries representing 15% or more of
the consolidated assets of the Company and its subsidiaries, (iii) issue, sale
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 15% or more of the votes associated with the outstanding
securities of the Company, (iv) transaction in which any person shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act), or the right to acquire beneficial ownership, or any "group" (as such
term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding Shares, (v) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or any of the Company's subsidiaries, or (vi) transaction which is
similar in form, substance or purpose to any of the transactions contemplated
by the Offer and the Merger Agreement; provided, however, that the term
"Acquisition Proposal" shall not include the Offer, the Merger Agreement and
the transactions contemplated thereby.
For purposes of the Merger Agreement, the term "Superior Proposal" means any
bona fide Acquisition Proposal, which is not subject to the receipt of any
necessary financing and which the Company Board determines in its good faith
judgment, based on the advice from an independent financial advisor, is
superior to the Company's stockholders from a financial point of view to the
Offer and the Merger.
Fees and Expenses. Except as otherwise provided in the Merger Agreement,
whether or not the Offer or the Merger is consummated, all fees, costs and
expenses incurred in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
cost or expense. Notwithstanding the foregoing, upon consummation of the
Merger, Parent may be reimbursed by the Company for all costs and expenses
incurred by Parent and Purchaser in connection with the Offer, the Merger
Agreement and the transactions contemplated thereby. If the Merger Agreement
is terminated as a result of (i) a willful breach by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement prior to the purchase of Shares pursuant to the Offer, which breach
(a) cannot be or has not been cured within 15 days after giving written notice
to the Company, or (b) would give rise to the failure of an offer condition
set forth in paragraph (c) or (e) of Annex A to the Merger Agreement; or (ii)
the Company entering into a definitive agreement to effect a Superior
Proposal, provided, however, that written notice will have been provided by
the Company to Parent no later than 12:00 noon two business days in advance of
any date that it intends to exercise its termination rights and enter into
such agreement (which notice shall specify proposed terms of such agreement
and the identity of the persons making such proposal), and provided further,
however that the Company, prior to any such termination, will have made
payment to Parent of all Termination Fee and Parent Expenses (as such terms
are hereinafter defined), the Company will make a cash payment to Parent of
$2,000,000 (the "Termination Fee") plus Parent's out-of-pocket costs and
expenses, including without limitation, fees and disbursements of its outside
legal counsel, investment bankers, accountants and other consultants retained
by or on behalf of Parent together with the other out-of-pocket costs incurred
by it in
22
connection with analyzing, structuring, participating in the negotiations of
the terms and conditions, arranging financing, conducting due diligence, and
other activities related to the Offer and the Merger and the transactions
contemplated thereby, including, without limitation, commitment fees paid to
potential lenders (collectively, the "Parent Expenses") provided, however,
that the aggregate amount of all Parent Expenses to be reimbursed by the
Company shall not exceed $1,000,000. Any Termination Fee or Parent Expenses
will be payable by the Company to Parent (by wire transfer of immediately
available funds to an account designated by Parent) within two business days
after demand by Parent.
Conduct of the Company's Business Until the Effective Time. The Merger
Agreement provides that during the period from the date of the Merger
Agreement until the Effective Time, except as otherwise provided in the Merger
Agreement, the Company will, and will cause each of its subsidiaries to,
conduct their respective businesses in the regular and ordinary course,
consistent with past practice, use their best efforts to preserve intact the
present business organization of the Company and each of its subsidiaries, to
keep available the services of each of their present advisors, managers,
officers and employees, and to preserve the goodwill of those having business
relationships with the Company or its subsidiaries. The Merger Agreement
further provides that, from the date of the Merger Agreement until the
Effective Time, except as consented in writing to by Parent, or as expressly
provided in the Merger Agreement, the Company will not, and will not permit
any of its subsidiaries to, (i)(a) declare, set aside or pay any dividend or
other distribution (whether in cash, stock, or property or any combination
thereof) in respect of any of its capital stock, (b) split, combine or
reclassify any of its capital stock, or (c) repurchase, redeem or otherwise
acquire any of its securities, except, in the case of clause (c), for the
acquisition of Shares from holders of Options in full or partial payment of
the exercise price payable by such holders upon exercise of Options
outstanding on the date of the Merger Agreement; (ii) authorize for issuance,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities (including indebtedness having the right to vote) or equity
equivalents (including, without limitation, stock appreciation rights) (other
than the issuance of Shares upon the exercise of Options outstanding on the
date of the Merger Agreement in accordance with their present terms); (iii)
acquire, sell, lease, encumber, transfer or dispose of any assets outside the
ordinary course of business which are material to the Company or any of its
subsidiaries (whether by asset acquisition, stock acquisition or otherwise),
except pursuant to obligations in effect on the date of the Merger Agreement
which have been disclosed in writing to Parent and Purchaser prior to the date
of the Merger Agreement; (iv)(a) incur any amount of indebtedness for borrowed
money, guarantee any indebtedness, issue or sell debt securities or warrants
or rights to acquire any debt securities, guarantee (or become liable for) any
debt of others, make any loans, advances or capital contributions, mortgage,
pledge or otherwise encumber any material assets, create or suffer any
material lien thereupon other than in the ordinary course of business
consistent with prior practice, or (b) incur any short-term indebtedness for
borrowed money, except, in each such case, pursuant to credit facilities in
existence on the date of the Merger Agreement which have been disclosed in
writing to Parent and Purchaser prior to the date of the Merger Agreement and
set forth in the Company disclosure schedules to the Merger Agreement, and as
necessary to carry on the Company's business in the usual, regular and
ordinary course, consistent with past practice; (v) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than any payment, discharge or
satisfaction (a) in the ordinary course of business consistent with past
practice, or (b) in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby; (vi) change any of the accounting
principles or practices used by it (except as required by generally accepted
accounting principles, in which case written notice shall be provided to
Parent and Purchaser prior to any such change); (vii) except as required by
law, (a) enter into, adopt, amend or terminate any Company Benefit Plan (as
such term is defined in the Merger Agreement), (b) enter into, adopt, amend or
terminate any agreement, arrangement, plan or policy between the Company or
any of its subsidiaries and one or more of their directors or officers, or (c)
except for normal increases in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
Company Benefit Plan or arrangement as in effect as of the date hereof; (viii)
adopt any amendments to the Restated Certificate of Incorporation of the
Company and the Amended and Restated Bylaws of the Company, except as
expressly provided by the terms of this Agreement; (ix) enter into a new
agreement
23
or amend any existing agreement which could reasonably be expected to have a
Company Material Adverse Effect (as such term is hereinafter defined); (x)
adopt a plan of complete or partial liquidation or resolutions providing for
or authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; (xi) enter into or amend,
extend or otherwise alter any collective bargaining agreement; (xii) settle or
compromise any litigation (whether or not commenced prior to the date of the
Merger Agreement) other than settlements or compromises or litigation where
the amount paid (after giving effect to insurance proceeds actually received)
in settlement or compromise does not exceed $10,000; (xiii) grant any new or
modified severance or termination arrangement or increase or accelerate any
benefits payable under its severance or termination pay policies in effect on
the date hereof, except as required under the present terms of any employment
agreement or severance agreement in effect on the date of the Merger
Agreement; (xiv) enter into any transaction, contract or arrangement with any
affiliate, except as required under the present terms of any contract or
arrangement with any such affiliate in effect on the date of the Merger
Agreement; (xv) enter into any other material agreement outside the ordinary
course of business; (xvi) enter into an agreement to take any of the actions
stated in clauses (i) through (xv) above; or (xvii) authorize any of, or
commit or agree to take any of, or take any corporate action in furtherance
of, any of the actions stated in clauses (i) through (xv) above.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer, Parent will be entitled to designate
such number of directors, rounded up to the next whole number, on the
Company's Board as is equal to the product of (i) the total number of
directors on the Company Board (after giving effect to the directors
designated by Parent pursuant to this sentence) and (ii) the percentage that
the total votes represented by such number of Shares in the election of
directors of the Company so purchased bears to the total votes represented by
the number of Shares outstanding. In furtherance thereof, the Company will,
upon request by Parent, promptly increase the size of the Company Board and/or
exercise its best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent's designees to be elected to the
Company Board and will take all actions to cause Parent's designees to be so
elected to the Company Board. At such time, the Company will also cause
persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board of (a) each
committee of the Company Board, (b) each board of directors (or similar body)
of each of the Company's subsidiaries, and (c) each committee (or similar
body) of each such board. The Company will take, at its expense, all action
required pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in order
to fulfill its obligations and will include in the Schedule 14D-9 to its
stockholders such information with respect to the Company and its officers and
directors as is required by such Section 14(f) and Rule 14f-1. Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The foregoing provisions are in
addition to and do not limit any rights which Purchaser, Parent or any of
their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise. In the
event that Parent's designees are elected to the Company Board, until the
Effective Time, the Company Board will have at least three directors who are
directors on the date hereof (the "Independent Directors"), provided that, in
such event, if the number of Independent Directors will be reduced below three
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there be only one remaining) will be entitled to designate
persons to fill such vacancies who will be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains,
the other directors will designate three persons to fill such vacancies who
will not be stockholders, affiliates or associates of Parent or Purchaser and
such persons will be deemed to be Independent Directors for purposes of the
Merger Agreement. Notwithstanding anything in the Merger Agreement to the
contrary, in the event that Parent's designees are elected to the Company
Board, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors will be required to (i) amend or terminate the Merger
Agreement by the Company, (ii) exercise or waive any of the Company's rights,
benefits or remedies hereunder, or (iii) extend the time for performance of
Parent's and Purchaser's respective obligations hereunder.
