Exhibit 99.2
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt as to the action you should take, you are recommended to seek advice
from your stockbroker, bank manager, solicitor, accountant or other independent
financial adviser duly authorised under the Financial Services Act 1986. If you
have sold or otherwise transferred any of your Ordinary Shares in Bright
Station, please send this document, together with the accompanying application
form and form of proxy, to the purchaser or transferee, or to the stockbroker,
solicitor, accountant, bank or other agent through whom the sale or transfer was
effected as soon as possible for transmission to the purchaser or transferee.
However, such documents should not be forwarded, transmitted or distributed in
or into the United States, Canada, Australia or Japan.
A copy of this document, which is a prospectus relating to Bright Station
prepared in accordance with the listing rules made under section 142 of the
Financial Services Act 1986, has been delivered to the Registrar of Companies in
England and Wales for registration in accordance with section 149 of that Act.
PricewaterhouseCoopers Corporate Finance, which is authorised to carry on
investment business by The Institute of Chartered Accountants in England and
Wales, is acting exclusively for Bright Station and no one else in connection
with the matters described herein, and will not be responsible to anyone other
than Bright Station for providing the protections afforded to customers of
PricewaterhouseCoopers Corporate Finance or for providing advice on the contents
of this document or any matter referred to herein.
Hoare Govett Limited, which is regulated by The Securities and Futures Authority
Limited, is acting exclusively for Bright Station and no one else in connection
with the matters described herein, and will not be responsible to anyone other
than Bright Station for providing the protections afforded to customers of Hoare
Govett Limited or for providing advice on the contents of this document or any
matter referred to herein.
Application has been made for the New Ordinary Shares to be admitted to listing
on the Official List of the UK Listing Authority and to trading on the London
Stock Exchange's market for listed securities. It is expected that admission to
the Official List and dealings on the London Stock Exchange's market for listed
securities will become effective on 9 July 2001.
- --------------------------------------------------------------------------------
Bright Station plc
Placing of 270,000,000 New Ordinary Shares at 5 (pence) each incorporating an
Open Offer of up to 138,661,969 New Ordinary Shares on the basis of 4 New
Ordinary Shares for every 5 existing Ordinary Shares held
Change of name to Smartlogik Group plc
Amendments to Share Option Schemes
- --------------------------------------------------------------------------------
The New Ordinary Shares have not been and will not be registered under the
Securities Act of 1933, as amended (the "US Securities Act"), or any securities
laws of any state in the United States. Neither this document nor any copy of it
may, subject to certain exceptions, without the express consent of the Company
and PricewaterhouseCoopers Corporate Finance, be taken or transmitted into the
United States or to any US Person (as defined in Regulation S under the US
Securities Act) for any other purpose. Persons outside the UK into whose
possession this document comes are required to inform themselves about, and to
observe, any restrictions or legal requirements in relation to the distribution
of this document. Any failure to comply with these requirements may constitute a
violation of the laws of the relevant jurisdiction.
A notice of an Extraordinary General Meeting of Bright Station to be held at 150
Aldersgate Street, London EC1A 4EJ on 6 July 2001 at 10.00 a.m. is set out on
page 88 of this document. Shareholders will find a form of proxy for use at the
meeting enclosed. To be valid, the form of proxy should be completed, signed and
returned in accordance with the instructions on it to the Company's registrars
at Computershare Investor Services PLC, PO Box 457, Owen House, 8 Bankhead
Crossway North, Edinburgh EH11 0XG as soon as possible but, in any event, so as
to arrive not later than 10.00 a.m. on 4 July 2001.
CONTENTS
Page
Proposed timetable 3
Issue statistics 3
Part I: Letter from the Chairman of Bright Station 4
Part II: Further terms of the Open Offer 15
Part III: Risk factors 23
Part IV: Unaudited interim consolidated results for the quarter ended 31 March 2001 26
Part V: Other financial information on Bright Station 32
Part VI: Pro forma statement of net assets 62
Part VII: Additional information 64
Definitions 86
Notice of Extraordinary General Meeting 88
2
- -------------------------------------------------------------------------------------------------------
PROPOSED TIMETABLE
Record Date for the Open Offer Close of business on 7 June 2001
Latest time and date for splitting Open Offer applications
(to satisfy bona fide market claims only) 3.00 p.m. on 3 July 2001
Latest time and date for receiving proxy forms for the 10.00 a.m. on 4 July 2001
Extraordinary General Meeting
Latest time and date for receipt of Application Forms and 3.00 p.m. on 5 July 2001
payment in full in respect of the Open Offer
Extraordinary General Meeting 10.00 a.m. on 6 July 2001
Dealings expected to commence in New Ordinary Shares 9 July 2001
CREST accounts will be credited in respect of New Ordinary Shares no
later than 10 July 2001
Definitive share certificates for New Ordinary Shares will be despatched 12 July 2001
by post no later than
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ISSUE STATISTICS
Issue Price 5 pence
Number of New Ordinary Shares to be issued pursuant to the
Placing and Open Offer 270,000,000
Total number of New Ordinary Shares to be issued pursuant to the Proposals* 293,905,735
Number of Ordinary Shares in issue following implementation
of the Proposals 467,233,196
Market capitalisation at the Issue Price (Pounds)23.4m
Estimated proceeds of the Placing and Open Offer (after expenses) (Pounds)12.0m
Notes:
1. The above statistics are based upon the assumption that 270,000,000 New Ordinary Shares are placed
on behalf of the Company.
2. Further details of the Placing are set out in paragraph 3 of Part I of this document.
* This number includes the 14,016,995 New Ordinary Shares to be issued to Hoare Govett in connection
with its fees referred to in paragraph 3(b) of Part I of this document and the 9,888,740 New
Ordinary Shares to be issued to certain Directors in connection with contractual payments referred
to in paragraph 7 of Part I of this document.
- -------------------------------------------------------------------------------------------------------
ACCOUNTING STANDARDS
Unless otherwise stated, all financial information and references to the
financial prospects of the Group in this document are on the basis of UK GAAP,
which differs in a number of significant respects from US GAAP.
3
PART I
LETTER FROM THE CHAIRMAN OF BRIGHT STATION
Directors: Registered and Head Office:
Allen Thomas - Non-executive Chairman* The Communications Building
Daniel Wagner - Chief Executive* 48 Leicester Square
David Mattey - Chief Financial Officer* London WC2H 7DB
Robert Lomnitz - Executive
Ian Barton - Non-executive*
Patrick Sommers - Non-executive*
*To resign on Completion
13 June 2001
To Shareholders and, for information only, to option and warrant holders
Dear Shareholder,
Placing of 270,000,000 New Ordinary Shares at 5(pence) each incorporating an
Open Offer of up to 138,661,969 New Ordinary Shares on the basis of 4 New
Ordinary Shares for every 5 existing Ordinary Shares held
Change of name to Smartlogik Group plc
Amendments to Share Option Schemes
1. Introduction
On 31 May 2001 your Board announced that it had secured commitments from
institutional investors to raise, by way of a Placing and Open Offer,
approximately (Pounds)12.0 million, net of expenses, which your Board and the
Proposed Directors believe is sufficient for the Company's present requirements
and to secure the future of its focused knowledge management business,
Smartlogik. Although the firm element of the Placing results in dilution of
existing Shareholders, through the Open Offer Shareholders will be given the
opportunity to subscribe for a proportion of the New Ordinary Shares on the
basis of 4 New Ordinary Shares for every 5 existing Ordinary Shares held. The
Board has explored many options, including the possibility of a rights issue, to
raise the necessary funds for the business. However, given the current state of
the UK equity market for technology stocks and the Company's current financial
position, the Directors believe that the Placing and Open Offer, on the terms
outlined in this document, provides the best option available to the Company.
The Directors believe that it was not possible to undertake an underwritten
rights issue given the pressing financial needs of the Company and the delay of
the receipt of funds when compared to the Placing and Open Offer. Without the
completion of these Proposals, the Directors are of the opinion that the Company
would be unable to continue trading and would have to take appropriate steps
under UK and US insolvency procedures.
The proceeds from the Placing and Open Offer will be focused on the Group's core
Smartlogik subsidiary, which provides search technologies and knowledge
management solutions to corporations and Internet portals. The Board is in the
process of closing what remains of both its Sparza and OfficeShopper businesses,
neither of which is currently trading, as well as continuing to reduce its head
office staff and other costs. To reflect this restructuring, it is proposed that
the Company will be renamed Smartlogik Group plc on Completion.
On Completion, I will resign from the Board along with Daniel Wagner (Chief
Executive), David Mattey (Chief Financial Officer), Patrick Sommers and Ian
Barton (Non-executive Directors). Robert Lomnitz, who was appointed to the Board
on 22 December 2000, will remain as an Executive Director. It is proposed that
the following directors of the Smartlogik subsidiary will then be appointed to
the Company's Board: David Jefferies CBE (Non-executive Chairman), Stephen Hill
(Chief Executive), Simon Canham (Chief Financial Officer) and James Bair (Non-
executive Director). Short biographies of these Proposed Directors are set out
in paragraph 2 of Part VII of this document.
4
Under the Placing, the Company is issuing 270,000,000 New Ordinary Shares
representing 156 per cent of the existing issued share capital. Under the Open
Offer, Qualifying Shareholders have the right to apply for up to 138,661,969 of
these New Ordinary Shares at the Issue Price of 5 pence per share. The New
Ordinary Shares will be issued credited as fully paid and will, on issue, rank
pari passu in all respects with the existing Ordinary Shares.
The purpose of this document is to provide you with details of, and reasons for,
the Placing and Open Offer and to explain why your Directors and Proposed
Directors believe that the Placing and Open Offer is in the best interests of
the Company and its Shareholders as a whole. A notice convening an Extraordinary
General Meeting of the Company at which the resolutions to approve the Placing
and Open Offer will be proposed is set out at the end of this document.
This letter, Part II of this document and the enclosed Application Form together
contain the formal terms and conditions of the Open Offer. Your attention is
drawn to Part II of this document which gives details of the procedure for
application and payment for the Open Offer Shares.
2. Background to and reasons for the Proposals
(a) Review of Group strategy
Following the disposal of our Information Services Division to Thomson
Corporation in May 2000, the Company was restructured as a technology
infrastructure business and renamed Bright Station plc. The Company used its
remaining proprietary technology assets to focus on and develop several
operating businesses in the technology sector, with the strategy of building
their initial value with existing funds while attempting to raise additional
capital from either the public or private markets or realising all or part of
these investments.
Throughout the past year, the Board has remained conscious of the need to
prioritise the use of the Company's financial resources, whilst continuing to
develop the operating businesses and exploring options to raise new equity
funding.
In the preliminary results announcement dated 28 February 2001, the Board
confirmed that it would continue to review options to ensure that additional
capital was available for further investment in the business and to take
whatever action was necessary to ensure that the Group continued to operate
within its available cash resources. However, the Board subsequently concluded
that the difficulties in raising additional capital made it no longer feasible
to continue its current rate of cash expenditure in support of all of its
business initiatives notwithstanding their longer-term potential for value
creation.
(b) Group restructuring
As announced on 30 April 2001, the Board believes that shareholder value is best
served by Bright Station being repositioned as a focused "pure play" knowledge
management business through its Smartlogik subsidiary (incorporating WebTop),
combined with the immediate rationalisation of the eCommerce businesses of the
Group by the sale or closure of Sparza and OfficeShopper, and reduction of
corporate overheads.
On 9 May 2001, the Company announced that it had entered into a legally binding
agreement regarding the sale of the name, customer list and debtor book of
OfficeShopper to Inkwell Direct. The disposal of these OfficeShopper assets has
reduced the ongoing operational cash outflows of the Group and has also
mitigated certain remaining closure costs. Under the terms of this agreement,
Bright Station has retained the liability for any costs associated with the
closure of the OfficeShopper operations.
The only non-core business now remaining within the Group is Sparza, where the
cost base has been reduced and the business is in the process of being closed,
with trading having ceased and notice given to employees. Closure of the Sparza
business is expected to be completed not later than 30 days following
Completion.
In anticipation of the new operating structure, corporate overheads have also
been curtailed.
5
(c) Current cash position
As explained in the announcement dated 30 April 2001, the Group requires
additional funds in the immediate short term to secure its financial position.
In the first four months of the year, Bright Station accelerated its cash spend
on the roll-out of its Smartlogik activities to build operational expertise for
Smartlogik whilst continuing to support the other businesses of the Group. This
followed on from having invested in the infrastructure build and management
teams in late last year.
Although the Board has now reduced the level of expenditure across all of its
businesses with the exception of Smartlogik, the Group has continued to absorb
cash. As at 31 March 2001, the Group had cash of (Pounds)7.4 million and net
current assets of (Pounds)5.6 million. On 2 May 2001, the Board announced that
cash balances as at 30 April 2001 amounted to (Pounds)2.9 million. As at 18 May
2001, the Group had cash resources of (Pounds)2.2 million. This included
approximately (Pounds)700,000 held in its dormant Japanese subsidiary, KMK
DigiTex Co. Ltd, which cannot be remitted to the Company until the resolution of
an investigation by the Japanese tax authorities into the final tax charge
associated with KMK DigiTex's liquidation.
The Company has secured a bridge financing facility to cover the period until
receipt of the funds from the Placing and Open Offer. Under the terms of an
agreement dated 12 June 2001 between the Company and antfactory Investments BV
("antfactory") antfactory has agreed to make available to the Company a secured
bridge facility of up to (Pounds)1,500,000. Drawdown may be made in three equal
tranches of (Pounds)500,000 no later than 13 July 2001. The loan is fully
repayable by 13 July 2001 or earlier on the occurrence of certain events of
default. Interest is payable on the outstanding amount of the loan from time to
time at the rate of 5 per cent above LIBOR on the first tranche, 7 per cent
above LIBOR on the second tranche and 9 per cent above LIBOR on the third
tranche. A commitment fee equal to 3 per cent of the total amount available
under the facility and a contribution of (Pounds)15,000 towards antfactory's
legal and other expenses are payable on first drawdown of the loan or, if no
drawdown occurs, on demand by antfactory. A drawdown fee of (Pounds)50,000 is
payable on the drawdown of each tranche. Further details of the Bridging
Facility are set out in paragraph 11 in Part VII.
(d) Financing discussions
Over recent months, the Company has been in negotiations regarding a number of
financing options with different potential investor groups. Most of these
options involved convertible securities financing, the terms of which were
highly conditional and could have involved more dilution for Shareholders than
the current Proposals.
In parallel with these initiatives, the Company held discussions with its
principal institutional Shareholders and certain other potential investors in
relation to a proposed equity fund-raising against the background of the
proposed restructuring of the Group. The Company has secured Placing Commitments
to provide funding for the business on the terms set out in this document.
If Shareholders do not approve the Proposals, your Board believes that the Group
would be unable to raise sufficient funding from alternative sources in the time
available and that the Company would have to take appropriate steps under UK and
US insolvency procedures.
The Board and the Proposed Directors consider that, having regard to the
Bridging Facility and the net proceeds of the Placing and Open Offer, the Group
has sufficient working capital for its present requirements, that is, for at
least the next twelve months from the date of publication of this document.
It is therefore important for the future of the Group that the Proposals are
approved by Shareholders at the EGM on 6 July 2001.
3. Details of the Placing and Open Offer
(a) General
The Company is proposing to raise (Pounds)13.5 million gross (approximately
(Pounds)12.0 million net of expenses) through the Placing and the Open Offer.
The net proceeds of the Placing and the Open Offer, together with the existing
cash resources of the Group, will be used principally to invest in the continued
growth
6
of the core Smartlogik subsidiary but also to repay any drawn portion of the
Bridging Facility and fund the residual balance of costs to complete the
restructuring of the Group.
The Placing Shares will in aggregate represent approximately 156 per cent of
the existing Ordinary Shares and approximately 58 per cent of the enlarged
issued Ordinary Share capital of the Company on Admission. All of the Placing
Shares will be issued credited as fully paid and will, on issue, rank pari passu
in all respects with the existing Ordinary Shares. None of the Placing Shares
are available to the public in conjunction with the application.
The Placing and the Open Offer are conditional on:
(i) the passing of the Resolutions at the EGM;
(ii) the Placing Commitments becoming unconditional; and
(iii) Admission of the New Ordinary Shares becoming effective.
(b) The Placing
It was announced on 31 May 2001 that Hoare Govett, as agent for the Company, had
secured Placing Commitments from certain institutional investors to subscribe
for 270,000,000 New Ordinary Shares at the Issue Price to raise (Pounds)13.5
million (gross). Of these, 131,338,031 New Ordinary Shares have been
conditionally placed firm with institutional investors at the Issue Price. Hoare
Govett, as agent for the Company, also conditionally placed the Open Offer
Shares with institutional investors at the Issue Price, subject to recall to
satisfy valid applications by Qualifying Shareholders pursuant to the Open
Offer.
The Placing Commitments from institutional investors are subject only to such
commitments becoming unconditional in accordance with their terms. The
conditions in the Placing Commitments are as set out in paragraph 11(xiv) of
Part VII of this document.
Hoare Govett has agreed that a portion of its commission in respect of the
Placing will be used to subscribe for 14,016,995 New Ordinary Shares at the
Issue Price. Further details of this arrangement are set out in paragraph 11(xv)
of Part VII of this document.
No commissions are payable to placees pursuant to their Placing Commitments.
(c) The Open Offer
Qualifying Shareholders are invited to subscribe under the Open Offer for the
Open Offer Shares at the Issue Price free of expenses, pro rata to their
existing shareholdings, on the basis of:
4 Open Offer Shares for every 5 existing Ordinary Shares
held on the Record Date and so in proportion for any greater or smaller number
of existing Ordinary Shares then held. The amount due in respect of each
application for Open Offer Shares is payable in full on application.
Entitlements to Open Offer Shares will be rounded down to the nearest whole Open
Offer Share. Fractional entitlements will not be allotted to Qualifying
Shareholders but will be aggregated and made available pursuant to the excess
applications facility or, in default of any excess applications, will be placed
for the benefit of the Company under the Placing. The pro rata entitlement of a
Qualifying Shareholder to Open Offer Shares is indicated on the Application Form
which accompanies this document. Each Application Form is personal to the
Qualifying Shareholder named on the form and may not be assigned, transferred or
split except to satisfy bona fide market claims. Applications for Open Offer
Shares in excess of such pro rata entitlement will be dealt with in accordance
with paragraph (d) below. Any Open Offer Shares not taken up under the Open
Offer will be subscribed by institutional investors pursuant to the terms of the
Placing Commitments.
(d) Excess applications
To the extent that Qualifying Shareholders do not apply for their full pro rata
entitlement of Open Offer shares under the Open Offer, such Open Offer Shares
will be available to other Qualifying Shareholders
7
who elect to take up a greater number of Open Offer Shares than they would
otherwise be able to under the terms of the Open Offer.
However, if, in aggregate, valid applications are made under the excess
applications facility for more Open Offer Shares than are available, such excess
elections will be scaled down as nearly as reasonably practicable pro rata to
the size of such excess elections.
(e) Further terms
Further details of the Open Offer are set out in Part II of this document, and
in the enclosed Application Form. The Open Offer will close at 3.00 p.m. on 5
July 2001. In order to be valid, Application Forms (duly completed) and payment
in full for the Open Offer Shares applied for must be received by Computershare
Investor Services PLC, PO Box 859, The Pavilions, Bridgwater Road, Bristol BS99
1XZ, by no later than 3.00 p.m. on 5 July 2001, or delivered by hand only
(during normal business hours only) to Computershare Investor Services plc, 7th
Floor, Jupiter House, Triton Court, 14 Finsbury Square, London EC2A 1BR.
Shareholders should note that the Open Offer is not a "rights issue".
Entitlements under the Open Offer are not transferable and the Application Form,
not being a document of title, cannot be traded. Qualifying Shareholders should
be aware that in the Open Offer, unlike a rights issue, the Open Offer Shares
not applied for will not be sold in the market or placed for the benefit of
Qualifying Shareholders who do not apply under the Open Offer, but will be
placed for the benefit of the Company at the Issue Price pursuant to the terms
of the Placing.
4. Information on the Group following Completion
(a) Background
Following the implementation of the Proposals, the operational and financial
resources of the Group will be focused on increasing the value of the Smartlogik
business. The Board and the Proposed Directors believe that Smartlogik is a
company of potential and that its management, if adequately funded and free from
legacy issues associated with the current Bright Station structure, as the Group
will be following implementation of the Proposals, is capable of delivering
value for Shareholders.
Smartlogik is a leading provider of search and categorisation solutions,
enabling unstructured information to be presented and accessed with a high
degree of precision and relevance. Smartlogik targets users and developers of
corporate intranets and portals in the USA and Europe, either directly or in
conjunction with a growing number of strategic partners.
Following implementation of the Proposals, the Group will employ approximately
160 staff and operate from offices in the UK (London, Cambridge and Wembley),
the USA (San Francisco and Alexandria, Virginia) and Denmark (Copenhagen).
(b) Smartlogik's position in the knowledge management market
Smartlogik operates within the knowledge management market which the Board and
Proposed Directors believe has substantial growth potential, a view supported by
independent industry observers and analysts. This market growth is driven by the
expansion of information available on the Internet and corporate intranets with
the challenge being to turn such information into useful knowledge and make it
available to those who need it, when and where they need it, in order to make
decisions. Slimmed down workforces, empowered individuals and increased levels
of remote working make knowledge management a priority for many organisations.
Smartlogik's products can be utilised by any organisation that requires a
knowledge management solution.
For the reasons set out below, the Board and Proposed Directors believe that
Smartlogik is well placed to take advantage of such growth potential in the
market:
- - Proven proprietary technology - The technology that underpins Smartlogik's
product range was developed in Cambridge, largely based upon public research
originally carried out at the university. This technology is based on
linguistic inference of important concepts from text, correlating these using
probabilistic modelling techniques even when the query posed by the user is
vague or ambiguous;
8
- - Established, proven, scalable products - Smartlogik's products are focused on
Muscat Discovery, a concept-based search algorithm offering both Boolean and
probabilistic retrieval, which allows users to find the information they seek
with the minimum of effort, and Muscat Structure, a software application
which reads and categorises textual information, helping users to define and
better understand their information. These products have recently been
supplemented with the addition of WebTop, the principal asset of which is the
client-based desktop `drag and drop' Webcheck, which is now being
incorporated into the Smartlogik product suite.
Smartlogik's core products are established and scalable and provide the
business with a competitive offering in the knowledge management market.
Management has begun to supplement these core products with applications and
templates geared to the needs of specific vertical markets, focusing
initially on the media, financial services and pharmaceutical industries.
With the release of a Java version of Muscat Discovery and with the imminent
release of a Com+ version of Muscat Discovery, Smartlogik has also
implemented the early phases of a programme of product development and
enhancement aimed at ensuring that the Group remains at the forefront of
technology in the knowledge management market;
- - Product differentiation - Smartlogik's breadth of product offerings, together
with the probabilistic modelling techniques and their proven scaleability to
handle effectively large quantities of information and large numbers of
users, provide considerable differentiation from competitors;
- - Experienced management team - During the past year an experienced senior
management team has been recruited to head the business led by Stephen Hill
(Chief Executive), formerly Managing Director (Europe) of Inktomi, and Simon
Canham (Chief Financial Officer). This executive team has been supplemented
by a number of experienced hires in key areas such as technology, product
development, sales and marketing;
- - Growing blue-chip customer base - Smartlogik has a strong and growing client
list including such blue-chip names as the BBC, Yell, Virgin Group, the DTI,
NASA and Thomson Corporation. Smartlogik currently has more than 100
customers;
- - Established strategic distribution partnerships - Smartlogik has recently
announced important distribution partnership agreements with Norcontrol,
Germinus and Horizon and enjoys a technology partnership with Fujitsu. The
Board and Proposed Directors believe that these partnerships will prove
rewarding and will be supplemented by further agreements over the coming
months; and
- - Recurring revenue streams - Smartlogik generates revenue from a blend of one-
off licence fees, a recurring annual maintenance charge and development and
consultancy work charged on a per diem basis, ensuring ongoing revenue
streams beyond the initial licence sale. The business also generates annuity
revenue streams from a small but significant proportion of its customers to
whom it provides a managed service.
(c) Distribution channels
Smartlogik delivers its products through two distinct channels:
(i) Solutions channel
This is a relatively high value business providing a unique combination of
software, applications and services to deliver a precise solution to specific
customers. Management is in the process of shifting the sales focus from a pure
technology product to the provision of integrated solutions, and in doing so the
average value of implementations is increasing steadily. The sales model is
predominantly direct, with fulfilment normally being by Smartlogik in
conjunction with selected strategic service partners.
(ii) Technology channel
Smartlogik provides the technology (Muscat software platform) to Original
Equipment Manufacturers (OEMs) and to systems integrators to build their own
applications and solutions. Current signed agreements include:
- - Norcontrol (announced March 2001) - A Value Added Reseller for the Spanish,
Portuguese and Latin American markets; and
9
- - Valid Information Systems (signed March 2001) - An OEM partner which provides
Smartlogik with access to numerous blue-chip clients including predominantly
governmental organisations such as The Inland Revenue, HM Treasury, The
Department of the Environment, The Royal Air Force and The Serious Fraud
Office.
Smartlogik has also allied with IBM to market Smartlogik solutions as an
approved IBM Independent Software Vendor. Other channel partners include
Fujitsu, Germinus, Horizon and Thomson Corporation.
Bright Station Contracts ("BSC") operates a five-year Department of Trade and
Industry contract to manage an online database of UK exporters to businesses,
governments and British embassies around the world. BSC provides an internet
portal for small to medium sized companies and now has over 17,000 registered
exporter companies using the service. Following completion of the Proposals, it
is proposed that BSC will be rebranded Smartlogik Contracts.
(d) Financial information
Historic revenues for the Group, as it will be constituted following
implementation of the Proposals, demonstrate growth of 18 per cent. for Q1 2001
over Q4 2000 and were made up as follows:
Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Smartlogik (incorporating WebTop) 691 994 1,017 1,441 1,746
Other (including
Bright Station Contracts) 411 419 476 498 547
-------- --------- -------- --------- ---------
Total 1,102 1,413 1,493 1,939 2,293
======== ========= ======== ========= =========
Source: 2001 Q1 quarterly results announcement
Investors should read the whole of this document and not just rely on the
summarised information shown above.
At Completion, the Group will retain significant tax losses. The quantum of
these is not yet agreed with the Inland Revenue. Subject to the agreement of the
Inland Revenue, the total tax losses accrued at 31 December 2000 and their
potential future benefit can be summarised as follows:
- - (Pounds)56 million of capital losses available to offset future capital
profits;
- - (Pounds)30 million of trading losses available to carry forward against
profits arising from the same trade, as determined by the Inland Revenue; and
- - (Pounds)12 million of non-trading deficits available to offset future non-
trading profits.
Part VI of this document sets out, for illustrative purposes only, an unaudited
proforma statement of the net assets of Bright Station reflecting the effect of
implementing the Proposals.
The Company also holds some peripheral investments which it will seek to realise
as opportunities become available.
5. Current trading and prospects
The unaudited results for the quarter ended 31 March 2001 were published on 31
May 2001 and the full text of the announcement is set out in Part IV of this
document.
Overall, Group revenues for continuing operations for the quarter of (Pounds)2.3
million reflected an 18 per cent increase over Q4 2000 and a 108 per cent
increase over Q1 2000. The increase was principally driven by revenues from
Smartlogik which continues to leverage the sales and marketing infrastructure
put in place towards the end of 2000.
Smartlogik continues to trade satisfactorily, having regard to the disruption
the current process inevitably causes. As a result of the recent uncertainties
over the financial position of the Group,
10
finalisation of some new sales contracts has been deferred, but the Board and
the Proposed Directors believe that growth in revenues will resume following
Completion of the Proposals.
The continuing businesses as a whole have not yet achieved the level of revenues
necessary to provide the Group with operating profits. The Group will look to
invest in building the profile and sales pipeline of its Smartlogik business.
Although the Board and the Proposed Directors anticipate strong revenue growth,
this investment will have a consequential impact on earnings for the year.
Although there can be no assurance that the Group will achieve overall
profitability in the near term, the Company expects to have sufficient working
capital as a result of the Proposals for its present requirements.
The Continuing Director and the Proposed Directors will actively manage the
Group's net expenditure and will, in particular, review carefully the pattern of
revenues and overall expenditure in the coming months in order to ensure that
the Group's working capital requirements do not exceed its available sources of
capital.
6. Share options
Amendments
At present, the Group has option arrangements which permit up to 10 per cent of
the issued share capital to be issued pursuant to options over Bright Station's
shares and up to 15 per cent of the issued share capital of Smartlogik and
WebTop to be issued under separate subsidiary share option schemes. It is
proposed to simplify these arrangements following the Placing and Open Offer so
that 15 per cent of the enlarged issued Ordinary Share capital of Bright
Station will be available for issue under all of the Group's share option
arrangements in any ten year period. In order to achieve this it will be
necessary to amend the current share limits in the Bright Station Share Option
Schemes (summarised in brief in Part VII of this document) to an aggregate
overall limit of 15 per cent of Bright Station's issued share capital. This
limit will necessarily include outstanding options granted to date to those
people who will not remain part of the Group but who will retain limited rights
of exercise until such time as those options lapse. The Resolutions to be
proposed at the EGM (notice of which is set out at the end of this document)
therefore include resolutions to amend the Share Option Schemes to increase the
limits to this revised level. In addition, it is also proposed to remove the
current individual limit on participation, in those Share Option Schemes in
which it appears, of eight times remuneration over a ten year period.
Initial Grants
It is proposed that any grant of options under the Share Option Schemes in the
period of 15 days immediately following Completion will be at an exercise price
of the average of the closing market price of an Ordinary Share for the 10
dealing days following the date of this document or, in relation to all of the
Share Option Schemes other than the Bright Station 1994 Unapproved Executive
Share Option Scheme (the "Unapproved Scheme") (which it is proposed to amend
accordingly) if higher, the closing market price of an Ordinary Share on the day
preceding the date of grant.
Rationalisation
Furthermore, it is proposed to rationalise the Group's current share scheme
arrangements which may involve the termination of some schemes and the adoption
of new schemes. However, it is not proposed to put forward detailed proposals at
this stage but to put these forward in due course. Any such proposals will
operate within the new 15 per cent limit referred to above. No further options
will be granted under the subsidiary share option schemes.
Individual Options
As well as the proposed amendments to the Share Option Schemes, it is intended
that the Proposed Directors will, subject to shareholder approval at the EGM,
grant share options over 2,336,166 Ordinary Shares to David Jefferies, 500,000
Ordinary Shares to James Bair and 1,800,000 Ordinary Shares to Alan Jeffries, an
independent consultant who supports Smartlogik in the critical area of strategic
product planning, with an exercise price the same as those granted under the
Unapproved Scheme in the 10 dealing days following the date of this document
(see above). The individual options will vest as to one twelfth at the end of
each quarter over a three year period. If the individual leaves
11
the Group for any reason prior to the third anniversary of grant, the Individual
Options will be exercisable only to the extent that they have vested. To the
extent that the Individual Options have not been exercised by the 10th
anniversary of grant they will lapse. The benefits under the Individual Options
are not pensionable and are not transferable.
It is also intended that, following Admission, the Proposed Directors will grant
share options to Stephen Hill, Simon Canham and Robert Lomnitz, as described in
paragraph 9 of Part VII of this document.
7. Proposed Board changes
On Completion, I will resign from the Board along with Daniel Wagner (Chief
Executive), David Mattey (Chief Financial Officer), Patrick Sommers and Ian
Barton (Non-executive Directors). Robert Lomnitz, who was appointed to the Board
on 22 December 2000, will remain as an Executive Director. It is proposed that
the following directors of Smartlogik will be appointed to the Company's Board
on Admission: David Jefferies CBE (Non-executive Chairman), Stephen Hill (Chief
Executive Officer), Simon Canham (Chief Financial Officer) and James Bair (Non-
executive Director). Short biographies of these Proposed Directors are set out
in paragraph 2 of Part VII of this document.
It is proposed that the Board be expanded following Completion of the Proposals
to include the necessary number of additional non-executive directors so that
the Company will continue to comply with all relevant aspects of best corporate
governance practice, save that, as disclosed in paragraph 6 above, it is
intended that David Jefferies, and James Bair will in due course be awarded
options in the Company, subject to shareholder approval of the Proposals at the
EGM.
In connection with these Proposals and under existing contractual obligations,
Daniel Wagner and David Mattey are entitled to certain payments on termination
of their contracts amounting to (Pounds)220,100 and (Pounds)274,337
respectively. At the request of the Board and the Proposed Directors, and as
part of the Proposals, both Daniel Wagner and David Mattey have agreed to
receive Ordinary Shares valued at these amounts, based upon the Issue Price, in
lieu of these cash payments in order to reduce the cash burden on the Company in
relation to these Proposals. At the same time both Daniel Wagner and David
Mattey have agreed to surrender for nil consideration all share options to which
they are currently entitled. Further details of these arrangements are contained
in paragraph 9 of Part VII of this document.
8. Proposed change of name
Following the completion of the restructuring described above, the Group will be
focused on its Smartlogik knowledge management business and the Board therefore
proposes to change the name of the Company to Smartlogik Group plc to reflect
better the future activities of the Group. A resolution to approve this change
of name will be proposed at the Extraordinary General Meeting.
It is expected that definitive certificates will be issued under the name
"Smartlogik Group plc" in respect of Open Offer Shares to be held in
certificated form and in respect of certificated transfers taking place after 9
July 2001. At the present time, it is not intended that existing "Bright Station
plc" share certificates be replaced and such share certificates will remain
valid in every respect, unless further notice is given.
Pending approval of the resolutions at the Extraordinary General Meeting to be
held on 6 July 2001, the Group will continue to trade on the London Stock
Exchange and NASDAQ.
9. Taxation
Your attention is drawn to paragraph 6 of Part II of this document. If you are
in any doubt as to your tax position you should consult an appropriate
professional adviser without delay.
10. Overseas shareholders
The attention of Shareholders who have a registered address outside the United
Kingdom, or who are citizens of countries other than the United Kingdom, is
drawn to paragraph 5 of Part II of this document.
12
11. Extraordinary General Meeting
You will find set out at the end of this document a notice convening an
Extraordinary General Meeting of the Company to be held at 10.00 a.m. on 6 July
2001 at which the following resolutions will be proposed:
(a) to increase the Company's authorised share capital from (Pounds)2,500,000 to
(Pounds)6,500,000 (an increase of 160 per cent);
(b) to authorise the Directors to allot the New Ordinary Shares (such authority
to expire on 31 August 2001) and to allot further securities up to
(Pounds)1,557,444 nominal value (being 33 per cent of the enlarged issued
share capital of the Company following Completion of the Proposals), (such
authority to expire on 5 July 2006);
(c) to disapply pre-emption rights in relation to the New Ordinary Shares, (such
authority to expire on 31 August 2001) and in relation to rights and other
pre-emptive issues to Shareholders and otherwise in respect of up to
(Pounds)233,617 nominal value (representing approximately 5 per cent of the
enlarged issued share capital of the Company following completion of the
Proposals), such authority to expire on 5 July 2006;
(d) to approve the amendments to the Company's share option schemes;
(e) to authorise the Board to grant options over Ordinary Shares to David
Jefferies, James Bair and Alan Jeffries;
(f) to appoint each of the Proposed Directors as directors of the Company and to
elect the Continuing Director as a director of the Company; and
(g) to change the Company's name to Smartlogik Group plc.
Other than pursuant to the Placing and Open Offer and the issue of shares to
Hoare Govett, David Mattey and Daniel Wagner described above, the Directors have
no present intention to exercise the allotment and disapplication authorities
referred to above other than in relation to the potential exercise of existing
options and warrants.
12. Further information
Your attention is drawn to Parts II to VII of this document which provide
additional information on the matters described above.
13. Action to be taken
(a) Applications under the Open Offer
The action to be taken by Qualifying Shareholders in order to apply under the
Open Offer is set out in Part II of this document. Pursuant to the terms and
conditions set out in this letter, Part II of this document and the Application
Form, Qualifying Shareholders who wish to apply for Open Offer Shares should
complete and return the enclosed Application Form to Computershare Investor
Services PLC, by post or by hand, to PO Box 859, The Pavilions, Bridgwater Road,
Bristol, BS99 1XZ, or by hand only (during normal business hours) to 7th Floor,
Jupiter House, Triton Court, 14 Finsbury Square, London EC2A 1BR by no later
than 3.00 p.m. on 5 July 2001. The attention of overseas Shareholders is drawn
to the relevant paragraphs in Part II of this document and to the warranties
concerning overseas shareholders in the Application Form.
(b) Form of Proxy
You will find enclosed a Form of Proxy for use in connection with the
Extraordinary General Meeting. Whether or not you intend to be present in person
at the Extraordinary General Meeting, you are requested to complete, sign and
return it by post or by hand to Computershare Investor Services PLC, PO Box 457,
Owen House, 8 Bankhead Crossway North, Edinburgh EH11 0XG, as soon as possible
but in any event to arrive no later than 10.00 a.m. on 4 July 2001. Completion
and return of a Form of Proxy will not preclude you from attending the
Extraordinary General Meeting and voting in person should you so wish.
13
14. Recommendation
If Shareholders do not approve the Proposals, your Board believes that the Group
would be unable to raise sufficient funding from alternative sources in the time
available and that the Company would have to take appropriate steps under UK and
US insolvency procedures.
The Board and the Proposed Directors consider that, having regard to the
Bridging Facility and the net proceeds of the Placing and Open Offer, the Group
has sufficient working capital for its present requirements, that is, for at
least the next twelve months from the date of publication of this document.
The Board and the Proposed Directors believe that Smartlogik is a company of
potential and that its management, if adequately funded and free from legacy
issues associated with the current Bright Station structure, as the Group will
be following implementation of the Proposals, is capable of delivering value for
Shareholders.
For the reasons set out above, your Directors unanimously consider the Proposals
to be in the best interests of the Company and Shareholders as a whole.