Options. The Merger Agreement provides that each option (collectively, the
"Options") granted under the Company's 1989 Stock Option Plan (the "1989
Plan"), 1995 Stock Option Plan (the "1995 Plan") and
24
Long-Term Incentive Stock Option Plan (the "Long-Term Plan" and, together with
the 1989 Plan and the 1995 Plan, the "Stock Option Plans") which is
outstanding (whether or not currently exercisable), as of immediately prior to
the Effective Time and which has not been exercised or cancelled prior thereto
will at the Effective Time, be cancelled and upon the surrender and
cancellation of the option agreement presenting such Option and delivery of an
Option Termination (as such term is defined in the Merger Agreement), Parent
shall pay to the holder thereof cash in an amount equal to the product of (i)
the number of Shares provided for in such Option and (ii) the excess, if any,
of the Merger Consideration over the exercise price per Share provided for in
such Option, which cash payment will be treated as compensation and will be
net of any applicable federal or state withholding tax (the "Option
Consideration"). The Company will take all actions necessary to ensure that
(i) all Options, to the extent not exercised prior to the Effective Time, will
terminate and be cancelled as of the Effective Time and thereafter be of no
further force or effect, (ii) no Options are granted after the date of this
Agreement, and (iii) at the Effective Time, the Stock Option Plans and all
Options issued thereunder will terminate.
The Merger Agreement further provides that except as may be otherwise agreed
to by Parent or Purchaser and the Company, the Stock Option Plans and the
Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") will
terminate as of the Effective Time and the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
subsidiaries will be deleted as of the Effective Time and no holder of Options
or any participant in any Stock Option Plan or the Purchase Plan or any other
plans, programs or arrangements will have any right thereunder to acquire any
equity securities of the Company, the surviving corporation or any subsidiary
thereof. In connection with the foregoing, Parent, Purchaser and the Company
agree that participants in the Purchase Plan will not be entitled to purchase
any shares under the Purchase Plan for the period beginning October 1, 1998
and ending on the Effective Time, and after the Effective Time, any amounts
which have been withheld from participants under the Purchase Plan will be
returned without interest to such participants.
Employee Benefits. The Merger Agreement provides that except as may
otherwise be agreed to by the parties to the Merger Agreement, after the
closing of the Merger, Parent will cause Purchaser or the Company to honor all
obligations under the existing terms of the employment and severance
agreements to which the Company or any of its subsidiaries is currently a
party. For a period of up to twelve months following the Effective Time as
determined by Parent in its sole discretion (the "Transition Period"),
employees of the Company will continue to participate in the employee benefit
plans of the Company on substantially similar terms to those currently in
effect. Following the Transition Period, the Company's employees will be
permitted to participate in the employee benefit plans of Parent as in effect
on the date thereof on terms substantially similar to those provided to
employees of Parent. The Merger Agreement further provides that if any
employee of the Company or of any of the Company's subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Parent, any of
its affiliates or the surviving corporation of the Merger, such employee will
be given credit under such plan for all service prior to the Effective Time
with the Company and the Company's subsidiaries and prior to the time such
employee becomes such a participant, for purposes of eligibility (including,
without limitation, waiting periods) and vesting but not for any other
purposes for which such service is either taken into account or recognized
(including, without limitation, benefit accrual); provided, however, that such
employees will be given credit for such service for purposes of any vacation
policy. In addition, if any employees of the Company or any of the Company's
subsidiaries employed as of the closing date of the Merger become covered by a
medical plan of Parent, any of its affiliates or the surviving corporation of
the Merger, such medical plan will not impose any exclusion on coverage for
preexisting medical conditions with respect to these employees.
Indemnification. The Merger Agreement provides that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of the directors, officers, employees and agents of the Company and
its subsidiaries provided for in the Restated Certificate of Incorporation of
the Company and the Amended and Restated Bylaws of the Company as in effect as
of the date of the Merger Agreement with respect to matters occurring prior to
the Effective Time, and including the Offer and the Merger will continue in
full force and
25
effect for a period of not less than six years from the Effective Time;
provided however, that all rights to indemnification in respect of any claims
(a "Claim") asserted or made within such period will continue until the
disposition of such Claim. The Merger Agreement further provides that at or
prior to the Effective Time, Parent will purchase directors' and officers'
liability insurance coverage for the Company's directors and officers which
will provide such directors and officers with coverage for six years following
the Effective Time of not less than the existing coverage under, and have
other terms not materially less favorable to the insured persons than the
directors' and officers' liability insurance coverage presently maintained by
the Company; provided, however, that in any event the total aggregate cost of
such policy shall not exceed $250,000 (the "Maximum Amount"); and provided,
further, that if such coverage cannot be obtained for such cost, the Company
will maintain, for such six-year period, the maximum amount of comparable
coverage as will be available for the Maximum Amount on such terms.
Representations and Warranties. In the Merger Agreement, the Company made
customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization and qualification, its
capitalization, its authority relative to the Merger Agreement, filings made
by the Company with the Commission, the absence of certain changes or events,
litigation, payment of taxes, maintenance of its books and records, title to
properties, intellectual property, environmental matters, labor matters,
employee benefit plans, related party matters, Year 2000 compliance, suppliers
and customers and insurance.
Also in the Merger Agreement, Parent made representations and warranties to
the Company with respect to, among other things, its organization and
qualification, its authority relative to the Merger Agreement, necessary
consents and approvals and the availability of funds to consummate the Offer
and the Merger.