Accordingly, the Board unanimously recommends Shareholders to vote in favour of
the Resolutions to be proposed at the Extraordinary General Meeting as the
Directors intend to do in respect of their own entire beneficial and non-
beneficial interests of 20,782,115 Ordinary Shares representing 12 per cent of
the current issued share capital. Under the terms of the Placing Commitments,
institutions holding 14 per cent of the current issued share capital have
committed to support the Proposals. Details of the Directors' intentions with
respect to their Open Offer entitlements are included in paragraph 9 of Part
VII.
Yours faithfully
Allen Thomas
Chairman
14
PART II
FURTHER TERMS OF THE OPEN OFFER
1. Terms of the Open Offer
The Open Offer is made by Bright Station to Qualifying Shareholders, subject to
the terms and conditions set out below, in Part I of this document and in the
enclosed Application Form, to apply for Open Offer Shares at the Issue Price
which is payable in full in cash on application and is free of all expenses on
the basis of:
4 Open Offer Shares for every 5 existing Ordinary Shares
held at the close of business on the Record Date and so in proportion for any
greater or smaller number of existing Ordinary Shares then held. Entitlements to
Open Offer Shares will be rounded down to the nearest whole number of Open Offer
Shares. Fractional entitlements will not be allotted to Qualifying Shareholders
but will be aggregated and made available pursuant to the excess applications
facility or in default of any excess applications will be placed for the benefit
of the Company.
To the extent that Qualifying Shareholders do not apply for their full pro rata
entitlement of Open Offer Shares under the Open Offer, such Open Offer Shares
will be made available under an excess applications facility to other Qualifying
Shareholders who elect to take up a greater number of Open Offer Shares than
they would otherwise be able to under the terms of the Open Offer.
However, if, in aggregate, valid applications are made under the excess
applications facility for more Open Offer Shares than are available, such excess
elections will be scaled down as nearly as reasonably practicable pro rata to
the size of such excess elections.
If valid applications are not received for all of the Open Offer Shares being
made available under the Open Offer (including excess applications), such number
of Open Offer Shares not so applied for will be subscribed for by those parties
with whom they have been conditionally placed at the Issue Price by Hoare
Govett, as agent for the Company.
Any Qualifying Shareholder who sold or transferred all or part of his/her
registered holding(s) of Ordinary Shares prior to the date upon which the
existing Ordinary Shares were marked "ex" the entitlement to the Open Offer by
the London Stock Exchange is advised to consult his/her stockbroker, bank or
other agent through or to whom the sale or transfer was effected as soon as
possible since the benefits arising under the Open Offer may be claimed from
him/her by purchasers under the rules of the London Stock Exchange.
The Open Offer Shares will be issued credited as fully paid and will, on issue,
rank pari passu in all respects with the existing Ordinary Shares. No temporary
documents of title will be issued.
The Placing and the Open Offer are conditional on:
(a) the passing of the Resolutions at the EGM;
(b) the Placing Commitments becoming unconditional; and
(c) Admission of the New Ordinary Shares becoming effective.
The Open Offer is not a "rights issue". Entitlements under the Open Offer are
not transferable, and the Application Form is not a document of title and cannot
be traded. Qualifying Shareholders should be aware that in the Open Offer,
unlike in a rights issue, the Open Offer Shares not applied for will not be sold
in the market or placed for the benefit of Qualifying Shareholders who do not
apply under the Open Offer, but will be subscribed by other Qualifying
Shareholders under their excess applications or will be placed for the benefit
of the Company at the Issue Price pursuant to the terms of the Placing.
The attention of overseas Shareholders is drawn to paragraph 5 of this Part II.
15
2. Procedure for application
Each Application Form shows the number of Ordinary Shares registered in the
Qualifying Shareholder's name on the Record Date, and also shows the pro rata
number of Open Offer Shares for which such Qualifying Shareholder is entitled to
apply under the Open Offer, calculated on the basis set out in paragraph 1
above. The Application Form incorporates further terms of the Open Offer. A
Qualifying Shareholder may apply for any number of Open Offer Shares, including
in excess of the pro rata entitlement as shown on the Application Form. Any
application for Open Offer Shares in excess of this pro rata amount will be
treated according to the terms of the excess applications facility described
below.
To the extent that Qualifying Shareholders wish to subscribe in excess of their
pro rata entitlement to Open Offer Shares (shown on the Application Form), they
may do so under the excess applications facility. A Qualifying Shareholder
wishing to subscribe for a number of Open Offer Shares in excess of his/her pro
rata entitlement should insert on the Application Form (in Box 6) the total
number of Open Offer Shares for which he/she wishes to subscribe. However, if in
aggregate valid applications are made under this excess applications facility
for more Open Offer Shares than are available, Qualifying Shareholders' excess
applications will be scaled down as nearly as reasonably practicable pro rata to
the size of such excess applications.
Any monies received from an applicant in excess of the amount due in respect of
his/her application or deemed application (including after any scaling back
under the excess applications facility) will be returned to the applicant
without interest at the applicant's risk.
Applications for Open Offer Shares under the Open Offer may only be made on
Application Forms. Each Application Form is personal to the Qualifying
Shareholder(s) named thereon and may not be assigned, transferred or split
except to satisfy bona fide market claims in relation to purchases of existing
Ordinary Shares through the market prior to the date upon which the existing
Ordinary Shares were marked "ex" the entitlement to the Open Offer by the London
Stock Exchange. The Application Form represents only a right to apply for Open
Offer Shares. It is not a document of title and cannot be traded.
Any Qualifying Shareholder who wishes to apply for any of the Open Offer Shares
must complete the Application Form in accordance with the instructions printed
thereon and return it to Computershare Investor Services PLC ("Computershare"),
by post or by hand, to PO Box 859, The Pavilions, Bridgwater Road, Bristol BS99
1XZ, or by hand only (during normal business hours only) to 7th Floor, Jupiter
House, Triton Court, 14 Finsbury Square, London EC2A 1BR (being the address of
the receiving agent) with a cheque or banker's draft for the full amount payable
on application so as to arrive before 3.00 p.m. on 5 July 2001, at which time
the Open Offer will close. A reply-paid envelope is enclosed for use by
Qualifying Shareholders in connection with the Open Offer. If an Application
Form is being sent by post, Qualifying Shareholders are recommended to allow at
least four working days for delivery.
Any Qualifying Shareholder who does not wish to apply for any of the Open Offer
Shares to which he/she is entitled should not return a completed Application
Form to Computershare. He/she is, however, requested to complete and return the
Form of Proxy.
Applications made under the Open Offer are irrevocable. Receipt of applications
will not be acknowledged.
Cheques and banker's drafts should be made payable to "The Royal Bank of
Scotland plc a/c Bright Station plc" and crossed "a/c payee only". Cheques or
banker's drafts must be drawn in sterling on a bank or building society in the
United Kingdom, the Channel Islands or the Isle of Man which is either a member
of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company
Limited or which is a member of either of the committees of the Scottish or
Belfast clearing houses or which has arranged for its cheques or banker's drafts
to be cleared through the facilities provided for members of any of those
companies or committees. Such cheques or banker's drafts must bear the
appropriate sorting code in the top right hand corner and must be for the full
amount payable on application.
Bright Station reserves the right to have cheques and banker's drafts presented
for payment on receipt and to instruct Computershare to seek special clearance
of cheques to allow Bright Station to obtain
16
value for remittances at the earliest opportunity. Any person returning an
Application Form with a remittance in the form of a cheque warrants that the
cheque will be honoured on first presentation. Bright Station may elect at its
sole discretion to treat as invalid any acceptance in respect of which
remittance is notified to it as not having been so honoured.
If cheques or banker's drafts are presented before the conditions of the Open
Offer are fulfilled, the application monies will be held in a separate interest
bearing account, with any interest being retained for the benefit of the
Company, until all conditions are met. If such conditions are not fulfilled by
8.30 a.m. on 31 August 2001, at the latest, the Placing and Open Offer will
lapse and application monies will be returned, without interest, by crossed
cheque in favour of the applicant(s) through the post at his/her own risk as
soon as practicable after the lapse of the Placing and Open Offer.
Bright Station reserves the right at its discretion to treat an Application Form
as valid and binding on the person(s) by whom or on whose behalf it is lodged,
even if it is not completed in accordance with the relevant instructions and is
not accompanied by the required remittance or a valid power of attorney (where
required) or verification of identity satisfactory to Computershare to ensure
that the Money Laundering Regulations 1993 (the "Money Laundering Regulations")
would not be breached by acceptance of the payment submitted in connection with
the Application Form or if it otherwise does not strictly comply with the terms
and conditions of application.
Bright Station reserves the right, but shall not be obliged, to accept
applications in respect of which remittances are received prior to 3.00 p.m. on
5 July 2001, from an authorised person (as that term is defined in the Financial
Services Act 1986) specifying the number of Open Offer Shares concerned and
undertaking to lodge the relevant Application Form in due course. No temporary
document of title will be issued.
All enquiries in connection with the procedure for application and completion of
the Application Form should be referred to Computershare Investor Services PLC,
PO Box 859, The Pavilions, Bridgwater Road, Bristol BS99 1XZ, which is acting as
Receiving Agent and Paying Agent in respect of the Open Offer. The telephone
number of Computershare is 0870 702 0100.
3. Money Laundering Regulations
To ensure compliance with the Money Laundering Regulations, Computershare may
require, at its absolute discretion, verification of the identity of the person
by whom or on whose behalf an Application Form is lodged with payment (which
requirements are referred to below as the "verification of identity
requirements"). The person (the "applicant") who, by lodging an Application Form
with payment, applies for the Open Offer Shares (the "relevant shares") and any
agent lodging such Application Form on his/her behalf shall thereby be deemed to
agree to provide Computershare with such information and other evidence as
Computershare may require to satisfy the verification of identity requirements.
If Computershare determines that the verification of identity requirements apply
to any application, the relevant shares will not be allotted to the applicant
(notwithstanding any other term of the Placing and Open Offer) until the
verification of identity requirements have been satisfied. If the verification
of identity requirements have not been satisfied within a reasonable period
following a request for evidence of identity the Company shall, at its sole
discretion, be entitled to elect to treat the relevant application as invalid,
in which event the monies paid by the applicant will be returned at his/her own
risk without interest to the account of the bank or building society on which
the relevant cheque or banker's draft was drawn.
Computershare shall be entitled, at its sole discretion, to determine whether
the verification of identity requirements apply to any applicant and whether
such requirements have been satisfied and neither Computershare nor the Company
will be liable to any person for any loss suffered or incurred as a result of
the exercise of such discretion.
If the verification of identity requirements apply, failure to provide the
necessary evidence or identity within a reasonable time may result in an
application being treated as invalid or in a delay in the despatch of a share
certificate or delivery of the relevant shares in CREST (as applicable).
17
The verification of identity requirements will not usually apply:
(a) if the applicant is an organisation required to comply with the EU Money
Laundering Directive (no. 91/308/EEC) or;
(b) if the applicant (not being an applicant who delivers his/her application
in person) makes payment by way of a cheque drawn on an account in the name
of such applicant; or
(c) if the aggregate subscription price for the relevant shares is less than
(Pounds)8,500.
In other cases the verification of identity requirements may apply. Satisfaction
of these requirements may be facilitated in the following ways:
(i) if payment is made by building society cheque (not being a cheque drawn on
an account in the name of the applicant) or banker's draft, by the building
society or bank endorsing on the cheque or banker's draft the applicant's
name and the number of an account held in the applicant's name at such
building society or bank, such endorsement being validated by a stamp and
an authorised signature;
(ii) if payment is not made by cheque or drawn on an account in the name of the
applicant and (i) above does not apply, the applicant should enclose with
his/her Application Form evidence of his/her name and address from an
appropriate third party; for example, a recent bill from a gas, electricity
or telephone company or a bank statement, in each case bearing the
applicant's name and address (originals of such documents (not copies) are
required which will be returned in due course); and
(iii) if the Application Form is lodged with payment by an agent which is an
organisation of the kind referred to in (a) above or which is subject to
anti-money laundering regulation in a country which is a member of the
Financial Action Task Force (the non-European Union members of which are
Argentina, Australia, Brazil, Canada, Gibraltar, Hong Kong, Iceland, Japan,
Mexico, New Zealand, Norway, Singapore, Switzerland, Turkey, UK Crown
Dependencies and the United States), the agent should provide with the
Application Form written confirmation that it has that status and that it
has obtained and recorded evidence of the identity of the person for whom
it acts and that it will on demand make such evidence available to
Computershare.
In order to confirm the acceptability of any written assurances referred to in
(iii) above or in any other case, the applicant should contact Computershare.
The telephone number is 0870 702 0100.
If (an) Application Form(s) in respect of Open Offer Shares with an aggregate
subscription price of (Pounds)8,500 or more is/are lodged by hand by the
applicant in person, he/she should ensure that he/she has with him/her his/her
evidence of identity bearing his/her photograph (for example his/her passport)
and evidence of his/her address.
If an Application Form is delivered by hand and the accompanying payment is not
the applicant's own cheque, the applicant should ensure that he/she has with
him/her evidence of identity bearing his/her photograph, for example a valid
full passport.
4. CREST
Although the Open Offer will be processed outside CREST, for the purposes of
calculating entitlements under the Open Offer, CREST and non-CREST shareholdings
will be treated independently. If a Qualifying Shareholder has both an
uncertified and certified shareholding in the Company, there will be two
separate Application Forms despatched in respect of such holdings.
Qualifying Shareholders holding their Ordinary Shares in certificated form will
be allotted all Open Offer Shares for which they validly apply in certificated
form. Qualifying Shareholders holding their Ordinary Shares in uncertificated
form will be allotted all Open Offer Shares for which they validly apply in
uncertificated form to the extent that their entitlement arises as a result of
their holding Ordinary Shares in uncertificated from.
Notwithstanding any other provision of this document or of the Application Form,
the Company reserves the right to allot and/or issue any Open Offer Shares in
certificated form. In normal circumstances, this right is only likely to be
exercised in the event of any interruption, failure or
18
breakdown of CREST (or any part of CREST), or on the part of the facilities and
/or systems operated by the Company's registrars in connection with CREST. This
right may also be exercised if the correct details in respect of bona fide
market claims (such as the Member Account ID and Participation ID details) are
not provided as requested on the Application Form.
Qualifying Shareholders who are CREST sponsored members should refer to their
CREST sponsor regarding the action to be taken in connection with this document
and the Open Offer.
For more information as to the procedure for application in each case,
Qualifying Shareholders are referred to the Application Form.
5. Overseas Shareholders
The making of the Open Offer to persons not resident in the United Kingdom or
who are citizens of countries other than the United Kingdom may be affected by
the laws or regulatory requirements of such relevant jurisdiction. No person
receiving a copy of this document and/or the Application Form in any territory
other than the United Kingdom may treat the same as constituting an invitation
or offer to him/her, nor should he/she in any event use such Application Form,
unless in the relevant territory such an invitation or offer could lawfully be
made to him/her and such Application Form could lawfully be used without
compliance with any registration or other legal or regulatory requirements other
than those which may have been fulfilled.
It is the responsibility of any person outside the United Kingdom wishing to
apply for any Open Offer Shares under the Open Offer to satisfy himself/herself
as to the full observance of the laws of the relevant territory in connection
therewith, including the obtaining of any governmental or other consents which
may be required and compliance with any other formalities needing to be observed
in such territory and payment of any issue, transfer or other taxes due in such
territory.
Persons (including, without limitation, nominees and trustees) receiving a copy
of this document and/or an Application Form in connection with the Open Offer
must not distribute or send either of these documents in or into the United
States, Canada, Australia, the Republic of Ireland, France or Japan or their
respective territories or possessions or any other jurisdiction where to do so
would or might contravene local securities laws or regulations (together the
"prohibited territories"). If a copy of this document and/or the Application
Form is received by a person in any of the prohibited territories or by his/her
agent or nominee of such a person, he/she must not seek to take up the Open
Offer Shares under the Open Offer. Any person who does forward a copy of this
document and/or the Application Form into any prohibited territory, whether
pursuant to a contractual or legal obligation or otherwise, should draw the
attention of the recipient to the contents of this letter.
Bright Station reserves the right to accept or reject in its absolute discretion
Application Forms received from persons in any prohibited territory or persons
it believes are acquiring Open Offer Shares for resale in any such territory. A
Shareholder who is in any doubt as to his/her position should consult an
appropriate professional adviser without delay. All payments must be made in
pounds sterling.
In particular, Shareholders should note the following:
United States and Canada
As the Open Offer Shares are not being registered under the United States
Securities Act of 1933 (as amended) and as the relevant exemptions are not being
obtained from the appropriate provincial authorities in Canada, the Open Offer
Shares are not being offered in or for purchase by persons resident in the
United States or Canada or any territory or possessions thereof ("North
America"). Applications from any North American person who appears to be or whom
Bright Station has reason to believe to be so resident or the agent of any
person so resident will be deemed to be invalid. No Application Form will be
sent to any Shareholder whose registered address is in North America. These
restrictions are subject to applicable exemptions under the United States
Securities Act of 1933 (as amended).
For the purposes of this document, "North American person" means a "US Person"
as defined in Regulation S of the United States Securities Act of 1933 (as
amended) or resident of North America
19
including the estate of any such person or any corporation, partnership or other
entity created or organised under the laws of North America or any state or
trust, the income of which is liable to United States Federal or Canadian income
tax regardless of its source or any political sub-division thereof.
Each distributor of New Ordinary Shares (including underwriters, dealers and all
other persons who receive remuneration in respect of securities sold during the
"distribution compliance period" (as such term is defined under Regulation S of
the United States Securities Act of 1933 (as amended)) shall agree in writing to
make all offers and sales of New Ordinary Shares during the "distribution
compliance period" only in accordance with Regulation S or an exemption under
the United States Securities Act of 1933 (as amended) or pursuant to an
effective registration statement under said act. In addition, each distributor
selling New Ordinary Shares to a distributor, dealer or a person receiving a
selling concession shall confirm to the purchaser that the purchase is subject
to the same restrictions on offers and sales that apply to such distributor.
Australia
No prospectus in relation to the Open Offer Shares has been lodged with, or
registered by, the Australian Securities and Investment Commission. A person may
not:
(a) directly or indirectly offer for subscription or purchase, or issue an
invitation to subscribe for or buy or sell, the Open Offer Shares; or
(b) distribute any draft or definitive document in relation to any such offer,
invitation or sale
in the Commonwealth of Australia, its states, territories or possessions
("Australia") or to any resident of Australia (including corporations and other
entities organised under the laws of Australia but not including a permanent
establishment of such a corporation or entity located outside Australia).
Accordingly, this document and the Application Form will not be issued to
Shareholders with registered addresses in, or to residents of, Australia.
Republic of Ireland
In order to comply with the laws of the Republic of Ireland, no Application
Forms will be sent to Qualifying Shareholders with registered addresses in the
Republic of Ireland.
France
This document has not been prepared in the context of a public offer of
securities in France within the meaning of Regulation No. 92.02 of the
Commission des Operations de Bourse (the "COB"), and has therefore not been
submitted to the COB for prior approval. It is made available on the condition
that it shall not be passed on to any person nor reproduced (in whole or part)
and that Qualifying Shareholders are investing for their own account and
undertake not to re-transfer, directly or indirectly, the Open Offer Shares to
the public in France, other than in compliance with applicable laws and
regulation(s).
Japan
The Open Offer is not being made in Japan and the Open Offer Shares will not be
available for purchase by any resident of Japan, including any corporations
organised under the laws of Japan.