The Tender Agreements. Concurrently with the execution of the Merger
Agreement, Parent, Purchaser and the executive officers and directors of the
Company who beneficially own Shares (collectively referred to as the
"Management Stockholders" and each a "Management Stockholder") entered into
Tender Agreements (the "Tender Agreements"). The following is a summary of
certain provisions of the Tender Agreements.
Pursuant to the Tender Agreements, the Management Stockholders agreed to,
not later than the fifth business day after commencement of the Offer, validly
tender (or cause the record owner of such shares to validly tender) pursuant
to the Offer and not withdraw an aggregate of 1,200,976 Shares owned by the
Management Stockholders (together with any Shares acquired by the Management
Stockholders after the date of the Tender Agreements and prior to the
termination thereof, whether upon the exercise of Options, or by means of
purchase, dividend, distribution or otherwise), representing approximately
18.3% of the total Shares outstanding.
Each Management Stockholder agreed pursuant to the Tender Agreements that it
would during the term of the Tender Agreements, vote the Management
Stockholder's Shares owned by it at any meeting of the stockholders of the
Company, however called, or in connection with any written consent (i) in
favor of the Merger and any actions in furtherance thereof, and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify the Tender Agreements, or result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the offer conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled. Each Management Stockholder covenanted and agreed that, except as
contemplated by the Tender Agreements and the Merger Agreement, it shall not
(i) transfer (which term includes, without limitation, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of such
Management Stockholder's Shares, Options or any interest therein, (ii) enter
into any contract, option or other agreement or understanding with respect to
any transfer of any or all of such Shares, Options or any interest therein,
(iii) grant any proxy, power-of-attorney or other authorization in or with
respect to such Shares or Options, (iv) deposit such Shares or Options into a
voting trust or enter into a voting agreement or arrangement with respect to
such Shares or Options, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of its obligations under the
Tender Agreements or the transactions contemplated by the Tender Agreements or
the Merger Agreement.
26
The Tender Agreements further provide that in order to induce Parent and
Purchaser to enter into the Merger Agreement, each Management Stockholder
shall grant to Parent an irrevocable option (a "Stock Option") to purchase
such Management Stockholder's Shares (the "Option Shares") at an amount (the
"Purchase Price") equal to the Offer Price. If (i) the Offer is terminated,
abandoned or withdrawn by Parent or Purchaser (due to the failure of the offer
conditions set forth in paragraph (g) or (h) of Annex A to the Merger
Agreement), or (ii) the Merger Agreement is terminated by the Company pursuant
to Section 9.1(c)(ii) of the Merger Agreement, each Stock Option shall, in any
such case, become exercisable, in whole or in part, upon the first to occur of
any such event and remain exercisable in whole or in part until the date which
is 60 days after the date of the occurrence of such event (the "60 Day
Period"), so long as: (i) all waiting periods under the HSR Act required for
the purchase of the Option Shares upon such exercise will have expired or been
waived, and (ii) there will not be in effect any preliminary or final
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Stock Options pursuant to this Agreement; provided, however,
that if all HSR Act waiting periods have not expired or been waived or there
is in effect any such injunction or order, in each case on the expiration of
the 60 Day Period, the 60 Day Period will be extended until five (5) business
days after the later of (a) the date of expiration or waiver of all HSR Act
waiting periods or (b) the date of removal or lifting of such injunction or
order. In the event that Parent wishes to exercise a Stock Option, Parent will
send a written notice (the "Notice") to the Management Stockholders
identifying the place and date (not less than two nor more than five (5)
business days from the date of the Notice) for the closing of such purchase.
Each Management Stockholder agreed, in the capacity as a Management
Stockholder or otherwise, that neither such Management Stockholder nor any of
its subsidiaries or affiliates shall (and such Management Stockholder shall
use its best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other
entity or group (other than Parent, any of its affiliates or representatives)
concerning any Acquisition Proposal or take any other action prohibited by
Section 7.4 of the Merger Agreement. Each Management Stockholder will
immediately cease any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal and
will immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by
such Management Stockholder in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction.
Under the Tender Agreements, each Management Stockholder irrevocably granted
to and appointed Parent, Corey Torrence and Douglas Webb, or either of them,
in their respective capacities as officers of Parent, and any individual who
shall succeed to any such office of Parent, and each of them individually,
such Management Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Management
Stockholder, to vote such Management Stockholder's Shares, or grant a consent
or approval in respect of the Shares in favor of any or all of the
transactions contemplated by the Merger Agreement and Tender Agreements and
against any Acquisition Proposal. Each Management Stockholder waived any
rights of appraisal or rights to dissent from the Merger.
The Tender Agreements contain certain representations and warranties of the
parties. Each Management Stockholder severally represented that it is the
record and Beneficial Owner (as such term is defined in the Tender Agreements)
of the Shares and has sole voting and dispositive powers with respect to the
Management Stockholder Shares. In addition, Parent, Purchaser and the
Management Stockholders made representations regarding their organization and
qualification, authority relative to the Tender Agreements, and absence of
conflicts.
Employment Agreement with Dennis Yablonsky. In connection with the Offer and
the Merger, Parent and Dennis Yablonsky have entered into an at will
employment agreement (the "Yablonsky Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Yablonsky Employment Agreement, Mr. Yablonsky agreed to serve as the
Executive Vice President of the Carnegie Group division of Parent. The
Yablonsky Employment Agreement provides that Mr. Yablonsky will
27
receive, subject to certain conditions, an initial annual salary of $240,000
and Mr. Yablonsky will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Yablonsky will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Yablonsky will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. With respect
to each Option held by Mr. Yablonsky having an exercise price greater than or
equal to the Offer Price, Mr. Yablonsky will receive a Logica Option to
acquire such number of ordinary shares of Logica plc ("Ordinary Shares") equal
to (i) the product of the number of Shares represented by the Option and the
exercise price of such Option, divided by (ii) the exchange rate in U.S.
Dollars per British Pounds, (iii) such result divided by the market price of
an Ordinary Share as of the Effective Time (the "Option Formula"). Under the
Yablonsky Employment Agreement, in the event Mr. Yablonsky terminates his
employment with Parent with an effective date that is before or after the
Anniversary Date (as such term is defined in the Yablonsky Employment
Agreement), Mr. Yablonsky will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Yablonsky terminates his
employment with Parent with an effective date on the date which is the
Anniversary Date, Parent will continue to pay Mr. Yablonsky's salary at the
rate in effect as of the closing date of the Merger (the "Closing Date") and
Mr. Yablonsky's benefits for a period of twelve (12) months from the
termination date. The Yablonsky Employment Agreement further provides that in
the event Parent terminates Mr. Yablonsky's employment with an effective date
that is (i) on or before the Anniversary Date, Parent will continue to pay Mr.
Yablonsky's salary at the rate in effect as of the Closing Date until the
second anniversary of the Closing Date and Mr. Yablonsky's benefits for a
period of twelve (12) months after the termination date, (ii) after the
Anniversary Date and before the date which is eighteen (18) months after the
Closing Date, Parent will continue to pay Mr. Yablonsky's salary at the rate
in effect as of the Closing Date and Mr. Yablonsky's benefits until the second
anniversary of the Closing Date, or (iii) after the date which is eighteen
(18) months after the Closing Date, Parent will continue to pay Mr.
Yablonsky's salary at the rate in effect as of the Closing Date and Mr.
Yablonsky's benefits for a period of six (6) months after the termination
date.
Employment Agreement with John Manzetti. In connection with the Offer and
the Merger, Parent and John Manzetti have entered into an at will employment
agreement (the "Manzetti Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Manzetti
Employment Agreement, Mr. Manzetti agreed to serve as the Senior Vice
President--Finance and Government Operations of the Carnegie Group division of
Parent. The Manzetti Employment Agreement provides that Mr. Manzetti will
receive, subject to certain conditions, an initial annual salary of $200,004
and Mr. Manzetti will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Manzetti will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Manzetti will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. With respect
to each Option held by Mr. Manzetti having an exercise price greater than or
equal to the Offer Price, Mr. Manzetti will be entitled to receive Logica
Options determined pursuant to the Option Formula. Under the Manzetti
Employment Agreement, in the event Mr. Manzetti terminates his employment with
Parent with an effective date that is before or after the Nine-Month
Anniversary Date (as such term is defined in the Manzetti Employment
Agreement), Mr. Manzetti will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Manzetti terminates his
employment with Parent with an effective date on the date which is the Nine-
Month Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at
the rate in effect as of the Closing Date and Mr. Manzetti's benefits for a
period of nine (9) months from the termination date. The Manzetti Employment
Agreement further provides that in the event Parent terminates Mr. Manzetti's
employment with an effective date that is (i) on or before the Nine-Month
Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at the
rate in effect as of the Closing Date until the date that is eighteen (18)
months after the Closing Date and Mr. Manzetti's benefits for a period of nine
(9) months after the termination date, or (ii) after the Nine-Month
Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at the
rate in effect as of the Closing Date and Mr. Manzetti's benefits for a period
of six (6) months after the termination date.
28
Employment Agreement with Bruce Russell. In connection with the Offer and
the Merger, Parent and Bruce Russell have entered into an at will employment
agreement (the "Russell Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Russell
Employment Agreement, Mr. Russell agreed to serve as the Senior Vice
President--Engineering of the Carnegie Group division of Parent. The Russell
Employment Agreement provides that Mr. Russell will receive, subject to
certain conditions, an initial annual salary of $200,004 and Mr. Russell will
be eligible for performance bonuses to be determined annually by Parent. In
addition to the performance bonuses to be determined annually by Parent, Mr.
Russell will be entitled, for the fiscal year ending December 31, 1998, to
receive a bonus to which he would otherwise have been entitled under the
Company's current bonus plan. Pursuant to the Merger Agreement, Mr. Russell
will receive cash in exchange for his Options which have an exercise price
less than the Offer Price. See Section 11. With respect to each Option held by
Mr. Russell having an exercise price greater than or equal to the Offer Price,
Mr. Russell will be entitled to receive Logica Options determined pursuant to
the Option Formula. Under the Russell Employment Agreement, in the event Mr.
Russell terminates his employment with Parent with an effective date that is
before or after the Nine-Month Anniversary Date (as such term is defined in
the Russell Employment Agreement), Mr. Russell will not be entitled to receive
any compensation or other payments from Parent. However, in the event Mr.
Russell terminates his employment with Parent with an effective date on the
date which is the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Russell's salary at the rate in effect as of the Closing Date and Mr.
Russell's benefits for a period of nine (9) months from the termination date.
The Russell Employment Agreement further provides that in the event Parent
terminates Mr. Russell's employment with an effective date that is (i) on or
before the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Russell's salary at the rate in effect as of the Closing Date until the date
that is eighteen (18) months after the Closing Date and Mr. Russell's benefits
for a period of nine (9) months after the termination date, or (ii) after the
Nine-Month Anniversary Date, Parent will continue to pay Mr. Russell's salary
at the rate in effect as of the Closing Date and Mr. Russell's benefits for a
period of six (6) months after the termination date.
Employment Agreement with Raymond Kalustyan. In connection with the Offer
and the Merger, Parent and Raymond Kalustyan have entered into an at will
employment agreement (the "Kalustyan Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Kalustyan Employment Agreement, Mr. Kalustyan agreed to serve as the
Vice President of the Carnegie Group division of Parent. The Kalustyan
Employment Agreement provides that Mr. Kalustyan will receive, subject to
certain conditions, an initial annual salary of $150,000 and Mr. Kalustyan
will be eligible for performance bonuses to be determined annually by Parent.
In addition to the performance bonuses to be determined annually by Parent,
Mr. Kalustyan will be entitled to receive, (i) for the fiscal year ending
December 31, 1998, a bonus to which he would otherwise have been entitled
under the Company's current bonus plan, and (ii) at the Effective Time, a one-
time bonus of $50,000 payable in one lump sum. Pursuant to the Merger
Agreement, Mr. Kalustyan will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. Under the
Kalustyan Employment Agreement, in the event Mr. Kalustyan terminates his
employment with Parent with an effective date that is before or after the
Seventh-Month Anniversary Date (as such term is defined in the Kalustyan
Employment Agreement), Mr. Kalustyan will not be entitled to receive any
compensation or other payments from Parent. However, in the event Mr.
Kalustyan terminates his employment with Parent with an effective date on the
date which is the Seventh-Month Anniversary Date, Parent will continue to pay
Mr. Kalustyan's salary at the rate in effect as of the Closing Date and Mr.
Kalustyan's benefits for a period of six (6) months from the termination date.
The Kalustyan Employment Agreement further provides that in the event Parent
terminates Mr. Kalustyan's employment with an effective date that is (i) on or
before the Seventh-Month Anniversary Date, Parent will continue to pay Mr.
Kalustyan's salary at the rate in effect as of the Closing Date until the date
that is thirteen (13) months after the Closing Date and Mr. Kalustyan's
benefits for a period of six (6) months after the termination date, or (ii)
after the Seventh-Month Anniversary Date, Parent will continue to pay Mr.
Kalustyan's salary at the rate in effect as of the Closing Date and Mr.
Kalustyan's benefits for a period of six (6) months after the termination
date.
Each of the Merger Agreement, the Tender Agreements, the Yablonsky
Employment Agreement, the Manzetti Employment Agreement, the Russell
Employment Agreement and the Kalustyan Employment
29
Agreement contains other terms and conditions. The foregoing description of
certain terms and provisions of such agreements is qualified in its entirety
by reference to the text of such agreements, which are filed as exhibits to
the Schedule 14D-1, which may be examined at, and copies thereof may be
obtained from, the offices of the Commission in the manner set forth in
Section 8 (except that copies are not available at the regional offices of the
Commission), and are available via EDGAR at the Commission's website.
Miscellaneous. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company may
have certain rights under Delaware law to demand appraisal of, and seek the
payment in cash of the fair value of, their Shares. Such rights, if the
statutory procedures are strictly complied with, could lead to a judicial
determination of the fair value (which, under Delaware law, excludes any
element of value arising from the accomplishment or expectation of the Merger)
required to be paid in cash to such dissenting holders for their Shares. Any
such judicial determination of the fair value of Shares could be based upon
considerations other than or in addition to the price paid in the Offer and
the market value of the Shares. The value so determined could be more or less
than the purchase price per Share paid pursuant to the Offer or the
consideration per Share to be paid in the Merger. The foregoing summary of the
rights of dissenting shareholders does not purport to be a complete statement
of the procedures to be followed by stockholders desiring to exercise their
appraisal rights. The preservation and exercise of appraisal rights are
conditioned on strict adherence to the applicable provisions of Delaware law.
A more complete description of appraisal rights under Delaware law will be
sent to stockholders of the Company if the merger is or is to be consummated.
The Merger will have to comply with any federal law applicable at the time.
In the event that the Merger is consummated more than one year after
termination of the Offer and Purchaser has become an affiliate of the Company
as a result of the Offer, or the Merger provides for the payment of
consideration less than that paid pursuant to the Offer, and in certain other
circumstances, Purchaser may be required to comply with Rule 13e-3 under the
Exchange Act. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of such transaction and the consideration
offered to minority stockholders be filed with the Commission and distributed
to minority stockholders prior to the consummation of such transaction.