Other overseas territories
Shareholders resident in other overseas territories should consult appropriate
professional advisers as to whether they require any governmental or other
consents or need to observe any further formalities to enable them to apply for
any Open Offer Shares.
6. Taxation
UK Taxation
The following paragraphs, which are intended as a general guide only and are
based on current legislation and Inland Revenue practice as at the date of this
document, summarise advice received by
20
the Directors of the Company as to the position of Shareholders who are resident
or ordinarily resident in the United Kingdom for tax purposes and who
beneficially hold their shares as investments rather than trading stock.
Shareholders who are in any doubt as to their tax position, or who are subject
to tax in a jurisdiction other than the United Kingdom, are strongly recommended
to consult their professional advisers.
Capital Gains Tax
The issue of the New Ordinary Shares by the Company will be regarded as a
reorganisation of the Company's share capital for the purposes of UK tax on
chargeable gains. Accordingly, to the extent that a Qualifying Shareholder takes
up Open Offer Shares, he or she will not be treated as making a disposal of his
or her corresponding holding of Ordinary Shares, Instead, his/her existing
holding of Ordinary Shares will generally be treated as a single asset ("New
Holding"), acquired at the time he/she acquired his/her existing holding of
Ordinary Shares. For the purpose of computing any gain or loss on a subsequent
disposal by a Shareholder of any Ordinary Shares comprised in his New Holding,
the subscription amount paid for the Open Offer Shares will be added to the base
cost of his/her existing holding(s) of Ordinary Shares.
For disposals on or after 6 April 1998, indexation allowance is available for
the purposes of corporation tax only and is not therefore available to
individuals, personal representatives or trustees. The following paragraphs
accordingly deal with the positions of corporate and non-corporate Qualifying
Shareholders:
(a) Corporate Qualifying Shareholders
Qualifying Shareholders who are within the charge to corporation tax will
continue to obtain the benefit of the indexation allowance on the Open
Offer Shares, although for the purposes of calculating the indexation
allowance on any disposal of any Open Offer Shares, the expenditure
incurred in subscribing for the Open Offer Shares will be treated as
incurred only when the Qualifying Shareholder became liable to make or made
payment, not at the time the original Ordinary Shares were acquired.
(b) Non-corporate Qualifying Shareholders
For disposals on or after 6 April 1998 by individuals, personal
representatives or trustees the indexation allowance was frozen by
reference to the Retail Prices Index at April 1998 (although indexation
allowance for holding periods up to then was preserved) and was replaced by
a system of taper relief. Taper relief operates by reducing the amount of
any chargeable gain realised on the disposal of assets (after indexation
allowance, if available) by a percentage amount that is dependent on the
period of ownership of the relevant asset since April 1998 and on whether
that asset qualifies for the business or non-business rate of taper. The
period of ownership (since 6 April 1998) of the existing holding of
Ordinary Shares is taken into account when assessing the availability of
taper relief.
Taxation of Dividends
There is no United Kingdom withholding tax on dividends and, since 6 April 1999,
no advance corporation tax.
An individual shareholder who is resident (for tax purposes) in the United
Kingdom and who receives a dividend paid by the Company currently will be
entitled to receive a tax credit equal to 10 per cent of the combined total of
the dividend paid and the tax credit. An individual will be taxable upon the
total of the dividend and the related tax credit which will be regarded as the
top slice of the individual's income. An individual who is not liable to income
tax at a rate greater than the basic rate (currently 22 per cent) will pay tax
on the dividend and the related tax credit at the Schedule F ordinary rate
(currently 10 per cent). Accordingly, the tax credit will be treated as
satisfying the individual's liability to income tax in respect of the dividend.
If the dividend and related tax credit (taken together with other taxable
income) exceeds the individual's threshold for the higher rate of income tax the
individual will, to that extent, pay tax on the dividend and related tax credit
at the Schedule F upper rate (currently 32.5 per cent). Accordingly, an
individual who is a higher rate taxpayer will have further income tax to pay at
the rate of 22.5 per cent on the dividend and related tax credit (equivalent to
25 per cent of the net dividend). Tax credits are generally no longer repayable
to shareholders with no tax liability.
21
Subject to exceptions for certain insurance companies and companies which hold
shares as trading stock, a shareholder which is a company resident (for tax
purposes) in the United Kingdom and which receives a dividend paid by the
Company will not be liable to corporation tax or income tax on the dividend.
Subject to certain exceptions for Commonwealth citizens, citizens of the
Republic of Ireland, residents of the Isle of Man or the Channel Islands,
nationals of states which are part of the European Economic Area and certain
others, the right of a shareholder who is not resident (for tax purposes) in the
United Kingdom to claim payment of any part of the tax credit in respect of a
dividend received from the Company will depend on the existence and terms of any
double tax treaty between the United Kingdom and the country in which the holder
is resident. Generally, an individual or corporate shareholder who holds less
than 10 per cent. of the voting shares of the Company will not be entitled to
payment of any part of the tax credit. However, corporate shareholders which
hold 10 per cent. or more of the voting shares of the Company may be able to
claim payment of part of the tax credit. Such amount will normally be very
small, typically one quarter of one per cent. Shareholders who are not resident
in the United Kingdom for tax purposes should consult their own tax advisers
concerning their tax liabilities on dividends received, whether they are
entitled to claim any part of the tax credit and, if so, the procedure for doing
so. Non-United Kingdom resident shareholders may also be subject to taxation on
dividends in their country of tax residence.
7. Admission, dealings and settlement
Application has been made to the UK Listing Authority and to the London Stock
Exchange for the New Ordinary Shares to be admitted respectively to (i) the
Official List and (ii) the London Stock Exchange's market for listed securities.
Subject to the Placing and the Open Offer becoming unconditional in all
respects, it is expected that Admission will become effective and that dealings
in the New Ordinary Shares, fully paid, will commence on 9 July 2001.
Subject to the satisfaction of the conditions of the Open Offer, the Open Offer
Shares will be registered in the names of those Qualifying Shareholders validly
applying for them and issued as applicable either:
(a) in certificated form with the relevant share certificate expected to be
despatched by post, at the applicant's risk by 12 July 2001; or
(b) in CREST, with delivery (to the designated CREST account) of the Open Offer
Shares applied for expected to take place by 10 July 2001 unless the
Company exercises its right to issue such Open Offer Shares in certificated
form.
No temporary documents of title will be issued. All documents or remittances
sent by or to an applicant, or as he/she may direct, will be sent through the
post at his/her risk. Pending the despatch of definitive share certificates,
instruments of transfer will be certified against the register.
8. Holders of options over Ordinary Shares under the Share Option Schemes
The Open Offer is not being extended to holders of options over Ordinary Shares
under the Share Option Schemes or to warrant holders.
9. Further information
Your attention is drawn to the additional information set out in this document
and to the terms and conditions set out in the enclosed Application Form.
22
PART III
RISK FACTORS
Investment in shares in the Company ("Investment") is high risk speculation, for
which no compensation scheme is available, and should only be undertaken by
investors who can afford to lose their entire investment. As such, Investment
will not be suitable for all investors and the Directors and Proposed Directors
recommend that potential investors consult an independent financial advisor
prior to making any decision to invest. The Directors and Proposed Directors
particularly recommend consideration of the risk factors listed below although
this list is not, and is not intended to be, exhaustive.
1. Share price performance
The value of shares in the Company may go down as well as up and may not reflect
the value of the Company's underlying assets. The Issue Price should not be
relied on as an indication of the market price of the Company's Ordinary Shares
following Completion of the Proposals, which could fall as a result of the
material dilution of existing Shareholders as a result of the Placing and Open
Offer. Sales by substantial Shareholders immediately, or some time after
Completion of the Proposals, or the dilutive effect of possible future financing
rounds, may also lead to share price falls.
The share price may be volatile given the potential volatility of the Company's
operational results, and unpredictable market sentiment towards technology
stocks, which may be determined by reference to the performance of comparable
companies and other factors which may be outside the control of the Directors
and Proposed Directors.
The Company does not have any distributable reserves and is unable to pay
dividends for the foreseeable future.
2. Operational performance
Smartlogik has a limited, loss-making operational history which provides little
assistance to potential investors in, and gives no guarantee of future
performance for, assessing the Group's prospects. The Group is expected to
continue to make losses and remain cash flow negative, at least in the short
term, and there is no guarantee that the Group will achieve profitability.
The Group's performance expectations are based on forecasts and estimates and
targets which, although the Directors and Proposed Directors believe them to be
reasonable, may not be achieved. The nature of the Group's operations, and
rapidly evolving, immature market, may result in fluctuating and unpredictable
performance, leading to failure to meet analysts' expectations. In particular,
the Group's revenue growth expectations rely heavily upon the continued growth
of the Internet and knowledge management markets, which are subject to a large
number of uncertainties many of which may not now even have been considered. In
addition, the Group may fail sufficiently to understand customer requirements,
maintain product quality, increase the value and profile of its brand, or
achieve anticipated price increases. The nature of the Group's revenues makes
performance susceptible to the loss of key customers.
The Group's strategy for achieving revenue growth is highly dependent upon its
strategy of international, and particularly US, expansion. This strategy is
unpredictable and may fail as a result, inter alia, of the Group's limited
experience of international operations, established competitors, the potential
for different technical evolution and growth rates in foreign markets, foreign
exchange risk and multi-jurisdictional legal risks.
The Group's costs are also unpredictable, and there is a risk that the Group
will fail to control these, or that cost control may have an adverse impact upon
growth. Further, the restructuring which the Group is currently implementing may
not be successful, or future acquisitions may not be effectively integrated,
with adverse implications for costs, revenues and performance.
23
3. Competition and strategy
While the Directors and Proposed Directors believe that the Group currently
derives competitive advantage from product tailoring and differentiation, the
market in which the Group operates is characterised by intense competition and
rapidly changing technology. The Group's strategy may prove unsuccessful in the
face of new entrants or the unforeseen actions of existing competitors,
particularly those which are financially stronger. Moreover, the Group's
existing strategy may be negated, or required to change completely, by currently
unanticipated market, technological or other developments. The Group's
technology position may be surpassed by that of new or existing competitors.
The Group's distribution strategy relies in part on the achievement of
agreements with OEMs and strategic partners, which may not be achieved or which
may result in the Group taking on unforeseen warranty, after-sales support or
other liabilities. In addition, the use of sales intermediaries exposes the
Group's brand to damage caused by the actions of any of the Group's partners or
distributors.
4. Infrastructure and employees
The Group depends for the delivery of its services upon the efficient
functioning of its computer hardware and software infrastructure, and the
continued goodwill and performance of its employees. The Group's infrastructure
or employees may not have the capacity to meet current targets, or the Group may
be unable to obtain sufficient additional resources to meet its future needs,
and this may act as a constraint on growth, or cause permanent damage to the
Group's brand and, consequently, performance.
Smartlogik is particularly reliant upon its Chief Executive, Stephen Hill, Chief
Financial Officer, Simon Canham, and Yvonne Jacklin, Development and Customer
Service Director. While every effort has been made to mitigate the potential
damage caused by their departure by offering appropriate incentive packages,
there can be no guarantee that they will remain with the Group. The Company
intends to take out keyman insurance on Stephen Hill, Simon Canham and Yvonne
Jacklin as soon as practicable post-Completion, but there can be no guarantee
that insurance would fully indemnify the Group against the impact of their
departure.
One key area of the Group's systems is its ability to ensure the security and
privacy of client information. Failure of the systems to ensure this, either as
a result of system breakdown, or unforeseen technical advances which render the
Group's systems inadequate, would have a materially adverse impact on the
Group's brand and, consequently, future performance.
5. Intellectual property rights
Smartlogik's key products are currently based on proprietary software which has
been developed in-house or purchased from external sources. The rights to this
software are protected by copyright and certain confidential know-how and
patents. There can be no guarantee, however, that these will provide sufficient
protection either in domestic or overseas markets. In particular, there is a
risk that the Group's strategic partners, or employees, may use knowledge gained
from the Group to produce competing technologies, or that existing or future
competitors may achieve similar technologies by different development routes.
Certain of the Group's Muscat software is based on publicly available research.
It is also possible that the Group may be shown not to have good title to its
proprietary assets, either as a result of a previous owner not having good
title, or because of claims made by in-house developers for rights over software
in the development of which they were involved. Any diminution in the Group's
rights over its intellectual property may have severe adverse consequences for
performance and may prevent the Group from continuing in operation. Moreover,
any lawsuits necessary to protect the Group's intellectual property may prove
highly expensive and cause permanent damage to the Group's brands.
24
6. Legislation and regulation
The Internet is being increasingly regulated. The Group's performance may in the
future be adversely affected by the introduction of, inter alia, new regulations
in areas of the Group's activities which are currently regulated, regulations in
areas which are not currently regulated and regulations in areas in which the
Group may participate at some time in the future, or on which the Group's
activities are contingent. It is also possible that the Group may have legal
liability for content accessed by its software.
7. Additional funding requirements
The Company currently intends to use the proceeds of the Placing and Open Offer
to meet operational cash flow requirements until the achievement of positive
cash flow.
There can be no guarantee, however, that the proceeds will prove sufficient to
achieve positive cash flow. Any of the factors listed above, including but not
restricted to unexpected cost increases, failure to meet revenue targets or the
need to make corporate acquisitions, may result in additional funding being
required at some point in the future. Any such future funding may not be
available on commercially reasonable terms, if at all, and may involve
shareholders suffering substantial dilution or other cost.
Capital constraints imposed by lack of available funding may cause management to
scale back expenditure which is necessary to achieve growth and market share
targets, in particular on marketing and the development of new products. Any
such cut backs may have a material adverse, and permanent, effect on the
Company's performance.
25
PART IV
UNAUDITED INTERIM CONSOLIDATED RESULTS OF BRIGHT STATION
FOR THE QUARTER ENDED 31 MARCH 2001
Set out below is the text of Bright Station's 2001 first quarter results
announcement released on 31 May 2001.
"Bright Station plc Q1 2001 Results Announcement
London, 31 May 2001, Bright Station plc today announced its first quarter
results for the three month period ending 31 March 2001, which follows on from
the Board's recent statements relating to the Group's restructuring and today's
announcement regarding additional funding for the Group.
Consistent with the revised strategy outlined in the Board's announcement of
30th April 2001, the attached statement of results reflects the fact that our
eCommerce businesses, comprising Sparza and OfficeShopper, will be either closed
or sold, in order to reposition the Group as a pure play knowledge management
company through its Smartlogik subsidiary.
Today, the Company announced that it had secured placing commitments from
institutional investors to raise approximately (Pounds)12 million (net of
expenses) through the issue of 270,000,000 New Ordinary Shares at 5 (pence) each
through a Placing and Open Offer. As a result, the Company expects to be in a
position to fully implement the restructuring.
As a consequence, these results now show the eCommerce operations as
discontinued. The results also include a significant level of overhead relating
to corporate staff, currently being deployed to manage the funding and Group
restructuring plans, which on completion will render the majority of these
individuals redundant.
In addition, the proposed restructuring has necessitated the restatement of
certain of the 31 December 2000 results. Details of these restatements are
included in note 2.
Group revenues for continuing operations for the quarter of (Pounds)2.3 million
reflected an 18 per cent increase over Q4 2000 and a 108 per cent increase
over Q1 2000. Operating loss for the quarter was (Pounds)6.1 million, of which
(Pounds)4.4 million related to continuing operations. In addition, a (Pounds)0.2
million charge was written off against the carrying value of investments.
The increase in revenues was principally driven by Smartlogik which continues to
leverage the sales and marketing infrastructure put in place towards the end of
2000. Smartlogik announced important strategic relationships with Intel
Corporation and Norcontrol during the quarter, and with IBM since the quarter
end. Smartlogik has continued to secure new customers, including Virgin Group,
the Danish Foreign Ministry and others. Its client list now includes over 100
corporations and organisations.
As at 31 March 2001, cash at bank was (Pounds)7.4 million compared to a net
current asset position of (Pounds)5.6 million. On 2 May 2001, the Board
announced that cash balances as at the end of April amounted to (Pounds)2.9
million and that the Board was taking radical action to reduce significantly the
level of operational cash outflows for the remainder of the quarter. The rate of
decline in cash reserves during April was in part attributable to accelerated
payments to settle creditor liabilities coupled with slower than anticipated
cash collection of receivables.
Cash outflows in the month of April also included the final payment of
(Pounds)450,000 in deferred consideration for Write Works Ltd, in addition to
costs incurred in relation to the Group's reorganisation of its WebTop
operations which were transferred to Smartlogik on 8 May 2001.
On 9 May 2001, the Board announced that it had entered into a legally binding
agreement regarding the sale of the name, customer list and debtor book of
OfficeShopper, its online office supplies company, to Inkwell Direct, a division
of the Howarine Calvert group of companies.
26
The only non-core business remaining within the Group is Sparza, where the cost
base has been reduced and plans made for its closure. During the past month
corporate overheads have also been curtailed, and the corporate centre is now
focused exclusively on completing the restructuring for the ongoing business,
Smartlogik.
Allen Thomas, Chairman of Bright Station, said:
"Smartlogik, the business around which the company is currently being
restructured, continues to trade satisfactorily, despite the disruption that the
current process inevitably causes.
Today's funding announcement shows institutional endorsement of the Smartlogik
business and management and we are confident that Smartlogik will be able to
deliver value to our shareholders under the revised corporate structure."
BRIGHT STATION PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
For the 3 months ended 31 March 2001
Restated
-------------------------------------------
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
2001 2001 2001 2000 2000 2000
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Turnover 2,293 748 3,041 1,102 38,751 39,853
Cost of sales (262) (420) (682) (146) (17,377) (17,523)
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit 2,031 328 2,359 956 21,374 22,330
Distribution costs (1,711) (175) (1,886) (210) (5,835) (6,045)
Administrative expenses (4,685) (1,918) (6,603) (1,051) (15,755) (16,806)
- -----------------------------------------------------------------------------------------------------------------------------
Operating loss (4,365) (1,765) (6,130) (305) (216) (521)
Loss on disposal of ISD - - - - (106,045) (106,045)
- -----------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities after
exceptional items (4,365) (1,765) (6,130) (305) (106,261) (106,566)
- ---------------------------------------------------------------- ----------------------------
Interest receivable 143 80
Amounts written off investments (181) -
Interest payable (3) (4,695)
- -----------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities before
taxation (6,171) (111,181)
Taxation on loss on ordinary activities - (282)
- -----------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities after
taxation (6,171) (111,463)
Minority equity interests - (21)
- -----------------------------------------------------------------------------------------------------------------------------
Retained loss (6,171) (111,484)
- -----------------------------------------------------------------------------------------------------------------------------
Loss per share (pence) (3.6) (71.9)
- -----------------------------------------------------------------------------------------------------------------------------
Shares used in computing loss per
share (thousands) 172,615 155,061
- -----------------------------------------------------------------------------------------------------------------------------
27
BRIGHT STATION PLC
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As of 31 March 2001
31 March 31 December
2001 2000
(Pounds)'000 (Pounds)'000
Fixed assets
Goodwill 2,335 2,364
Tangible assets 1,908 1,445
Investments 600 600
- ---------------------------------------------------------------------------------------------------------------------
4,843 4,409
- ---------------------------------------------------------------------------------------------------------------------
Current assets
Debtors 4,748 3,310
Cash at bank and in hand 7,414 16,334
- ---------------------------------------------------------------------------------------------------------------------
12,162 19,644
Creditors (amounts falling due within one year) (6,537) (7,354)
- ---------------------------------------------------------------------------------------------------------------------
Net current assets 5,625 12,290
- ---------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 10,468 16,699
Creditors (amounts falling due after more than one year) (17) (17)
- ---------------------------------------------------------------------------------------------------------------------
10,451 16,682
- ---------------------------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 1,726 1,726
Share premium account 184,057 184,057
Shares to be issued 134 134
Profit and loss account (175,466) (169,235)
- ---------------------------------------------------------------------------------------------------------------------
Total equity shareholders' funds 10,451 16,682
- ---------------------------------------------------------------------------------------------------------------------
Certain adjustments have been made to the carrying amount of certain fixed
assets in the balance sheet as at 31 December 2000 as the result of the ongoing
restructuring of the Group. These are detailed in note 2.