Purchaser does not believe that Rule 13e-3 will be applicable to the Merger.
Upon the completion of the Offer, Logica intends to conduct a detailed
review of the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies, management, and personnel
and consider, subject to the terms of the Merger Agreement, what, if any,
changes would be desirable in light of the circumstances which then exist and
reserves the right to effect such actions or changes. Such changes could
include changes in the Company's business, corporate structure, Certificate of
Incorporation, By-Laws, capitalization, Company Board, management or dividend
policy, although Logica has no current plans with respect to any of such
matters, except as disclosed in this Offer to Purchase. Upon consummation of
the Offer, Logica intends to elect its representatives to the Company Board as
provided for in the Merger Agreement.
Except as noted in this Offer to Purchase, Logica has no present plans or
proposals that would result in an extraordinary corporate transaction, such as
a merger, reorganization, liquidation, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure, business or composition of its management
or personnel.
Whether or not Purchaser purchases Shares pursuant to the Offer, subject to
the terms of the Merger Agreement, Logica expressly reserves the right to
acquire, following consummation or termination of the Offer, and may
thereafter acquire, subject to the availability of Shares at favorable prices
and the availability of financing, additional Shares through open market
purchases, privately negotiated transactions, another tender offer or
otherwise. Any such purchases of additional Shares might be on terms which are
the same as, or more or less favorable than, those of this Offer. In any
event, Logica is under no obligation to effect any such purchases. Logica also
reserves the right to dispose of any or all Shares acquired by it.
30
12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by Logica
to purchase all of the Shares pursuant to the Offer and to pay related fees
and expenses is estimated to be approximately $38 million (the "Total Funds
Amount"). Purchaser plans to obtain all funds needed for the Offer and the
Merger and to pay related fees and expenses through capital contributions and
advances that will be made by Logica plc and Parent. Logica plc plans to
obtain funds for such capital contributions and advances from cash accounts
and available lines of credit or credit facilities to be established by Logica
plc prior to the acceptance of and payment for Shares in the Offer. Logica plc
has not conditioned the Offer on obtaining financing and Logica plc has
available in its cash accounts and under existing lines of credit amounts in
excess of the Total Funds Amount.
Logica anticipates that any indebtedness incurred to fund the Offer and the
Merger will be repaid from a variety of sources, which may include, but may
not be limited to, funds generated internally by Logica and its affiliates,
bank refinancing, and the public or private sale of debt securities. Decisions
concerning the method of repayment will be made based on Logica's review from
time to time of the feasibility of particular actions and on prevailing
interest rates and market conditions.
13. CERTAIN CONDITIONS OF THE OFFER. The Merger Agreement provides that
Purchaser shall not be required to accept for payment, or to purchase or to
pay for, any tendered Shares, and Purchaser may terminate or amend the Offer
and may postpone the purchase of, and payment for, the Shares if: (i) there
shall not have been validly tendered and not withdrawn immediately prior to
the expiration of the Offer, at least that number of Shares that, when taken
as a whole with all the other Shares owned or acquired by Purchaser (whether
pursuant to the Offer or otherwise), constitutes at least the Minimum Share
Condition; (ii) prior to the time of payment for any such Shares, any waiting
period (and any extension thereof) applicable to the Offer under the HSR Act,
shall not have expired or otherwise been terminated; or (iii) at any time on
or after the date of the Merger Agreement and prior to the time of payment for
any such Shares, any of the following events shall have occurred:
(a) there shall be in effect a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or a statute,
rule, regulation or executive order shall have been promulgated or enacted by
a governmental authority (or, in the case of an action or proceeding before or
by any governmental, regulatory or administrative agency or commission or
governmental authority, any of the foregoing shall be threatened or pending)
which (1) restrains or prohibits the making of the Offer or the consummation
of the Offer, (2) prohibits or restricts the ownership or operation by
Purchaser (or any of its subsidiaries) of any portion of the Company's or
Company subsidiaries' business, properties or assets which is material to the
Company as a whole, (3) imposes any material limitation on the ability of
Purchaser or Parent effectively to acquire or to hold or to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by Purchaser or Parent on all matters presented to
the shareholders of the Company, (4) imposes any limitations on the ability of
Parent or any of its subsidiaries to control in any material respect the
business, properties and operations of the Company, or (5) which otherwise
results in a Company Material Adverse Effect. A "Company Material Adverse
Effect" shall mean a material adverse effect on the current business, results
of operations or financial condition of the Company and its subsidiaries taken
as a whole, other than any actions, omissions, changes, events or effects that
(1) are primarily related to a general drop in stock prices in the United
States or the United Kingdom that are primarily due to political or economic
turmoil, or (2) are primarily related to or result from the announcement or
pendency of the Offer and/or the Merger, including disruptions to the
Company's business or the business of its subsidiaries, and their respective
employees, customers and suppliers; provided, however, that fully diluted
earnings per share (calculated in accordance with US GAAP consistently
applied) of the Company for the fiscal quarter ended September 30, 1998 of
$0.00 or more shall not be deemed to have a Company Material Adverse Effect;
(b) any of the representations and warranties of the Company contained in
the Merger Agreement (1) specifically concerning the Customer Contracts (as
such term is defined in the Merger Agreement), or (2) that are qualified as to
Company Material Adverse Effect shall not have been, or shall cease to be,
true and correct in all material respects (whether because of circumstances or
events occurring in whole or in part prior to, on or after the date of the
Merger Agreement), or any of the representations and warranties of the Company
set forth in the Merger
31
Agreement that are not so qualified shall not have been, or cease to be, true
and correct (whether because of circumstances or events occurring in whole or
in part prior to, on or after the date of the Merger Agreement) under
circumstances in which such failure to be true and correct results in a
Company Material Adverse Effect;
(c) there shall have occurred (1) any general suspension of, or limitation
on prices for, or trading in, securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq Stock Market which shall continue for
more than 24 hours, (2) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the United
Kingdom (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States or the United Kingdom which has a material adverse
effect on Logica plc's ability to borrow sufficient funds under its bank
facilities to purchase and pay for the Shares pursuant to the Offer and the
Merger in accordance with the terms of the Merger Agreement, or (4) any
limitation (whether or not mandatory) by any United States or United Kingdom
governmental authority or agency on the extension of credit by banks or other
financial institutions, which has a material adverse effect on Logica plc's
ability to borrow sufficient funds under its bank facilities to purchase and
pay for the Shares pursuant to the Offer and the Merger in accordance with the
terms of the Merger Agreement;
(d) a tender or exchange offer for some portion of or all the Shares shall
have been publicly proposed to be made or shall have been made by another
person with respect to the Shares;
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
(f) since the date of the Merger Agreement, there has occurred any change
that, when taken together with all other such changes, has a Company Material
Adverse Effect;
(g) the Company shall not have performed all obligations required to be
performed by it under the Merger Agreement, including, without limitation, the
covenants contained in Article 2, 6 or 7 thereof, except where any failure to
perform (1) would, individually or in the aggregate, not materially impair or
significantly delay the ability of Purchaser to consummate the Offer; (2) has
been caused by or results from a material breach of the Merger Agreement by
Parent or Purchaser; or (3) does not have a Company Material Adverse Effect
(provided, however, that the foregoing exceptions shall not apply to the
covenants contained in Article 2 of the Merger Agreement);
(h) Parent shall have learned that any person, entity or "group" (within the
meaning of Section 13(d) of the Exchange Act) shall have acquired beneficial
ownership of more than 5% of the Shares, through the acquisition of Shares,
the formation of a group or otherwise, or shall have been granted any right,
option or warrant, conditional or otherwise, to acquire ownership of more than
5% of the Shares; provided, however, that the acquisition of beneficial
ownership of more than 5% of the Shares but less than 15% of the Shares by any
such person, entity or "group" as contemplated by the foregoing shall not be
deemed a failure of this condition provided that such Shares were acquired and
are held by such person, entity or "group" solely as a passive investment and
not (1) with a purpose or effect of changing or influencing control of the
Company, or (2) in connection with or as a participant in any transaction
having that purpose or effect, in each case other than the Offer;
(i) any consent, authorization, order or approval of (or filing or
registration with) any governmental commission, board, other regulatory body
or other third party required to be made or obtained by the Company or any of
its subsidiaries or affiliates in connection with the execution, delivery and
performance of this Agreement shall not have been obtained or made, except
where the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration, would not have a Company Material
Adverse Effect;
(j) any principal stockholder who has executed a Tender Agreement shall have
failed to tender his or her Shares or the option set forth in Paragraph 3 of
any of the Tender Agreements shall not be in full force and effect in
accordance with the terms thereof, or any United States federal or state court
of competent jurisdiction shall have issued an injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
enforcement of any of the terms of any Tender Agreement; or
32
(k) the Company is unable to obtain waivers (on terms reasonably
satisfactory to Parent and Purchaser) with respect to any default,
termination, acceleration of payment or performance or modification clause
contained in any contract, agreement, commitment, or lease, to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries, or their respective properties or assets is bound, except
where the failure to have so obtained such waiver or waivers does not have a
Company Material Adverse Effect.