28
BRIGHT STATION PLC
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the 3 months ended 31 March 2001
2001 2000
(Pounds)'000 (Pounds)'000
Net cash (outflow)/inflow from operating activities (8,072) 2,770
- --------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 172 64
Interest paid on bank loans and overdrafts - (1,472)
Interest paid on finance leases - (5)
- --------------------------------------------------------------------------------------------------------------------
172 (1,413)
- --------------------------------------------------------------------------------------------------------------------
Taxation paid (61) (120)
- --------------------------------------------------------------------------------------------------------------------
Capital expenditure
Payments to acquire intangible assets - (2,008)
Payments to acquire tangible fixed assets (775) (354)
Payments to acquire fixed asset investments (175) -
- --------------------------------------------------------------------------------------------------------------------
(950) (2,362)
- --------------------------------------------------------------------------------------------------------------------
Cash outflow before the use of liquid resources and financing (8,911) (1,125)
- --------------------------------------------------------------------------------------------------------------------
Financing
Net proceeds on issue of Ordinary share capital - 84
Debt due within one year
- - Repayment of loans - (3,701)
- - Repayment of capital element of finance leases - (642)
- --------------------------------------------------------------------------------------------------------------------
- (4,259)
- --------------------------------------------------------------------------------------------------------------------
Decrease in cash (8,911) (5,384)
- --------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
Decrease in cash in the period (8,911) (5,384)
Cash used to decrease lease financing - 642
Cash used to repay loans - 3,701
- --------------------------------------------------------------------------------------------------------------------
Change in net debt from cash flows (8,911) (1,041)
Other non-cash changes - (249)
Effect of foreign exchange rate changes - 520
- --------------------------------------------------------------------------------------------------------------------
Movement in net funds/(debt) in period (8,911) (770)
Net funds/(debt) at beginning of period 16,297 (154,126)
- --------------------------------------------------------------------------------------------------------------------
Net funds/(debt) at end of period 7,386 (154,896)
- --------------------------------------------------------------------------------------------------------------------
29
BRIGHT STATION PLC
For the 3 months ended 31 March 2001 (unaudited)
1. Analysis of Revenues
2000 2001
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Qtr 1
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Continuing operations
Smartlogik 691 994 1,017 1,441 4,143 1,746
Other 411 419 476 498 1,804 547
--------- ---------- -------- --------- --------- ---------
Total continuing operations 1,102 1,413 1,493 1,939 5,947 2,293
Discontinued operations 38,751 11,294 875 775 51,695 748
--------- ---------- --------- --------- --------- ---------
Total revenues 39,853 12,707 2,368 2,714 57,642 3,041
========= ========== ========= ========= ========= =========
2. Post 31 December 2000 balance sheet events
On 28 February 2001, the Company made its preliminary announcement of its
results for the year ended 31 December 2000. The loss before tax for the year
was (Pounds)128,944,000.
This loss has been adjusted as follows:
(Pounds)'000
Original loss before tax per preliminary announcement (128,944)
Impairment adjustment (see below) (2,249)
Reclassification of capital development costs relating to ISD (501)
------------
Loss before tax (131,694)
============
On 30 April 2001 the Group announced its intention to refocus its business
operations with the resultant sale or closure of its e-commerce activities,
comprising officeshopper and Sparza, and curtailment of head office activities.
The decision to refocus the activities of the business as described above
provided evidence of an impairment in value that had occurred prior to the
balance sheet date. An impairment review of the carrying value of the fixed
assets held in the balance sheet at 31 December 2000 has been performed and an
adjustment to the carrying value was made as above.
The impairment of fixed assets was calculated as follows:
Carrying
Original value
2000 adjustments 2000
(Pounds)'000 (Pounds)'000 (Pounds)'000
FIXED ASSETS
Intangible assets 295 (295) -
Goodwill 2,621 (257) 2,364
Tangible assets 2,398 (953) 1,445
Investments 1,344 (744) 600
------------ ------------ ------------
6,658 (2,249) 4,409
============ ============ ============
A change was also made to the exceptional loss on the disposal of ISD as a
result of reclassification of capitalised development costs. The effect of this
change has also been detailed above.
30
BRIGHT STATION PLC
For the 3 months ended 31 March 2001 (unaudited)
3. Reconciliation of operating loss to net cash (outflow)/inflow from
operating activities
31 March 31 March
2001 2000
(Pounds)'000 (Pounds)'000
Operating loss (6,130) (521)
Depreciation charges 307 1,501
Amortisation of goodwill 32 -
Amortisation of development costs - 2,878
Profit on disposal of intangible fixed assets - (56)
Loss on disposal of fixed asset investments - 93
Loss on disposal of tangible fixed assets 3 1
Increase in debtors (1,719) (1,448)
(Decrease)/increase in creditors (546) 6,420
Exchange variances (19) (4,257)
Cash cost of restructuring - (73)
Other working capital movements - (5)
Other adjustments for non-cash items - (1,763)
------------ ------------
Net cash (outflow)/inflow from operating activities (8,072) 2,770
------------ ------------
4. Discontinued activities
The quarterly financial statements for the 3 months ending 31 March 2001 have
been restated to reflect the reclassification of the e-commerce business,
comprising Sparza and OfficeShopper, as discontinued.
5. Administrative expenses
Administrative expenses for the quarter ending 31 March 2001 include non-
recurring costs relating to the Group restructuring.
6. Post Balance Sheet events
Disposal of OfficeShopper assets
On 9 May 2001, the board announced that it had entered into a legally binding
agreement regarding the sale of the name, customer list and debtor book of
OfficeShopper, its online office supplies company, to Inkwell Direct, a division
of the Howarine Calvert group of companies for consideration of up to
(Pounds)450,000, payable in cash.
Placing and Open Offer
On 31 May 2001, the Group announced its proposed Placing and Open Offer of
270,000,000 new shares of 1p each subject to approval by shareholders at an
Extraordinary General Meeting of the Company. The estimated proceeds of the
Placing and Open Offer of approximately (Pounds)12 million net of expenses, are
required for the Group to be able to continue in operational existence for the
foreseeable future.
These results are unaudited and do not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The financial statements for
the year ended 31 December 1999 have been reported on by PricewaterhouseCoopers,
and delivered to the Registrar of Companies. The audit report for the year ended
31 December 1999 was not qualified and neither did it contain any statements
under Section 237(2) or (3) of the Companies Act 1985. The auditors expect to
issue an unqualified, but modified opinion for the year ended 31 December 2000.
The modified opinion is expected to contain an explanatory paragraph relating to
a fundamental uncertainty concerning the going concern basis of preparation for
the financial statements being dependent upon the successful completion of the
Placing and Open Offer."
31
PART V
OTHER FINANCIAL INFORMATION ON BRIGHT STATION
A. NATURE OF FINANCIAL INFORMATION
The financial information set out in this Part V has been extracted without
material adjustment from the audited consolidated financial statements of Bright
Station for the financial years ended 31 December 2000 and 31 December 1999. It
represents profit and loss accounts and cash flow statements and associated
notes for the three years ended 31 December 2000, balance sheets as at 31
December 1998, 1999 and 2000, and associated notes as at 31 December 1999 and
2000. However, some notes to the financial statements in relation to the parent
company and share options have been excluded.
The financial information concerning Bright Station does not constitute
statutory accounts within the meaning of section 240 of the Act. The financial
statements for the year ended 31 December 2000 have been reported on by the
Company's auditors, PricewaterhouseCoopers, but have not been delivered to the
Registrar of Companies. The financial statements for the years ended 31 December
1999 and 31 December 1998 have been reported on by PricewaterhouseCoopers, and
delivered to the Registrar of Companies. The audit report for the year ended 31
December 2000, while unqualified contains an explanatory paragraph making
reference to a fundamental uncertainty concerning the going concern basis of
preparation of the financial statements being dependent upon the successful
completion of the Placing and Open Offer as follows:
"Fundamental Uncertainty: Going Concern
In forming our opinion, we have considered the adequacy of the disclosures made
in the financial statements concerning the basis of preparation. The financial
statements have been prepared on the going concern basis and the validity of
this depends on the successful execution of the restructuring plan and the
Company receiving the anticipated (Pounds)12.0 million of funds (net of
expenses) from the Placing and Open Offer, which is conditional, inter alia, on
approval by the shareholders at an Extraordinary General Meeting. The financial
statements do not include any adjustments that would result from failure to
obtain such funds. Details of the circumstances relating to this fundamental
uncertainty are described in Note 1 to the financial statements. Our opinion is
not qualified in this respect."
The audit reports for the years ended 31 December 1998 and 31 December 1999 were
unqualified. None of the audit reports contained any statements under section
237(2) or (3) of the Companies Act 1985.
The comparative figures for the year ending 31 December 1999 as disclosed in the
financial statements for the year ending 31 December 2000 have been restated to
reflect a change in accounting policy as regards the treatment of research and
development costs relating to the non-ISD businesses. See Note 1 Accounting
policies for further details. Despite the restatement there has been no material
change in the results for the year ending 31 December 1999.
Amounts disclosed for the year ended 31 December 1999 in respect of amounts
written off investments and discontinued activities have been re-presented to
conform with the presentation adopted for the year ended 31 December 2000.
Due to the restatement discussed above the financial information has been
presented in two formats. The profit and loss account provided in Section B
details the results as disclosed in the financial statements for the year ended
31 December 2000 including the restated 1999 financial information.
The profit and loss account provided in Section C details the results as
disclosed in the financial statement for the year ended 31 December 1999
including the 31 December 1999 and 1998 results as originally presented in the
annual report. This 1999 information is presented as 'original 1999'.
The balance sheet and cash flow statement are presented in four columns
including both the restated and original 1999 figures.
Continuing operations for the years ended 31 December 2000 comprise the Web
Services Division (including the Smartlogik businesses), the eCommerce division,
the Ventures division and Head Office.
Discontinued operations represent the ISD operations disposed of during the year
ended 31 December 2000.
32
B. CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the years ended 31 December 2000 and 1999
Restated
--------------------------
Continuing Discontinued Continuing Discontinued
Notes Operations Operations Total Operations Operations Total
2000 2000 2000 1999 1999 1999
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Turnover 2 8,498 49,144 57,642 9,319 165,133 174,452
Cost of sales (2,044) (22,100) (24,144) (1,389) (66,785) (68,174)
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 6,454 27,044 33,498 7,930 98,348 106,278
Distribution costs (2,646) (7,613) (10,259) (1,144) (20,974) (22,118)
Administrative expenses
---------------------------------------------- ---------------------------------------
Recurring | (21,875) (15,789) (37,664)| | (8,290) (47,483) (55,773)|
Exceptional provision for | | | |
diminution in value of goodwill | (4,084) - (4,084)| | - - - |
Amortisation of development costs | - (3,656) (3,656)| | - (9,142) (9,142)|
---------------------------------------------- ---------------------------------------
Total administrative expenses (25,959) (19,445) (45,404) (8,290) (56,625) (64,915)
- -----------------------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit before ---------------------------------------------- ---------------------------------------
exceptional item 2,4| (18,067) (14) (18,081)| | (1,504) 20,749 19,245 |
Exceptional item | (4,084) - (4,084)| | - - - |
---------------------------------------------- ---------------------------------------
Operating (loss)/profit (22,151) (14) (22,165) (1,504) 20,749 19,245
Loss on disposal of ISD 5 - (101,688) (101,688) - - -
Loss on termination of subsidiary 5 - - - - (911) (911)
- ---------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities (22,151) (101,702) (123,853) (1,504) 19,838 18,334
======== ========= ======= ======
Interest receivable 762 305
Amounts written off investments 7 (1,944) (4,619)
Interest payable and similar charges 8 (6,659) (18,366)
- ---------------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities before
taxation (131,694) (4,346)
Taxation on (loss) on
ordinary activities 10 (271) (1,478)
- ---------------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities after
taxation (131,965) (5,824)
Minority equity interests (37) (50)
- ---------------------------------------------------------------------------------------------------------------------------------
Retained deficit 24 (132,002) (5,874)
- -----------------------------------------------------------------------------------------------------------------------------------
Loss per share (pence) 11 (79.2) (3.9)
- -----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED LOSSES GAINS AND
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Loss for the financial year (132,002) (5,874)
Consolidated translation differences on foreign
currency net investments (4,008) (5,491)
- -----------------------------------------------------------------------------------------------------------------------------------
Total recognised losses for the financial year (136,010) (11,365)
Prior year adjustment (776)
- ---------------------------------------------------------------------------------------------------------------
Total losses since last annual report (136,786)
- ---------------------------------------------------------------------------------------------------------------
The prior year adjustment results from the change in accounting policy relating
to development costs (see note 1).
The profit and loss accounts shown above have been prepared on a historical cost
basis.
33
C. CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the years ended 31 December 1999 and 1998
Original
1999 1998
Notes (Pounds)'000 (Pounds)'000
Turnover 2 174,452 170,762
Cost of sales (68,174) (71,618)
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 106,278 99,144
Distribution costs (22,118) (21,560)
Administrative expenses (54,677) (46,798)
Amortisation/write-off of development costs 10,11 (9,749) (7,760)
Amounts written off investments 7 (4,619) (2,300)
- -----------------------------------------------------------------------------------------------------------------------
Operating profit 2,4 15,115 20,726
Exceptional item - provision for closure of business 5 (911) -
Exceptional item - gain on sale of fixed asset investments 5 -
Interest receivable 305 205
Interest payable and similar charges 8 (18,366) (17,436)
- -----------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities before taxation (3,857) 5,564
Taxation on (loss)/profit on ordinary activities 10 (1,478) (769)
- -----------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities after taxation (5,335) 4,795
Minority equity interests 26 (50) (356)
- -----------------------------------------------------------------------------------------------------------------------
Retained (deficit)/profit 24 (5,385) 4,439
- -----------------------------------------------------------------------------------------------------------------------
(Loss)/earnings per share (pence) 11 (3.5) 2.9
Fully diluted (loss)/earnings per share (pence) 11 2.7
- -----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
the years ended 31 December 1999 and 1998
Original
1999 1998
(Pounds)'000 (Pounds)'000
(Loss)/gain for the financial year (5,385) 4,439
Consolidated translation differences on foreign currency net investments (5,491) 680
- -----------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses for the financial year (10,876) 5,119
- -----------------------------------------------------------------------------------------------------------------------
The profit and loss accounts shown above have been prepared on a historical cost
basis.
34
D. CONSOLIDATED BALANCE SHEET
as at December 2000, 1999 and 1998
Restated Original
2000 1999 1999 1998
Notes (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Fixed assets
Intangible assets 12 - 26,254 27,030 23,154
Goodwill 13 2,364 9,805 9,805 7,676
Tangible assets 14 1,445 14,338 14,338 17,870
Investments 15 600 9,635 9,635 12,354
- ---------------------------------------------------------------------------------------------------------------------------
4,409 60,032 60,808 61,054
- ---------------------------------------------------------------------------------------------------------------------------
Current assets
Stock - 60 60 221
Debtors 16 3,310 36,690 36,690 42,781
Assets held for resale - - - 992
Cash and bank deposits 16,334 10,521 10,521 4,494
- ---------------------------------------------------------------------------------------------------------------------------
19,644 47,271 47,271 48,488
Creditors (amounts falling due within one year) 17 (7,354) (71,574) (71,574) (58,845)
- ---------------------------------------------------------------------------------------------------------------------------
Net current assets/(liabilities) 12,290 (24,303) 24,303 (10,357)
- ---------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 16,699 35,729 36,505 50,697
Creditors (amounts falling due after
more than one year) 18 (17) (137,370) (137,370) (139,741)
Provisions for liabilities and charges 19 - (1,430) (1,430) (4,697)
- ---------------------------------------------------------------------------------------------------------------------------
Net assets/(liabilities) 16,682 (103,071) (102,295) (93,741)
- ---------------------------------------------------------------------------------------------------------------------------
Capital and reserves - equity
Called up share capital 21 1,726 1,549 1,549 1,514
Share premium account 22 184,057 154,949 154,949 152,128
Shares to be issued 23 134 967 967 967
Profit and loss account 24 (169,235) (261,079) (260,303) (249,427)
- ---------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 25 16,682 (103,614) (102,838) (94,818)
Minority equity interest 26 - 543 543 1,077
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' funds 16,682 (103,071) (102,295) (93,741)
- ---------------------------------------------------------------------------------------------------------------------------
35
E. CONSOLIDATED CASH FLOW STATEMENT
for the years ended 31 December 2000, 1999 and 1998
Restated Original
2000 1999 1999 1998
Notes (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Net cash (outflow)/inflow from
operating activities 28 (11,229) 32,807 33,583 34,151
- ----------------------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 782 303 303 205
Interest paid on bank loans and overdrafts (7,798) (16,945) (16,945) (15,251)
Interest paid on finance leases (25) (106) (106) (46)
- ----------------------------------------------------------------------------------------------------------------------------------
(7,041) (16,748) (16,748) (15,092)
- ----------------------------------------------------------------------------------------------------------------------------------
Taxation paid (248) (911) (911) (349)
- ----------------------------------------------------------------------------------------------------------------------------------
Capital expenditure
Payments to acquire and develop intangible assets (2,896) (11,402) (12,178) (11,762)
Payments to acquire tangible fixed assets (2,747) (4,536) (4,536) (7,223)
Payments to acquire fixed asset investments (1,824) - - -
Receipts from sale of tangible fixed assets 99 78 78 211
- ----------------------------------------------------------------------------------------------------------------------------------
(7,368) (15,860) (16,636) (18,775)
- ----------------------------------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings (257) - - (965)
Cash impact of revisions to fair values - - - (2,284)
Payments to acquire minority interests in a
subsidiary undertaking - (428) (428) (1,720)
Net cash acquired with subsidiary undertakings - - - (33)
Investment in joint venture - (1,235) (1,235) (1,086)
Expenses in connection with purchase of
subsidiary undertakings - - - (471)
Proceeds from sale of assets held for resale/investment 2,537 777 777 7,123
Expenses in connection with the sale of assets held for resale - (303) (303) -
Payment of deferred consideration (1,430) - - -
Cash transferred with sale of ISD (4,813) - - -
Expenses in relation to sale of ISD (4,910) - - -
Proceeds from sale of ISD 185,474 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
176,601 (1,189) (1,189) 564
- ----------------------------------------------------------------------------------------------------------------------------------
Cash inflow/(outflow) before the use of liquid resources
and financing 150,715 (1,901) (1,901) 500
- ----------------------------------------------------------------------------------------------------------------------------------
Management of liquid resources
Cash withdrawn from deposit 29 - - - 620
- ----------------------------------------------------------------------------------------------------------------------------------
Financing
Net proceeds on issue of Ordinary Share Capital 28,299 142 142 458
Debt due within one year - Increase in borrowings - 13,187 13,187 -
Debt due within one year - Increase in finance leases - 1,549 1,549 -
Debt due within one year - Repayment of loans (172,559) (22,004) (22,004) (9,551)
Debt due after one year - New secured loan - 15,593 15,593 -
Debt due after one year - Increase in finance leases - 1,509 1,509 -
Expenses on raising of Senior Credit Facility and Senior
Subordinated Notes - (1,246) (1,246) (29)
Repayment of capital element of finance leases (642) (525) (525) (549)
- ----------------------------------------------------------------------------------------------------------------------------------
(144,902) 8,205 8,205 (9,671)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash 5,813 6,304 6,304 (8,551)
- ----------------------------------------------------------------------------------------------------------------------------------
Reconciliation of net cash flow to movement in net (debt)/funds
Increase/(decrease) in cash in the period 5,813 6,304 6,304 (8,551)
Cash used to decrease lease financing 642 525 525 549
Cash acquired from issue of debt (net of expenses) - (27,533) (27,533) 29
Cash used to repay loans 172,559 22,004 22,004 9,551
Cash acquired from sale and leaseback - (3,058) (3,058) -
Decrease in liquid resources and cash deposits with
original maturity dates of more than one year - - - (620)
- ----------------------------------------------------------------------------------------------------------------------------------
Change in net (debt)/funds from cash flows 179,014 (1,758) (1,758) 958
Other non-cash changes (6,125) (1,274) (1,274) (946)
New finance leases (37) (3,614) (3,614) -
Finance lease obligations transferred to ISD 5,724 - - -
Effect of foreign exchange rate changes (5,300) (5,242) (5,242) 1,695
- ----------------------------------------------------------------------------------------------------------------------------------
Movement in net (debt)/funds in period 173,276 (11,888) (11,888) 1,707
Net debt at beginning of period (156,979) (145,091) (145,091) (145,904)
- ----------------------------------------------------------------------------------------------------------------------------------
Net funds/(debt) at end of period 30 16,297 (156,979) (156,979) (144,197)
- ----------------------------------------------------------------------------------------------------------------------------------
36
F. NOTES TO THE FINANCIAL STATEMENTS
1 . ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention
and in accordance with accounting standards applicable in the United Kingdom.
Going concern
The financial statements have been prepared on the going concern basis in
anticipation of the receipt of the estimated proceeds of approximately
(Pounds)12.0 million, net of expenses, from the proposed Placing and Open Offer
which was formally approved by the Directors on 12 June 2001. Further details
are contained in note 32.
The Placing and Open Offer is conditional inter alia, on approval by
shareholders at an Extraordinary General Meeting to be held on 6 July 2001.
Without the above injection of capital the Group would be unable to continue in
operational existence for the foreseeable future and the going concern basis
would be inappropriate. Adjustments would then have to be made to reduce the
balance sheet amounts of assets to their recoverable amounts, to provide for
further liabilities that might arise and to reclassify fixed assets and long-
term liabilities as current assets and liabilities.
Whilst there is uncertainty at present as to the outcome of the matter mentioned
above, the Directors believe that it is appropriate for the financial statements
to be prepared on the going concern basis.
The following principal accounting policies have been applied:
Accounting estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Group accounts
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries (the "Group"). All intercompany transactions
and balances have been eliminated. The accounts include the results of
subsidiaries acquired during the year from the relevant date of acquisition
other than those subsidiaries acquired with a view to resale. They also include
the results of subsidiaries disposed of during the year up to the relevant date
of disposal.
Goodwill
Prior to 1 January 1998, goodwill arising as the difference between the cost of
acquisition of a subsidiary and the fair value of its net assets at the date of
acquisition was written off to reserves in the year of acquisition. Goodwill
arising on acquisitions since 1 January 1998 is capitalised and subsequently
written off over its estimated useful life, which currently ranges from 10-20
years. Where necessary, adjustments to provisional fair values of net assets
acquired are adjusted to goodwill in the first full year following the
acquisition. Impairment reviews on the carrying amount of goodwill are performed
on an annual basis and any permanent diminution in value identified is charged
to the profit and loss account.
Turnover and revenue recognition
Turnover includes licence fees for technology sales, ongoing maintenance fees
and consultancy work. Revenues on such items are recognised when the Company has
fulfilled all of its significant
37
performance obligations. Turnover also arises on the provision of long term
government contracts the sale of office goods and supplies.
Turnover relating to discontinued activities represents database subscription
sales, online and charges and design and implementation fees at invoiced
amounts, exclusive of value added and sales taxes. Subscription revenues are
recognised when contractually due and invoiced. The costs fulfilling obligations
under the terms of the subscription contract are accrued at the time the is
recognised. Online and usage charges are recognised as the service is provided.
Most subscriptions are due and invoiced either annually or semi-annually in
advance and recognised in full at commencement of the subscription term. Some of
the Group's US operations billed monthly their `modular pricing' scheme, whereby
subscriptions for access to the Group's service are raised on monthly basis and
accounted for accordingly. Annual CD-ROM usage fees are deferred and amortised
over the life of the contract.
Fixed assets
Fixed assets are stated at cost. Depreciation is provided to write off the cost,
less estimated value, of all tangible fixed assets over their expected useful
lives. It is calculated at the following rates:
Equipment including personal computers - 33% straight line
Motor vehicles - 25% straight line
Fixtures and fittings - 20% straight line
Leasehold improvements - shorter of remaining lease period
and 20% straight line
Mainframe computers - 20% straight line
Leasehold improvements relate to the cost of refurbishment of the Group's short
leasehold properties.
Stocks
Stocks, which comprise consumable items, are stated at the lower of cost and net
realisable value.
Foreign currency
Transactions denominated in foreign currencies are recorded at the exchange rate
prevailing at the date of the transaction. Transactions to be settled at a
contract rate are recorded at that rate. Any gains or losses from the
translation of transactions denominated in foreign currencies are included in
the results of the operation. Assets and liabilities denominated in foreign
currencies are translated at the exchange rate ruling at the year end. Profit
and losses of overseas companies are translated at average rates of exchange for
the period. Exchange differences arising out of the translation of accounts of
foreign subsidiaries, net of associated borrowings, are taken to reserves.
Financial Instruments
Changes in the value of forward foreign exchange contracts are recognised in the
results in the same period as changes in the values of the assets and
liabilities they are intended to hedge. Any interest receipts arising from the
interest rate cap are matched to those arising from the underlying debt
position.
Intangible fixed assets
Historically it has been the Group's policy to capitalise costs associated with
the development of the host computer systems and the development of new
products. In the year 2000, following the disposal of ISD, the Group's business
comprised the eCommerce, Web Solutions and Ventures divisions. In recognition of
the fact that these divisions are not mature and in light of changing industry
practice, the Group decided to change its accounting policy such that
development costs associated with these divisions are expensed to the profit and
loss account as incurred.
38
The results for 2000 have been prepared on this revised basis, while the results
for 1999 have been restated to reflect this change in policy. The impact of the
restatement on the comparative profit and loss account for 1999 is an increase
to the loss of (Pounds)489,000 and the cumulative effect on the Group's reserves
as at 1 January 2000 amounts to a decrease of (Pounds)776,000. No such costs
were capitalised during the year ended 31 December 2000 and it would therefore
be inappropriate to estimate the effect of the restatement on the profit and
loss account for this period.
Fixed asset investments
Investments in subsidiaries and other fixed asset investments are stated in the
balance sheet at cost. Provision is made in full for diminution in value if
considered permanent.
Deferred taxation
Provision is made for timing differences between the treatment of certain items
for taxation and accounting purposes, to the extent that it is probable that a
liability or asset will crystallise.
Leased assets
Where assets are financed by leasing agreements that give rights approximating
to ownership ('finance leases'), the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the minimum
lease payments payable over the term of the lease. The corresponding leasing
commitments are shown as amounts payable to the lessor. Depreciation on the
relevant assets is charged to the profit and loss account except for that
proportion relating to assets wholly used for ISD product development.
Lease payments are analysed between capital and interest using the actuarial
method. The interest is charged to the profit and loss account except for that
proportion relating to assets wholly used for ISD product development. The
capital part reduces the amounts payable to the lessor.
All other leases are treated as operating leases. Their annual rentals are
charged to the profit and loss account on a straight line basis over the lease
term except where the costs are capitalised as development costs.
Pension costs
For the year ended 31 December 2000, the Group operated defined contribution
pension schemes in the UK, US and Switzerland. The amount of contributions
payable to the pension schemes are charged to the profit and loss account as
incurred.
Finance costs
Borrowings are stated net of the associated costs of raising the finance. Such
finance costs are charged to the profit and loss account over the term of the
related borrowing, increasing the outstanding borrowing to the amount of the
debt at the maturity date.
Warrants
Net proceeds from the issue of warrants are credited to equity upon issue. Where
warrants are issued in conjunction with debt, the net proceeds are allocated
between equity and debt based upon their respective fair values at the time of
issue.
39
2. SEGMENTAL ANALYSIS
Analyses by class of business of turnover, operating (loss)/profit and net
assets/(liabilities) are stated below. The Information Services Division ("ISD")
was sold to Thomson Corporation in May 2000 and all segmental information
disclosed below in respect of Information Services is discontinued.
The composition of turnover is analysed as follows:
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
Information Services:
- - Usage sales 41,604 132,631 136,992
- - Subscription sales 2,605 8,891 10,561
- - CD-ROM sales 2,005 7,465 8,737
- - Other sales/(1)/ 2,930 16,146 9,021
----------- ----------- -----------
49,144 165,133 165,311
Web solutions/(2)/ 5,947 7,917 4,010
eCommerce 2,496 1,402 77
Other 55 - 1,364
----------- ----------- -----------
57,642 174,452 170,762
=========== =========== ===========
/(1)/ Includes (Pounds)12.6 million in respect of the sale of exclusive
distribution rights in 1999.
/(2)/ Includes (Pounds)4.0 million in respect of technology sales in 1999.
The composition of operating (loss)/profit is analysed as follows:
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Information Services (14) 18,258 13,639 21,422
Web solutions (6,217) 2,220 2,692 953
eCommerce (9,509) (1,233) (1,216) (59)
Other (6,425) - - 601
------------ ----------- ----------- -----------
(22,165) 19,245 15,115 22,917
============ =========== =========== ===========
The `Other' category relates to royalties earned from the provision of hotel
Internet access in 1998 and in 2000 relates to the Ventures division and
corporate overheads. Following the disposal of ISD, corporate overheads,
including those of the Ventures division, have been reported separately from the
other divisions.
The composition of net assets/(liabilities) is analysed as follows:
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Information Services - 57,632 57,632 52,532
Web solutions (5,501) 1,294 2,053 2,209
eCommerce (7,526) (318) (301) (23)
Other 13,180) - - -
------------ ----------- ----------- -----------
153 58,608 59,384 54,718
Unallocated net assets/(liabilities) 16,529 (161,679) (161,679) (148,459)
------------ ----------- ----------- -----------
16,682 (103,071) (102,295) (93,741)
============ =========== =========== ===========
Unallocated net assets/(liabilities) comprise cash deposits and borrowings.
40
The geographical composition of turnover by source is analysed as follows:
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
United Kingdom 11,414 22,764 17,243
North America 38,697 131,997 129,478
Continental Europe 7,531 15,271 17,231
Rest of the World - 4,420 6,810
----------- ----------- -----------
57,642 174,452 170,762
=========== =========== ===========
The geographical composition of turnover by destination is analysed as follows:
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
United Kingdom 11,892 21,661 24,374
North America 30,289 80,626 91,845
Continental Europe 9,390 26,234 24,547
Rest of the World 6,071 45,931 29,996
----------- ----------- -----------
57,642 174,452 170,762
=========== =========== ===========
The geographical composition of operating (loss)/profit is analysed as follows:
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
United Kingdom (24,279) (9,859) (13,989) (12,639)
North America 882 31,559 31,559 31,111
Continental Europe 1,325 (2,088) (2,088) 1,508
Rest of the World (93) (367) (367) 746
----------- ----------- ----------- -----------
(22,165) 19,245 15,115 20,726
=========== =========== =========== ===========
The operating (loss)/profit for the United Kingdom for the periods under review
includes the central costs associated with the Group's worldwide head office
functions.
The composition of net assets/(liabilities) by location is presented on a basis
consistent with the segmental analysis of operating profit/(loss). The assets in
any location are not necessarily matched with the turnover in that location. The
net assets and total assets for the United Kingdom for the periods under review
include those associated with the Group's worldwide head office functions.
The geographical composition of net assets/(liabilities) is analysed as follows:
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
United Kingdom (127) 14,971 15,747 13,003
North America 293 40,756 40,756 37,720
Continental Europe (13) 2,460 2,460 2,481
Rest of the World - 421 421 1,514
----------- ----------- ----------- -----------
Net operating assets 153 58,608 59,384 54,718
Unallocated net liabilities 16,529 (161,679) (161,679) (148,459)
----------- ----------- ----------- -----------
16,682 (103,071) (102,295) (93,741)
=========== =========== =========== ===========
41
3. STAFF NUMBER AND COSTS
Staff costs (including Directors) consist of:
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
Wages and salaries 18,024 34,091 32,529
Social security costs 1,887 3,878 2,997
Other pension costs 499 945 910
----------- ----------- -----------
20,410 38,914 36,436
=========== =========== ===========
The average number of full-time employees during the year was:
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
United Kingdom 250 308 275
North America 178 560 573
Continental Europe 37 110 99
Rest of the World 11 74 78
----------- ----------- -----------
476 1,052 1,025
=========== =========== ===========
Pension arrangements
The Group operates defined contribution pension schemes in the UK. The pension
cost charge representing contributions payable by the Group to the funds
amounted to (Pounds)499,000 (1999: (Pounds)945,000; 1998: (Pounds)910,000). The
assets of all the schemes are held by independent custodians and kept entirely
separate from the assets of the Group.
4. OPERATING (LOSS)/PROFIT
This is arrived at after charging/(crediting):
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Hire of plant and machinery - operating leases 1,163 60 60 -
Hire of other assets - operating leases 1,990 4,613 4,613 5,160
Depreciation:
- - on owned assets 2,702 6,964 6,964 7,069
- - on leased assets 2 518 518 893
- - impairment of tangible fixed assets 953 - - -
Amortisation/write-off:
- - of development costs 3,623 9,047 9,334 7,699
- - of goodwill 617 415 415 61
- - impairment of intangible fixed assets 295 - - -
Auditors' remuneration 110 252 252 229
Exceptional provision for diminution of goodwill 4,084 - - -
(Loss)/Gain on foreign currency translations 48 (119) (119) (290)
Loss on disposal of fixed assets 195 631 631 17
=========== =========== =========== ===========
The auditors' remuneration includes amounts in respect of the parent company for
the year ended 31 December 2000 of (Pounds)60,000 (1999: (Pounds)100,000; 1998:
(Pounds)100,000)
Additional fees paid to PricewaterhouseCoopers for non-audit services amounted
to (Pounds)978,000 in 2000 (1999: (Pounds)52,000, 1998: (Pounds)8,000)
42
The exceptional provision of (Pounds)4.1 million is against the carrying value
of goodwill in its eCommerce division, arising principally on the Write Works
acquisition, see note 13.
The loss for the year attributable to shareholders, dealt with in the accounts
of Bright Station plc, is:
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
(35,027) (103,843) (103,340) (9,016)
============ ============ ============ ============
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account of the company is not presented.
5. EXCEPTIONAL ITEMS CHARGED AFTER OPERATING (LOSS)/PROFIT
2000
The Information Services Division was disposed of on 4 May 2000. The loss on
disposal of this division was (Pounds)101.7 million. Further information on this
loss is provided in note 6.
It is estimated that this disposal gives rise to a tax capital loss of
approximately (Pounds)51 million.
1999
The provision for closure of business of (Pounds)911,000 booked during the year
ended 31 December 1999 relates to the closure of its former subsidiary
distributor in Japan, KMK DigiTex Co. Limited.
1998
On 6 May 1998, the Group disposed of its investment in NewsEDGE Corporation, an
online service provider, for net proceeds, of (Pounds)3.9 million. This resulted
in a book profit on the disposal of (Pounds)1.0 million.
On 13 May 1998, the Company disposed of its investment in Easynet Group plc, an
Internet and telecommunications company, for net proceeds, after associated
expenses, of (Pounds)3.2 million. This resulted in a book profit on the disposal
of (Pounds)1.1 million.
6. LOSS ON DISPOSAL OF INFORMATION SERVICES DIVISION
On 4 May 2000, the Company disposed of its Information Services Division to
Thomson Corporation and realised a loss on disposal of (Pounds)101.7 million.
The loss arose as follows:
2000
(Pounds)'000
Net proceeds 175,428
Less:
Net assets disposed of (see below) (43,637)
Goodwill previously written off to reserves (227,854)
Unamortised finance costs (5,625)
-----------
(101,688)
===========
Net assets disposed of:
Fixed assets 45,569
Current assets 41,302
Current liabilities (34,567)
Long-term liabilities (8,087)
Minority interests (580)
-----------
43,637
===========
43
7. AMOUNTS WRITTEN OFF INVESTMENTS
2000
For the year ended 31 December 2000, the Company has reviewed the carrying
amount of its investments, and has provided (Pounds)1.9 million against the
carrying value of its portfolio of minority investments.
1999
The amounts written off investments during the year ended 31 December 1999
comprised (Pounds)3.2 million in respect of the Company's remaining investment
in eHotel (formerly 4th Network), reflecting further delays in its proposed
initial public offering. In addition, a provision of (Pounds)1.4 million was
made against the Company's investment in Frost and Sullivan Electronic
Distribution LLC reflecting concerns over the value of certain of its exclusive
online distribution rights.
1998
An exceptional write-down of (Pounds)2.3 million was charged to the profit and
loss account relating to the Company's investment in eHotel.
8. INTEREST PAYABLE AND SIMILAR CHARGES
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
Bank loans and overdrafts:
- - on Senior Subordinated Notes 4,151 12,268 12,013
- - on Senior Credit Facility 1,769 4,585 4,399
- - amortisation of debt fees 500 1,274 946
- - on bank overdrafts 46 78 33
- - other 168 59 -
----------- ----------- -----------
6,634 18,264 17,391
Finance leases 25 105 45
Exchange gains on foreign currency deposits - (3) -
----------- ----------- -----------
6,659 18,366 17,436
=========== =========== ===========
9. DIRECTORS' EMOLUMENTS AND INTERESTS IN ORDINARY SHARES
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
Aggregate emoluments 2,248 1,233 1,326
Compensation to past Directors for loss of office/(1)/ - 154 -
Amounts paid to third parties/(2)/ - 33 51
Amounts paid to former Directors for consultancy work/(3)/ 22 11 50
Contributions to defined contribution pension schemes 14 25 12
----------- ----------- -----------
2,284 1,456 1,439
=========== =========== ===========
(1) Derek Smith resigned on 2 February 1999 and received (Pounds)153,600 in
respect of the termination of his service contract.