Pursuant to the Merger Agreement, the foregoing conditions (i) may be
asserted by Purchaser or Parent regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates other than a material
breach of the Merger Agreement), and (ii) are for the sole benefit of
Purchaser, Parent and their respective affiliates. The foregoing conditions
may be waived by Parent in whole or in part at any time and from time to time
in the sole discretion of Parent. The conditions may be considered to be
material to the Offer. The failure by Purchaser or Parent at any time to
exercise any of the foregoing rights will not be deemed a waiver of any other
rights and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
See Section 11 for a description of certain representations, warranties,
covenants and agreements of the Company under the Merger Agreement, the breach
or failure to satisfy of which may constitute a failure to satisfy certain of
the conditions to the Offer.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the
Shares or its capitalization, (ii) issue or sell any additional securities of
the Company or otherwise cause an increase in the number of outstanding
securities of the Company (except for Shares issuable upon the exercise of
Options outstanding on the date of the Merger Agreement), or (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, then, without prejudice to the Purchaser's rights
described under Sections 1 and 13, Purchaser, in its sole discretion, may make
such adjustments as it deems appropriate in the purchase price and other terms
of the Offer and the Merger, including, without limitation, the amount and
type of securities offered to be purchased.
15. CERTAIN LEGAL MATTERS.
General. Except as described below, based upon discussions between Purchaser
and the Company and the examination by Purchaser of available information
filed by the Company with the Commission and other publicly available
information concerning the Company, Purchaser is not aware of any license or
regulatory permit that appears to be material to the business of the Company
and the Company's subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer or,
except as set forth below, of any approval or any other action by any domestic
(federal or state) or foreign governmental, administrative or regulatory
authority that would be required for the acquisition or ownership of Shares by
Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought. Although Purchaser does not presently intend to delay acceptance for
payment of Shares tendered pursuant to the Offer pending the receipt of any
such approval or the outcome of any such actions, there can be no assurance
that any such approval or other action, if needed, would be obtained, or would
be obtained without substantial conditions, or that adverse consequences might
not result to the Company's business or that certain parts of the Company's
business might not have to be disposed of in the event that such approvals
were not obtained or such other actions were not taken in order to obtain any
such approval or other action. If certain types of adverse actions are taken
with respect to the matters discussed below, Purchaser could decline to accept
for payment any Shares tendered. Purchaser's obligation under the Offer to
accept the Shares for payment is subject to certain conditions, including
conditions relating to the legal matters discussed in this Section 15. See
Section 13.
Antitrust. The Offer and Merger are subject to the HSR Act, which provides
that certain acquisition transactions may not be consummated unless certain
information has been furnished to the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice and certain waiting period
requirements have been satisfied. Each of Logica and the Company intends to
file a Notification and Report Form under the HSR Act with respect to the
Offer on or about October 8, 1998.
33
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Logica and the Company.
Accordingly, assuming the filing is in substantial compliance with the HSR
Act, the waiting period will expire at 11:59 p.m., New York City time, on
October 23, 1998 (assuming an October 8, 1998 filing date), unless earlier
terminated by the FTC and the Antitrust Division. However, if either the FTC
or the Antitrust Division requests additional information or documents from
Logica or the Company within such initial waiting period, the initial waiting
period would be extended for an additional ten days from the date of
substantial compliance by Logica or the Company, as the case may be with such
request. Thereafter, the waiting period may be extended only by a court order
or with the consent of Logica or the Company, as the case may be. Each of the
parties has requested that the FTC and the Antitrust Division grant early
termination of the applicable waiting period, but there can be no assurance
that such request will be granted.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer. At any time before or after the Purchaser's
acceptance for payment of Shares, the FTC or the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by Purchaser or divestiture of substantial assets of Purchaser or its
subsidiaries. Private parties and state attorney generals may also bring legal
action under the antitrust laws under certain circumstances. Based upon the
Purchaser's discussions with the Company and its examination of publicly
available information with respect to the Company, Purchaser believes that the
acquisition by Purchaser of the Shares will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made, or, if such a challenge is made, of the
result.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. Section 203 of the DGCL limits the ability of a Delaware
corporation to engage in business combinations with "interested stockholders"
(defined as any beneficial owner of 15% or more of the outstanding voting
stock of the corporation) unless, among other things, the corporation's board
of directors has given its prior approval to either the business combination
or the transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly elected that Section 203 of the DGCL be inapplicable to the offer,
the Merger and the transactions contemplated in the Merger Agreement. At a
meeting on September 29, 1998, the Company Board approved the Merger
Agreement, the Merger, the Offer and the Purchaser's purchase of Shares
pursuant to the Offer. Accordingly, the provisions of Section 203 of the DGCL
have been satisfied with respect to the offer and the Merger and such
provisions will not delay the consummation of the Merger.
A number of states have adopted laws and regulations applicable to offers to
acquire securities of corporations which are incorporated in such states
and/or which have substantial assets, stockholders, principal executive
offices or principal places of business therein. In Edgar v. MITE Corporation,
the Supreme Court of the United States held that the Illinois Business
Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was
therefore unconstitutional. In CTS Corporation v. Dynamics Corporation of
America, however, the Supreme Court of the United States held that as a matter
of corporate law, and in particular, those laws concerning corporate
governance, a state may constitutionally disqualify an acquiror of "control
shares" (i.e., shares representing ownership in excess of certain voting power
thresholds) of a corporation incorporated in such state and meeting certain
other judicial requirements from exercising voting power with respect to those
shares without the approval of a majority of the disinterested stockholders.
Subsequently, a number of Federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
Purchaser does not believe that any of the takeover laws adopted by any
other states in which the Company conducts business applies by its terms to
the Offer or the Merger Agreement, and Purchaser has not taken steps
34
to comply with any such takeover law. Should any person seek to apply any
state takeover law, Purchaser will take such action as then appears desirable,
which may include challenging the validity or applicability of any such
statute in appropriate court proceedings. In the event it is asserted that one
or more state takeover laws is applicable to the Offer, the Merger or the
Merger Agreement and an appropriate court does not determine that such law is
inapplicable or invalid as applied to the Offer, the Merger or the Merger
Agreement, Purchaser may be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Purchaser may be unable to accept for payment any Shares tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer
and the Merger. In such case, Purchaser may not be obligated to accept for
payment any Shares tendered. See Section 13.
16. FEES AND EXPENSES. DLJ is acting as financial advisor to Logica plc,
Parent and Purchaser in connection with the Merger Agreement and is also
acting as Dealer Manager in connection with the Offer. In connection with the
transaction, Parent has agreed to pay DLJ a financial advisory fee of
$800,000, $200,000 of which is payable upon the commencement of the Offer and
the remainder is payable upon consummation of the Merger. Parent has also
agreed to reimburse DLJ for its reasonable out-of-pocket expenses (including
reasonable fees and expenses of its legal counsel) and to indemnify DLJ
against certain liabilities and expenses in connection with its services as
Dealer Manager and financial advisor, including certain liabilities under the
federal securities laws.
Parent has retained D.F. King & Co., Inc. to act as the Information Agent
and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, facsimile, telephone, telex, telegraph or in person and may request
brokers, dealers or other nominee holders to forward the Offer materials to
beneficial owners of Shares. The Information Agent and the Depositary each
will receive reasonable and customary compensation for such services, plus
reimbursement for certain out-of-pocket expenses. Parent has also agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws. Neither the Information Agent nor the Depositary
has been retained to make solicitations or recommendations in connection with
the Offer.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding
material to their customers.
17. MISCELLANEOUS. The Offer is being made to all holders of Shares.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with any such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, PARENT, LOGICA PLC OR THE COMPANY NOT
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
35
Pursuant to Rule 14d-3 promulgated under the Exchange Act, Purchaser, Parent
and Logica plc have filed with the Commission the Schedule 14D-1 (including
exhibits), furnishing certain additional information with respect to the
Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may
be inspected at, and copies may be obtained from, the same places and in the
same manner as set forth in Section 8 (except that they will not be available
at the regional offices of the Commission).
LOGICA PLC
LOGICA INC.
LOGICA ACQUISITION CORP.
October 7, 1998
36
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT
The following tables set forth the name, age, current business address and
present principal occupation and citizenship or employment, and material
occupations, positions, offices or employment for the past five years of each
director and executive officer of Purchaser and Parent. The current business
address of each such person is 32 Hartwell Avenue, Lexington, Massachusetts
02421, except the current business address for each of Mr. Given and Dr. Read
is Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom. Each
such person is a citizen of the United States except for Messrs. Webb and
Given, Dr. Read and Ms. Horsfall who are citizens of the United Kingdom.
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
NAME AGE POSITION WITH PURCHASER
- ---- --- -----------------------
Corey Torrence.................................. 40 President and Director
Douglas Webb.................................... 37 Vice President and Director
COREY TORRENCE. Mr. Torrence became the President and a Director of Logica
Acquisition Corp. in connection with its formation in September 1998. Mr.
Torrence joined Logica Inc. as President, Chief Executive Officer and a
Director in October 1997 and has been an Executive Committee Member of Logica
plc since October 1997. He was previously employed by AT&T Solutions, where he
was Managing Partner of the company's Supply Chain Management Consulting
Practice from 1995 until 1997. Mr. Torrence served as Vice President and
General Manager for the U.S. Atlantic Region of SHL Systemhouse Inc. from 1993
until 1995.
DOUGLAS WEBB. Mr. Webb became the Vice President and a Director of Logica
Acquisition Corp. in connection with its formation in September 1998. Mr. Webb
has held the position of Chief Financial Officer of Logica Inc. since 1997 and
has also served as a Director of Logica Inc. since January 1996. From April
1997 to December 1997, Mr. Webb served as the Executive Vice President of the
Communications Division of Logica Inc. From 1996 to 1997, he held the position
of Chief Operating Officer of Logica Inc. From 1995 to 1996, he held the
position of Chief Financial Officer of Logica Inc. He was also Group Financial
Controller of Logica plc from 1994 to 1995. He was previously employed by
Price Waterhouse, where he was employed as a Senior Manager from 1990 to 1994.
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
NAME AGE POSITION WITH PARENT
- ---- --- --------------------
Corey Torrence.......... 40 President, Chief Executive Officer and Director
Douglas Webb............ 37 Chief Financial Officer and Director
Karen Roche............. 47 Executive Vice President--Financial Services Division
Mike Maloney............ 42 Executive Vice President--Communications Division
Pauline Horsfall........ 39 Vice President--Human Resources
Jim Cypert.............. 62 Vice President--Asset and Resource Management and
Acting Vice President--Energy and Utilities Division
Dr. Martin Read......... 48 Director
Andrew Given............ 50 Director
COREY TORRENCE. Mr. Torrence joined Logica Inc. as President, Chief
Executive Officer and a Director in October 1997 and has been an Executive
Committee Member of Logica plc since October 1997. He was
I-1
previously employed by AT&T Solutions, where he was Managing Partner of the
company's Supply Chain Management Consulting Practice from 1995 until 1997.
Mr. Torrence served as Vice President and General Manager for the U.S.
Atlantic Region of SHL Systemhouse Inc. from 1993 until 1995.
DOUGLAS WEBB. Mr. Webb has held the position of Chief Financial Officer of
Logica Inc. since 1997 and has also served as a Director of Logica Inc. since
January 1996. From April 1997 to December 1997, Mr. Webb served as the
Executive Vice President of the Communications Division of Logica Inc. From
1996 to 1997, he held the position of Chief Operating Officer of Logica Inc.
From 1995 to 1996, he held the position of Chief Financial Officer of Logica
Inc. He was also Group Financial Controller of Logica plc from 1994 to 1995.
He was previously employed by Price Waterhouse, where he was employed as a
Senior Manager from 1990 to 1994.
KAREN ROCHE. Ms. Roche was appointed Executive Vice President--Financial
Services Division of Logica Inc. in 1997. She was previously employed as Vice
President--Financial Products Group of Logica Inc. from 1996 to 1997 and Vice
President--Wholesale Banking Division of Logica Inc. from 1993 to 1995.
MIKE MALONEY. Mr. Maloney joined Logica Inc. as Executive Vice President--
Communications Division in 1997. He was previously employed by Ameritech,
where he served in various capacities from 1995 to 1997, including: General
Manager--Managed Services, Acting Vice President--Alliance Business Sales, and
General Manager--Alliance Business Planning. Mr. Maloney served as Managing
Director--Networked Systems Management Business Development for SHL
Systemhouse from 1993 to 1995.
PAULINE HORSFALL. Ms. Horsfall joined Logica Inc. as Vice President--Human
Resources in 1997. She was previously employed by Logica plc, where she was
Management Development and Training Manager from 1995 to 1997. Ms. Horsfall
served as Director of Human Resources, Sensors Group for Thorn EMI Electronics
from 1993 to 1995.
JIM CYPERT. Mr. Cypert has served as Vice President--Asset and Resource
Management and Acting Vice President--Energy and Utilities Division of Logica
Inc. since 1998. At Logica Inc., Mr. Cypert was also employed as Vice
President--Marketing for the Energy and Utilities Division from 1996 to 1998.
From 1993 to 1996, Mr. Cypert was Vice President of Integration Services for
the Synercom Division at Logica Inc.