(2) The amounts disclosed as paid to third parties were fees for the Non-
executive services of Michael Mander, paid to his primary employer, Close
Brothers Corporate Finance Ltd.
(3) Michael Mander resigned as a Non-executive Director on 1 July 1999. He was
paid (Pounds)22,000 during 2000 for services provided under a consultancy
agreement (1999: (Pounds)11,000).
44
Details of the full cost of the remuneration package of each of the Directors
for the year ended 31 December 2000 are as follows:
Emoluments
Pension
Fees Salary Benefits Bonus contributions 2000 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
I Barton 25,000 - - - - 25,000 25,000 20,000
M Hussey
(to 5 September 2000) 16,955 - - - - 16,955 25,000 20,000
R Lomnitz/(1)/
(from 22 December 2000) - 3,000 140 - 157 3,297 - -
S Maller (to 4 May 2000) - 40,000 2,333 50,000 - 92,333 127,026 98,841
D Mattey/(1)/ - 166,666 17,676 236,500 6,892 427,734 183,262 144,380
J Molle (to 4 May 2000) - 62,285 2,304 96,000 - 160,589 176,296 128,514
C Morton/(1)/
(to 4 May 2000) - 50,000 3,688 100,000 2,000 155,688 161,705 124,880
P Sommers/(2)/,/(3)/,/(4)/ 27,072 76,651 4,460 673,120 2,044 783,347 228,868 39,677
R Swank
(to 4 December 2000) 27,670 - - - - 27,670 20,233 -
A Thomas 65,000 - - - - 65,000 51,664 20,000
D Wagner/(1)/ - 196,666 25,096 280,000 2,500 504,262 214,407 168,078
------- ------- -------- -------- -------- --------- --------- -------
161,697 595,268 55,697 1,435,620 13,593 2,261,875 1,213,461 764,370
======= ======= ======== ========= ======== ========= ========= =======
/(1)/ Four Directors were members of the Company's defined contribution pension
scheme in the UK.
/(2)/ One Director was a member of the Company's defined contribution pension
scheme in the US.
The Company made contributions totalling (Pounds)11,549 to the UK scheme and
(Pounds)2,044 to the US scheme on behalf of Directors in 2000.
On 4 May 2000 the Company completed the sale of the ISD to Thomson Corporation.
On this date, Stephen Maller, Jason Molle and Ciaran Morton transferred to
Thomson Corporation and resigned as Directors of the Company. At the same date,
Patrick Sommers became a Non-executive Director of the Company upon the transfer
of his employment to Thomson Corporation. During the year, bonuses were paid to
the Executive Directors in respect of the sale of the ISD, the successful
repayment of the Company's debt and, where applicable, the restructuring and
formation of Bright Station plc. Bonuses payable in 2001 but relating to 2000
are also included in the table, being (Pounds)90,000 to Daniel Wagner and
(Pounds)76,500 to David Mattey.
/(3)/ Patrick Sommers' bonus includes a sum of (Pounds)480,800 paid on
completion of the ISD sale. In addition, he was issued with 71,361 ADSs,
credited as fully paid at a price of $10.51 per ADS. This is equivalent to
285,444 Ordinary Shares. Patrick Sommers was restricted from disposing of
these shares for a period of 12 months from the date of issue.
/(4)/ Patrick Sommers was the highest paid Director on the Board during the year
ended 31 December 2000.
Benefits include P11D benefits (non-cash compensation) for the UK Directors.
45
The following beneficial interests of the Directors of the Company are shown in
the register maintained by the Company in accordance with the Companies Act
1985:
Interests in Ordinary Shares
1 January 31 December % of issued
2000 or, if 2000, or if shares as at
later, on earlier, on 31 December
Name of beneficial owner appointment Acquisitions retirement 2000
I Barton/(1)/ 479,139 - 479,139 0.28
M Hussey (to 5 September 2000) 242,610 - 242,610 0.14
R Lomnitz/(1)/ (from 22 December 2000) 94,500 - 94,500 0.05
S Maller (to 4 May 2000) 25,441 - 25,441 0.02
D Mattey/(1)/ 2,335,200 - 2,335,200 1.35
J Molle (to 4 May 2000) 135,116 - 135,116 0.08
C Morton (to 4 May 2000) 202,001 - 202,001 0.12
P Sommers/(1)/ /(2)/ 48,000* 290,496 338,496 0.20
R Swank (to 4 December 2000) 32,000* - 32,000 0.02
A Thomas/(1)/ 100,000 - 100,000 0.06
D Wagner/(1)/ 17,434,780 - 17,434,780 10.10
------------ ------------ ------------ ------------
Total 21,128,787 290,496 21,419,283 12.42
============ ============ ============ ============
* held as American Depositary Shares, one ADS being equivalent to four Ordinary
shares
/(1)/ The interests of the current Directors in the Company's share capital
remained unchanged at 12 June 2001.
/(2)/ On exercise of his options under offers 3 and 4 of the Employee Stock
Purchase Plan, Patrick Sommers had unrealised net gains of (Pounds)248 and
(Pounds)1,225 respectively.
Apart from Daniel Wagner, Prudential plc and Thomson Finance S.A., to the
Company's knowledge, no other person is the owner of more than 5 per cent of
the outstanding Ordinary Shares nor is the Company directly or indirectly owned
or controlled by any other corporation or any government.
The percentages of shares held by each Director are shown based on the Ordinary
Share Capital outstanding of 172,614,502 as at 31 December 2000.
10. TAXATION ON LOSS/(PROFIT) ON ORDINARY ACTIVITIES
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
UK Corporation tax at 30% (1999: 31%; 1998: 31%) 10 (65) -
Overseas tax 166 1,413 776
Adjustment relating to earlier years 71 156 -
Deferred tax charge/(credit) 24 (26) (7)
----------- ----------- -----------
Tax charge 271 1,478 769
=========== =========== ===========
46
11. EARNINGS/(LOSS) PER SHARE
Restated Original
2000 1999 1999 1998
Attributable (loss)/profit (Pounds) (132,002,000) (5,874,000) (5,385,000) 4,439,000
Weighted average number of
ordinary shares in issue (no.) 166,572,662 151,928,606 151,928,606 150,579,177
============== ============== ============== ==============
(Loss)/earnings per share (pence) (79.2) (3.9) (3.5) 2.9
============== ============== =============== ==============
Attributable (loss)/profit as above 4,439,000
(Pounds)
Weighted average number of ordinary
shares in issue as above (no.) 150,579,177
Add:shares issuable on conversion
of options (no.) 384,655
Add:shares issuable on acquisition
of subsidiary (no.) 1,667,241
--------------
Adjusted average number of
ordinary shares (no.) 152,631,073
==============
Fully diluted earnings per share
(pence) 2.7
==============
47
12. INTANGIBLE FIXED ASSETS
(Pounds)'000
Cost
At 31 December 1998 41,982
Additions 11,958
Amounts written off (57)
Exchange adjustments 805
-----------
At 31 December 1999 - as previously reported 55,840
Prior year adjustment (see note 12a) (1,152)
-----------
As restated at 31 December 1999 54,688
Additions 2,896
Disposed of with ISD (58,346)
Exchange adjustments 1,128
-----------
At 31 December 2000 366
===========
Amortisation
At 31 December 1998 19,115
Provision for year 9,047
Exchange adjustments 272
-----------
At 31 December 1999 - as previously reported 28,810
Prior year adjustment (see note 12a) (376)
-----------
As restated at 31 December 1999 28,434
Provision for year 3,918
Disposed of with ISD (32,583)
Exchange adjustments 597
-----------
At 31 December 2000 366
===========
Net book amount
At 31 December 2000 -
-----------
As restated at 31 December 1999 26,254
===========
(a) During the year the Company changed its accounting policy for the
eCommerce, Web Solutions and Ventures divisions, as disclosed in note 1,
such that development costs associated with these divisions are expensed to
the profit and loss account as incurred. The results for 2000 have been
prepared on this revised basis, while the results for 1999 have been
restated to reflect this policy change.
(b) The Company continues to capitalise intangible fixed assets that are
acquired from outside the Group together with their associated purchase
costs.
48
13. GOODWILL
(Pounds)'000
Cost
At 31 December 1998 7,737
Additions 2,490
Exchange adjustments 54
-----------
At 31 December 1999 10,281
Additions 257
Disposed of with ISD (1,841)
Deferred consideration adjustment (1,342)
Exchange adjustments 73
-----------
At 31 December 2000 7,428
===========
Amortisation
At 31 December 1998 61
Provision for year 415
-----------
At 31 December 1999 476
Disposed of with ISD (113)
Provision for year 617
Exceptional provision for diminution in value 4,084
-----------
At 31 December 2000 5,064
===========
Net book amount
At 31 December 2000 2,364
-----------
At 31 December 1999 9,805
===========
Write Works
(a) On 18 November 1998, the Company acquired 100% of the share capital of
Write Works Limited in an agreement that capped the maximum consideration
(payable in cash and new Ordinary Shares) at (Pounds)6,015,000, based on
the achievement of certain earnings targets over the following two
financial years (see note 23). An initial payment of (Pounds)2,152,000 was
made on 18 November 1998 (consisting of cash of (Pounds)1,000,000 and the
issue of 694,025 new Ordinary Shares at a price of (Pounds)1.66 per share).
(b) Due to the failure to meet certain of the earnings targets, the remaining
deferred consideration was reduced and further consideration of
(Pounds)1,674,000 (consisting of (Pounds)1,260,000 in cash and the issue of
428,796 new Ordinary Shares at a price of (Pounds)0.96 per share) was paid
on 11 May 2000. A supplemental agreement was made with the vendors on 20
July 2000 leading to a further cash payment of (Pounds)156,000 on 20 July
2000 and a final consideration of (Pounds)584,000 (consisting of
(Pounds)450,180 in cash and the issue of 712,959 new Ordinary Shares at a
price of 18.8(pence) per share) on 15 April 2001.
(c) These adjustments to the consideration gave rise to a negative adjustment
of (Pounds)1,342,000 to goodwill.
(d) In view of the trading performance of the eCommerce division, subsequently
supported by the decision to terminate the eCommerce operations, the
Company has made an exceptional provision of (Pounds)4,084,000 against the
carrying value of the remaining goodwill balance associated with the
acquisition of Write Works Limited.
Muscat
The residual goodwill relates to Muscat Limited, which was acquired on 14 August
1997. On 1 December 1999, the Company announced that it had acquired the
remaining 30 per cent. minority interest in its UK subsidiary, Muscat Limited.
The consideration of (Pounds)2,500,737 was satisfied by the issue of 3,012,936
Ordinary Shares at 83 pence per share. The resultant goodwill of
(Pounds)2,490,000 has been capitalised and will subsequently be written off over
10 years as set out in Note 1.
49
14. TANGIBLE FIXED ASSETS
Leasehold Fixtures & Motor
improvements Equipment fittings vehicles Total
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Cost
At 31 December 1998 2,478 31,001 2,768 530 36,777
Exchange adjustments 30 582 78 (19) 671
Additions 776 3,464 287 9 4,536
Disposals (65) (5,133) (359) (158) (5,715)
----------- ----------- ----------- ----------- -----------
At 31 December 1999 3,219 29,914 2,774 362 36,269
Exchange adjustments 26 270 49 (3) 342
Additions 10 2,526 9 - 2,545
Disposals (376) (798) (158) (142) (1,474)
Disposed of with ISD (1,857) (26,842) (2,127) (189) (31,015)
----------- ----------- ----------- ----------- -----------
At 31 December 2000 1,022 5,070 547 28 6,667
=========== =========== =========== =========== ===========
Depreciation
At 31 December 1998 1,777 15,421 1,391 318 18,907
Exchange adjustments 31 493 44 (19) 549
Provided for the year 377 6,772 224 109 7,482
Disposals (31) (4,627) (239) (110) (5,007)
----------- ----------- ----------- ----------- -----------
At 31 December 1999 2,154 18,059 1,420 298 21,931
Exchange adjustments 12 115 16 (3) 140
Provided for the year 106 3,358 171 22 3,657
Disposals (358) (666) (65) (137) (1,226)
Disposed of with ISD (1,177) (16,907) (1,041) (155) (19,280)
----------- ----------- ----------- ----------- -----------
At 31 December 2000 737 3,959 501 25 5,222
=========== =========== =========== =========== ===========
Net book amount
At 31 December 2000 285 1,111 46 3 1,445
----------- ----------- ----------- ----------- -----------
At 31 December 1999 1,065 11,855 1,354 64 14,338
=========== =========== =========== =========== ===========
The provision for depreciation in the year ended 31 December 2000 includes an
amount of (Pounds)953,000 for the impairment of tangible fixed assets following
a review of the business by the Board of Directors resulting in a decision to
sell or terminate the Group's eCommerce division. On 10 November 1999, the
Company entered into an agreement with International Computers Limited ("ICL")
to outsource the operations of its data center in Palo Alto, California for a
period of seven years. In connection with this transaction, the Company sold
certain assets in the Palo Alto data centre with a net book value of
(Pounds)3,475,000 in return for cash of (Pounds)3,058,000 and a reduction in
outsourcing charges of (Pounds)1,451,000. As part of the disposal of ISD any
obligations arising under this arrangement will be recharged to Thomson
Corporation.
Equipment includes assets under finance leases of (Pounds)49,000 and
(Pounds)12,809,000 at 31 December 2000 and 1999, respectively. Accumulated
depreciation relating to equipment under finance leases totalled (Pounds)2,000
and (Pounds)7,554,000 at 31 December 2000 and 1999, respectively.
50
15. FIXED ASSET INVESTMENTS
(Pounds)'000
At 31 December 1998 12,354
Amounts written off (note 7) (4,619)
Additions 1,645
Disposals -
Exchange movements 255
-----------
At 31 December 1999 9,635
Additions 1,832
Amounts written off (note 7) (1,944)
Disposals (2,580)
Disposed of with ISD (6,343)
-----------
At 31 December 2000 600
===========
The additions during the year ended 31 December 2000 relate to minority
investments made by Bright Station Ventures in Internet related businesses.
The Board has provided (Pounds)1,944,000 against the carrying value of its
portfolio of minority investments in the year ended 31 December 2000.
Included within investments is the Company's investment in Sopheon plc, a
company listed on the Alternative Investment Market in London. This holding
arose following the acquisition of Teltech Resources Network Corporation (in
which the Company had an equity interest) by Sopheon plc for gross cash proceeds
of (Pounds)2,699,000 and the issue of 429,127 shares by Sopheon. At 31 December
2000 the carrying amount of the Company's investment in Sopheon was
(Pounds)300,000 and the market value was (Pounds)687,000.
The following companies were the Group's principal subsidiary undertakings as at
31 December 2000 and have all been included in the consolidated accounts. Each
subsidiary primarily does business in the country of its
incorporation/registration and all equity is in the form of Ordinary shares or
their equivalent.
Country of
incorporation/ Proportion of Nature of
Company name registration equity held business
Bright Station Ventures Ltd England 100% 1
Bright Station Contracts Ltd England 100% 2
KMK DigiTex Co. Ltd Japan 100% 3
OfficeShopper.com Holdings plc England 100% 4
OfficeShopper.com Ltd England 100% 5
Smartlogik Holdings plc England 100% 4
Smartlogik Inc USA 100% 6
Smartlogik Ltd England 100% 6
Sparza Ltd England 100% 7
WebTop.com Holdings plc England 100% 4
WebTop Search Ltd (formerly WebTop.com Ltd) England 100% 8
Key - Nature of business
1 Investment company
2 Dormant company
3 Dormant company in process of liquidation
4 Holding company
5 Provision of on-line office supplies
6 Provision of knowledge management technology
7 Provision of eCommerce procurement systems
8 Provision of indexing and search technology
51
16. DEBTORS
2000 1999
(Pounds)'000 (Pounds)'000
Amounts falling due within one year
Trade debtors 1,268 30,362
Other debtors 922 1,657
Prepayments and accrued income 1,067 4,671
----------- -----------
3,257 36,690
Amounts falling due in more than one year
Other debtors 53 -
----------- -----------
3,310 36,690
=========== ===========
Trade debtors for the Group are stated net of the allowance for doubtful trade
debtor balances which amounted to (Pounds)97,975 and (Pounds)2,184,000 at 31
December 2000 and 1999 respectively.
17. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2000 1999
(Pounds)'000 (Pounds)'000
Senior credit facility (see note 18) - 30,075
Deferred consideration - purchase of subsidiary
(see note 23) 450 1,437
Trade creditors 2,914 8,095
Obligations under finance leases 20 1,813
Other creditors 952 4,030
Taxation and social security 958 1,008
Corporation tax - 556
Accruals and deferred income 2,060 24,560
----------- -----------
7,354 71,574
=========== ===========
18. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2000 1999
(Pounds)'000 (Pounds)'000
$ 180 million 11% Senior Subordinated Notes due 2007 - 108,231
Senior credit facility - 22,835
Other creditors - 355
Deferred consideration - purchase of subsidiary (see note 23) - 1,396
Obligations under finance leases 17 4,553
----------- -----------
17 137,370
=========== ===========
Obligations under finance leases are due as follows:
2000 1999
(Pounds)'000 (Pounds)'000
Within 1 year 20 1,813
Within 1 - 2 years 17 3,629
Within 2 - 5 years - 924
----------- -----------
37 6,366
=========== ===========
52
19. PROVISION FOR LIABILITIES AND CHARGES
Restructuring costs
------------------------------------------------------
Removal of Post-
Knight- acquisition
Data Ridder Termination funding of
Deferred centre Information of property non-core
taxation integration name leases businesses
Group (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
At 31 December 1997 119 4,473 1,313 917 761
Reclassification from
creditors - - - - -
Transfer from/(to) profit
and loss account (7) (1,197) (524) 1,589 -
Amounts paid - (3,254) (418) (1,667) (1,483)
Revisions to fair values - - - 378 728
Exchange adjustments 16 (22) (10) (10) (6)
-------- -------- -------- -------- --------
At 31 December 1998 128 - 361 1,207 -
Transfer to profit
and loss account (26) - - - -
Amounts paid - - (372) (647) -
Exchange adjustments (13) - 11 6 -
-------- -------- -------- -------- --------
At 31 December 1999 89 - - 566 -
Reclassification to
creditors - - - - -
Transfer (to)/from profit
and loss account 24 - - - -
Disposed of with ISD (113) - - (566) -
-------- -------- -------- -------- --------
At 31 December 2000 - - - - -
======== ======== ======== ======== ========
Group Restructuring Costs
-----------------------------
Relocation
of US
Legal headquarters Total
(Pounds)'000 (Pounds)'000 (Pounds)'000
At 31 December 1997 - - 7,583
Reclassification from
creditors 547 - 547
Transfer from/(to) profit
and loss account - (947) (8,282)
Amounts paid (513)
Revisions to fair values 2,172 - 3,278
Exchange adjustments (13) (3) (48)
-------- -------- --------
At 31 December 1998 2,193 808 4,697
Transfer to profit
and loss account (620) - (646)
Amounts paid (808) (833) (2,660)
Exchange adjustments 10 25 39
-------- -------- --------
At 31 December 1999 775 - 1,430
Reclassification to
creditors (545) - (545)
Transfer (to)/from profit
and loss account (230) - (206)
Disposed of with ISD - - (679)
-------- -------- --------
At 31 December 2000 - - -
======== ======== ========
Deferred taxation
2000 2000 1999 1999
Potential Provided in Potential Provided in
liability accounts liability accounts
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Fixed asset related - - 2,704 -
Other timing difference - - 89 89
-------- -------- -------- -------
- - 2,793 89
======== ======== ======== =======
At Completion, the Group will retain significant tax losses. The quantum of
these is not yet agreed with the Inland Revenue. Subject to the agreement of the
Inland Revenue, the total tax losses accrued at 31 December 2000 and their
potential future benefit can be summarised as follows:
- - (Pounds)56 million of capital losses available to offset future capital
profits
- - (Pounds)30 million of trading losses available to carry forward against
profits arising from the same trade, as determined by the Inland Revenue
- - (Pounds)12 million of non-trading deficits available to offset future non-
trading profits.