DR. MARTIN READ. Dr. Read has been a Director of Logica Inc. since October
1993. Since 1993, he has also been Managing Director and the Chief Executive
of Logica plc. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
ANDREW GIVEN. Mr. Given has been a Director of Logica Inc. since April 1994.
Mr. Given has also been on the board of Logica plc as Group Finance Director
since April 1990 and has served as Company Secretary for Logica plc since June
1993.
I-2
ANNEX II
DIRECTORS AND EXECUTIVE OFFICERS OF LOGICA PLC
The following table sets forth the name, age, current business address and
present principal occupation or employment, and material occupations,
positions, offices or employment for the past five years of each director and
executive of Logica plc. The current business address of each such person is
Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom, except
the current business address for each of Messrs. Craig and De Meyere is
Wijnhaven 69, 3011 WJ Rotterdam, The Netherlands, and for Mr. Torrence is
32 Hartwell Avenue, Lexington, Massachusetts 02421. Each such person is a
citizen of the United Kingdom, except Mr. De Meyere, who is a citizen of the
Kingdom of Belgium, Mr. Mamsch, who is a citizen of Germany, Mr. Torrence, who
is a citizen of the United States of America and Mr. Vinken, who is a citizen
of The Netherlands.
NAME AGE POSITION
- ---- --- --------
Sir Frank Barlow........ 68 Non-Executive Chairman, Board Member, Executive Committee
Member and Non-Executive Director
Dr. Martin Read......... 48 Managing Director and Chief Executive, Board Member and
Executive Committee Member
Mario Anid.............. 40 Executive Committee Member and Corporate Development Director
Duncan Craig............ 49 Board Member, Executive Committee Member and Regional Director for
Continental European Operations
Wilfried De Meyere...... 45 Executive Committee Member and Regional Director
for Continental European Operations
Elizabeth Filkin........ 57 Non-Executive Director
Andrew Given............ 50 Board Member, Executive Committee Member, Group Finance
Director and Company Secretary
Royston Hoggarth........ 36 Executive Committee Member and Director of International
Lines of Business
Laurence Julien......... 52 Executive Committee Member and Supervisory Managing Director
of Logica UK Limited
Jim McKenna............. 43 Board Member, Executive Committee Member, Group Personnel
Director and Regional Director for Asia Pacific Region
Helmut Mamsch........... 53 Non-Executive Director
Sam Sassoon............. 53 Executive Committee Member and Supervisory
Managing Director of Logica UK Limited
Corey Torrence.......... 40 Executive Committee Member and President and Chief Executive
Officer of Logica Inc.
Pierre Vinken........... 70 Non-Executive Director
Richard Wakeling........ 51 Non-Executive Director
SIR FRANK BARLOW. Sir Frank joined the board as a Non-Executive Director in
January 1995 and became Chairman in November 1995. Among the many companies of
which Sir Frank serves as Director, he has served as a Director of the
Economist Newspaper Ltd since 1984 and served as Managing Director of Pearson
plc from 1986 until his retirement at the end of 1996. Sir Frank was knighted
in the Queen's New Year's Honours List 1998 for services to the newspaper
industry.
II-1
DR. MARTIN READ. Dr. Read joined the board as Managing Director and Chief
Executive in July 1993. He has also served as a Director of Logica Inc. since
October 1993. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
MARIO ANID. Mr. Anid joined the Executive Committee in 1995 as Corporate
Development Director. He was previously Corporate Development Director at Sema
Group plc from 1993 until 1995.
DUNCAN CRAIG. Mr. Craig joined the board in 1991 and is Regional Director
for Continental European Operations. He joined Logica plc in 1971 and has been
based in The Netherlands since 1974.
WILFRIED DE MEYERE. Mr. De Meyere joined the Executive Committee in July
1998 as Regional Director for Continental European Operations. From 1994 to
1998, he was Managing Director of Logica BV. From 1992 to 1996, Mr. De Meyere
was the Chief Executive of Logica SA/NV.
ELIZABETH FILKIN. Ms. Filkin joined the board as a Non-Executive Director in
January 1995. Ms. Filkin has also been the Adjudicator for the Inland Revenue,
Customs and Excise, Contributions Agency and Contributions Unit Northern
Ireland since June 1993. She has also served as a Non-Executive Director at
the Britannia Building Society since 1992.
ANDREW GIVEN. Mr. Given joined the board as Group Finance Director in April
1990 and has served as the Company Secretary since June 1993. Mr. Given has
also served as a Director of Logica Inc. since April 1994.
ROYSTON HOGGARTH. Mr. Hoggarth joined the Executive Committee in December
1997, as Director of International Lines of Business, responsible for Finance,
Telecoms and Energy and Utilities. From 1993 to 1997, Mr. Hoggarth served as
General Manager at IBM, where he was responsible for the group's retail brands
worldwide.
LAURENCE JULIEN. Mr. Julien joined the Executive Committee in 1996 as
Supervisory Managing Director of Logica UK Limited. He joined Logica in 1980
and has held line management positions since 1984.
JIM MCKENNA. Mr. McKenna joined the Executive Committee in 1993 as Group
Personnel Director and was appointed to the board in February 1998. Since 1996
he has also been the Regional Director for the Asia Pacific Region. From 1985
to 1993 Mr. McKenna served as Personnel Director of GEC Marconi Radar and
Control Systems Limited and associated companies.
HELMUT MAMSCH. Mr. Mamsch joined the board as a Non-Executive Director in
September 1997. He has also served as Director of VEBA AG since January 1998
and a Director of MEMEC Inc. (USA) since May 1998. From 1989 until 1996, Mr.
Mamsch served as Director of Raab Karcher U.K., Ltd.
SAM SASSOON. Mr. Sassoon joined the Executive Committee in November 1996 as
a Supervisory Managing Director of Logica UK Limited. From January 1993 until
June 1996, Mr. Sassoon served as Vice President and General Manager of the
European outsourcing group of Unisys.
COREY TORRENCE. Mr. Torrence joined the Executive Committee in October 1997
as President and Chief Executive of Logica Inc. He has also served as a
Director of Logica Inc. since October 1997. From 1995 until 1997, Mr. Torrence
served as Managing Partner of the Supply Chain Management Consulting Practice
for AT&T Solutions. From 1993 until 1995, Mr. Torrence served as Vice
President and General Manager for the U.S. Atlantic Region of SHL Systemhouse
Inc.
PIERRE VINKEN. Mr. Vinken joined the board in April 1990 and is a Non-
Executive Director, having previously served on the board of directors for
Logica BV since 1985. He was formerly Chairman of Reed Elsevier plc until his
retirement in 1995. He was also a Director of Pearson plc and The Economist
Group.
RICHARD WAKELING. Mr. Wakeling joined the board as a Non-Executive Director
in January 1995. He is a Non-Executive Director of Staveley Industries, Oxford
Instruments, and Henderson Geared Income & Growth Trust. He is also Chairman
of Henderson Technology Trust.
II-2
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates evidencing Shares and any
other required document should be sent or delivered by each holder of Shares
or his broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway
South Hackensack, New Jersey Mail Drop-Reorg 13th Floor
07606 Ridgefield Park, New New York, New York
Jersey 07660 10271
Attention:
Reorganization
Department
Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(201) 296-4860
----------------
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
and related materials may be directed to the Information Agent or the Dealer
Manager at their respective locations and telephone numbers set forth below.
Holders of Shares may also contact their broker, dealer, commercial banks or
trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
CALL TOLL FREE:
(800) 714-3312
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
277 Park Avenue
New York, New York 10172
Call Collect: (212) 892-7995