20. FINANCIAL INSTRUMENTS
The Group's principal financial instruments comprise cash and short-term
deposits and finance leases as well as other financial instruments, such as
trade debtors and trade creditors, that arise directly from its operations.
The Group is exposed to a number of different market risks including interest
rates and foreign currency rates. The Board reviews and agrees policies to
manage each of these risks as follows:
53
Interest rate risk
The Group deposits surplus funds at fixed rates of interest for relatively short
maturities (less than one month).
Foreign currency risk
Given the relatively small scale of overseas operations, the Group has limited
foreign currency exposure. Foreign currencies are purchased in the spot market
as and when required.
Credit risk
The Group's policy is to place its cash and investments with high-quality
financial institutions in order to limit the amount of credit exposure. The
Group performs ongoing evaluations of its customers' financial condition and
maintains provisions against potential credit losses. Such losses, in the
aggregate, have not exceeded management expectations. Financial instruments
which expose the Group to credit risk are cash, investments and trade debtors,
which generally are not collateralised.
Liquidity risk
The Group maintains a balance between continuity of funding and flexibility
through the use of deposits with a short maturity of less than one month.
Short-term debtors and creditors have been excluded from this note as permitted
under FRS 13.
Interest rate risk profile of financial liabilities
The interest rate risk profile of financial liabilities of the Group at 31
December 2000 was as follows:
Floating
Fixed rate rate
financial financial Finance
liabilities liabilities leases Total
At 31 December 2000
Sterling - - (37) (37)
=========== =========== =========== ===========
At 31 December 1999
US Dollar 114,550 52,910 - 167,460
Euro related 47 - - 47
----------- ----------- ----------- -----------
Total 114,597 52,910 - 167,507
=========== =========== =========== ===========
Interest rate risk profile of financial assets
Interest rate risk profile of financial assets of the Group at 31 December 2000
was as follows:
2000 1999
Cash and Cash and
bank bank
deposits deposits
(Pounds)'000 (Pounds)'000
Currency
Sterling 15,193 4,404
Euro related - 797
Japanese Yen 717 5,055
US Dollar 424 265
----------- -----------
Total 16,334 10,521
=========== ===========
At 31 December 2000, no deposits had a maturity of greater than one month. As
such, the Company considers the interest rate exposure of cash and bank deposits
to be floating.
The maturity profile of the Group's financial liabilities at 31 December 2000 is
shown in note 18 to the financial statements.
54
Fair values of financial assets and financial liabilities
In the opinion of the Directors, the carrying amount of cash and bank deposits
is a reasonable estimate of fair value and the market value of the finance lease
obligations approximates the carrying amount, having regard to the interest
rates available to the Group for similar borrowings at the balance sheet date.
21. SHARE CAPITAL
2000 1999
Number (Pounds)'000 Number (Pounds)'000
Authorised:
Ordinary shares of 1 pence each 250,000,000 2,500 199,827,000 1,998
Allotted, called up and fully paid:
Ordinary shares of 1 pence each 172,614,502 1,726 154,943,398 1,549
During the two years ended 31 December 2000, the following movements occurred in
the Ordinary shares of the Company:
Shares Shares
Dates Event Number (Pounds)'000 Notes
As at 31 December 1998 151,467,107 1,514
01/02/99 to 02/12/99 Allotment of shares under the 401(k) Plan 246,620 3 (2)
29/06/99 Employee Stock Purchase Plan 132,248 1 (4)
29/11/99 to 17/12/99 Save As You Earn share option exercises 84,487 1 (5)
30/11/99 Acquisition of outstanding Muscat Ltd
share capital 3,012,936 30 (6)
----------- ------
As at 31 December 1999 154,943,398 1,549
04/01/00 to 05/05/00 Allotment of shares under the 401(k) Plan 68,844 1 (2)
10/01/00 to 19/07/00 Save As You Earn share option exercises 155,335 2 (5)
03/03/00 to 15/03/00 Exercise of share options 194,318 2 (1)
06/03/00 to 06/05/00 Exercise of stock options 31,196 - (7)
27/03/00 Exercise of Muscat share options 84,038 1 (8)
05/05/00 Allotment to JIYU Holdings Ltd 7,038,123 70 (9)
05/05/00 Allotment to Thomson Finance SA 9,297,290 93 (10)
05/05/00 Employee Stock Purchase Plan 87,720 1 (4)
10/05/00 Allotment to Patrick Sommers 285,444 3 (11)
11/05/00 Write Works Ltd acquisition - deferred
consideration 428,796 4 (3)
----------- ------
As at 31 December 2000 172,614,502 1,726
=========== ======
(1) Exercise of share options
A number of eligible employees exercised their share options at various dates
throughout 2000 in accordance with the Company's share option schemes.
Ordinary Total
Year shares issued Price range consideration
2000 194,318 (Pounds)1.10 to (Pounds)1.885 (Pounds)267,637
=========== ============================= ===============
(2) 401(k) Investment Savings Plan contributions
Until 2 May 2000, the Company operated a defined contribution pension scheme in
the US (the 401(k) Investment Savings Plan). The Company matched employee
contributions to this Plan at various dates throughout 1998, 1999 and 2000,
partially with the allotment of Ordinary shares valued at market price at the
time of issue and subsequently converted into ADSs.
55
Ordinary ADS Total
Year shares issued equivalent Price range consideration
1999 246,620 61,655 (Pounds)0.66 to (Pounds)1.24 (Pounds)203,596
2000 68,844 17,211 (Pounds)0.92 to (Pounds)1.63 (Pounds) 80,108
========== =========== ============================ ===============
The Plan was terminated on 5 May 2000 due to the transfer of participants to
Thomson Corporation.
(3) Acquisition of Write Works Ltd
On 11 May 2000, interim consideration of (Pounds)1,674,000 (consisting of
(Pounds)1,260,000 in cash and the issue of 428,796 new Ordinary Shares at a
price of (Pounds)0.96 per share) was paid (see note 13).
(4) Employee Stock Purchase Plan
The Company operated an Employee Stock Purchase Plan for US employees as defined
by section 423(b) of the United States Internal Revenue Code of 1986.
Ordinary ADS Aggregate
Year shares issued equivalent market value
1999 132,248 33,062 (Pounds)120,346
2000 87,720 21,930 (Pounds) 57,850
========== ========= ===============
(5) Save As You Earn option exercises
At various dates throughout 1999 and 2000, in accordance with the Company's Save
As You Earn Option Scheme, a number of eligible employees exercised their share
options.
Ordinary Total
Year shares issued Price range consideration
1999 84,487 (Pounds)0.49 (Pounds)41,399
2000 155,335 (Pounds)0.49 to (Pounds)0.64 (Pounds)79,348
=========== ============================ ==============
(6) Acquisition of outstanding Muscat share capital
On 1 December 1999, the Company announced the acquisition of the remaining 30%
interest in the share capital of Muscat Ltd. The purchase consideration was
(Pounds)2,500,737, satisfied by the issue of 3,012,936 Ordinary Shares of the
Company. The Ordinary Shares were valued at 83(pence) each, being the average
mid-market price of Ordinary Shares of the Company over the five trading days
prior to 30 November 1999. The Company originally acquired 70% of Muscat Ltd in
1997.
(7) Exercise of stock options
A number of eligible employees exercised their options over ADSs at various
dates throughout 2000 in accordance with the Company's US Stock Option Scheme.
The options were exercised at prices between (Pounds)0.78 and (Pounds)1.87 per
share for a total consideration of (Pounds)31,019.
(8) Exercise of Muscat share options
On 27 March 2000, 84,038 share options were exercised in accordance with the
Muscat Unapproved Share Option Scheme at a price of (Pounds)0.43, representing a
total consideration of (Pounds)36,136.
(9) JIYU Holdings Ltd
On completion of the ISD sale, JIYU Holdings Ltd, a private investment company
unconnected to any of the Company's existing shareholders or investors,
subscribed for 7,038,123 new Ordinary Shares at a price of 170.5(pence) per
share, for an aggregate cash consideration of (Pounds)12 million. During the
year, JIYU Holdings Ltd transferred their holding to B D Holdings Ltd, another
company in the same group.
56
(10) Thomson Finance SA
Following the ISD sale, Thomson Finance S.A. agreed to subscribe for 9,297,290
new Ordinary Shares in the Company at 170.5(pence) per share, representing an
aggregate cash consideration of (Pounds)15.9 million.
(11) Patrick Sommers
As shown in note 9 of this Part V, Patrick Sommers was allotted 71,361 ADSs on
completion of the ISD sale credited as fully paid at a price of $10.51 per ADS
being the average mid-market closing price for ADSs during the period 2 March
2000 to 13 April 2000. This allotment is equivalent to 285,444 Ordinary Shares.
Patrick Sommers was restricted from disposing of these shares for a period of 12
months from the date of issue.
As at 31 December 2000, the Company had in place five option plans; the 1994
Executive Share Option Scheme, the 1994 Savings Related Share Option Scheme, the
1994 Unapproved Executive Share Option Scheme, the 1997 US Stock Option Plan and
the 1998 Employee Stock Purchase Plan. Options over the Company's Ordinary
Shares were also granted as part of a rollover arrangement with employees of
Muscat Ltd and options over American Depositary Shares were granted to certain
Non-executive Directors of a US subsidiary under individual arrangements.
Additionally, restricted share awards have been made under the Long Term
Incentive Plan established on 5 September 2000.
Warrants
On 17 May 1999, the Company agreed a new term facility of $25 million with Chase
Manhattan Bank International Ltd ("Chase"); between May 1999 and November 1999,
the Company issued a total of 3 million warrants to Chase, to subscribe for
Ordinary Shares in the Company. 1.5 million of those warrants entitle Chase to
subscribe for Ordinary Shares at any time before 11 October 2002 (the "2002
Warrants"). The remaining 1.5 million warrants entitle Chase to subscribe for
Ordinary Shares at any time up to 14 May 2004 (the "2004 Warrants"). The
subscription price payable for an Ordinary Share on exercise of a warrant is
90.6 pence.
The number of 2002 Warrants and 2004 Warrants and/or the exercise price are
adjustable on the occurrence of certain events, including a capital
reorganisation of the Company, a distribution of assets to shareholders or an
issue of Ordinary Shares for cash at less than "Fair Market Value", being
defined (whilst the Ordinary Shares are listed) as the average of the daily
market prices for an Ordinary Share for the 30 consecutive dealing days
commencing 45 days before the relevant date.
On 12 November 1999, warrants to subscribe for an additional 6 million Ordinary
Shares (the "2009 Warrants") were issued to the Company's senior lenders, in
consideration of their agreement to relax the covenant arrangements related to
the refinancing of the Company's senior debt. The 2009 Warrants may be exercised
in whole or in part at any time before 12 November 2009, at a subscription price
of 90.6 pence per Ordinary Share.
The terms of the 2009 Warrants contain provisions to protect the holders of
those warrants and, for adjusting the subscription price and the number of
warrants in certain circumstances, as discussed above in relation to the 2002
and 2004 Warrants.
At the date of this document, no warrants had been exercised into Ordinary
Shares of the Company.
22. SHARE PREMIUM
2000 1999
(Pounds)'000 (Pounds)'000
Balance at 1 January 154,949 152,128
Premium arising on shares issued 28,085 -
Premium arising on shares issued on exercise of options 1,023 350
Premium arising on shares issued on placing/flotation
and acquisitions of fixed asset investments - 2,471
------------ ------------
Balance at 31 December 184,057 154,949
============ ============
57
23. SHARES TO BE ISSUED
On 18 November 1998, the Company acquired 100% of the share capital of Write
Works Limited in an agreement that capped the maximum consideration (payable in
cash and new Ordinary Shares) at (Pounds)6,015,000, based on the achievement of
certain earnings targets over the following two financial years.
Due to the failure to meet certain of the earnings targets, the remaining
deferred consideration was reduced and further partial consideration of
(Pounds)1,674,000 (consisting of (Pounds)1,260,000 in cash and the issue of
428,796 new Ordinary Shares at a price of (Pounds)0.96 per share) was paid on 11
May 2000. A supplemental agreement was made with the vendors on 20 July 2000
leading to an interim cash payment of (Pounds)156,000 on 20 July 2000 and final
consideration of (Pounds)584,000 (consisting of (Pounds)450,180 in cash and the
issue of 712,959 new Ordinary shares at a price of (Pounds)0.19 per share) on 15
April 2001. The shares to be issued do not have a dilutive impact at the year
end as they were issued at market value on 17 April 2001.
The following table details the movement in shares to be issued in the year
ended 31 December 2000:
(Pounds)'000
At 1 January 2000 967
Revision to deferred consideration (420)
Issue of shares on 11 May 2000 (413)
-------------
At 31 December 2000 134
=============
24. PROFIT AND LOSS ACCOUNT
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Balance at 1 January (261,079) (249,714) (249,427) (243,524)
(Loss)/profit for the financial year (132,002) (5,874) (5,385) 4,439
Effect of exchange rate movements on net investment
in foreign subsidiaries net of associated borrowings (4,008) 894 894 (1,586)
Write back of goodwill following disposal of ISD 227,854 - - (11,022)
Effect of exchange rate movements on goodwill
written (off)/back - (6,385) (6,385) 2,266
--------- --------- --------- ---------
Balance at 31 December (169,235) (261,079) (260,303) (249,427)
========= ========= ========= =========
Cumulative goodwill written off at 31 December 2000 amounted to balances
denominated in Pounds Sterling of (Pounds)5,737,000 (1999: (Pounds)226,267,000
and 1998: (Pounds)219,361,000 both comprising balances denominated in US dollars
of $355,429,000 and balances denominated in Pounds Sterling of
(Pounds)5,737,000).
25. RECONCILIATION OF MOVEMENT IN ORDINARY SHAREHOLDERS' FUNDS
2000 1999
(Pounds)'000 (Pounds)'000
Loss for the financial year (132,002) (5,874)
Other recognised gains and losses relating to the year (net) (4,008) (5,491)
New share capital subscribed for cash 29,285 355
New share capital subscribed on acquisition of subsidiaries
and other fixed asset investments - 2,501
Decrease in shares to be issued (833) -
Write back of goodwill following disposal of ISD 227,854 -
------------ ------------
Net movement in ordinary shareholders' funds 120,296 (8,509)
Ordinary shareholders' funds at 1 January (103,614) (95,105)
------------ ------------
Ordinary shareholders' funds at 31 December 16,682 (103,614)
============ ============
58
26. MINORITY EQUITY INTERESTS
2000 1999
(Pounds)'000 (Pounds)'000
Balance at 1 January 543 1,077
Profit attributed to the minorities 37 50
ISD disposal (580) -
Exchange adjustments - 26
Arising from acquisitions during the year - (610)
------------ ------------
- 543
============ ============
27. COMMITMENTS UNDER OPERATING LEASES AND FINANCE LEASES
As at 31 December 2000, the Group had annual commitments under non-cancellable
operating leases as set out below:
2000 1999
Land and Land and
buildings Other buildings Other
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Operating leases which expire:
Within one year 6 186 31 -
In two to five years 697 57 1,970 40
After five years 332 - 3,700 -
------------ ------------ ------------ ------------
1,035 243 5,701 40
============ ============ ============ ============
28. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH
(OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
Restated Original
2000 1999 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Operating (loss)/profit (18,081) 19,245 15,115 23,026
Less: Restructuring costs - - - 2,583
----------- ----------- ----------- -----------
Operating (loss)/profit before restructuring costs (18,081) 19,245 15,115 25,609
Depreciation charges 2,704 7,482 7,482 7,962
Amortisation of intangible fixed assets 3,623 9,047 9,334 7,699
Amortisation of goodwill 617 415 415 61
Impairment of intangible fixed assets 295 - - -
Impairment of tangible fixed assets 953 - - -
Loss on sale of tangible fixed assets 195 631 631 17
Decrease in stocks 1 167 167 11
(Increase)/decrease in debtors (2,298) 5,686 10,305 (1,077)
Increase/(decrease) in creditors 1,139 (7,607) (7,607) (13)
Exchange variances 95 401 401 786
Cash costs of restructuring (472) (2,660) (2,660) (6,904)
----------- ----------- ----------- -----------
Net cash (outflow)/inflow from operating activities (11,229) 32,807 33,583 34,151
=========== =========== =========== ===========
The comparative figures for 1999 have been restated to reflect the change in
disclosure of amounts written off investments.
59
29. MANAGEMENT OF LIQUID RESOURCES
2000 1999 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
Net withdrawals from short-term deposits over three months
not repayable on demand - - 620
Net payments into short-term deposits over three months not
repayable on demand - - -
------------ ------------ -----------
Net cash inflow from management of liquid resources - - 620
============ ============ ===========
Movements in all short-term deposits not repayable on demand are reported under
the heading of management of liquid resources.
30. ANALYSIS OF CHANGES IN NET (DEBT)/FUNDS
Cash and Debt due Debt due
Bank Bank within one after one Finance
Cash deposits deposits year year lease Total
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
At 1 January 1998 13,102 620 13,722 (3,039) (155,806) (781) (145,904)
Cash flows (8,551) (620) (9,171) 2,770 6,812 547 958
Exchange movements (57) - (57) 81 1,671 - 1,695
Other non-cash changes - - - (44) (902) - (946)
Other movements - - - (14,446) 14,446 - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 1999 4,494 - 4,494 (14,678) (133,779) (234) (144,197)
Reclassification of loan
from other creditors - - - (894) - - (894)
Cash flows 6,304 - 6,304 1,404 (6,933) (2,533) (1,758)
Exchange movements (277) - (277) (465) (4,515) 15 (5,242)
Other non-cash changes - - - - (1,274) (3,614) (4,888)
Other movements - - - (16,942) 16,942 - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 2000 10,521 - 10,521 (31,575) (129,559) (6,366) (156,979)
Cash flows 5,813 - 5,813 32,441 140,118 642 179,014
Exchange movements - - - (866) (4,434) - (5,300)
Other non-cash changes - - - - (6,125) 5,687 (438)
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 December 2000 16,334 - 16,334 - - (37) 16,297
============ ============ ============ ============ ============ ============ ============
31. CAPITAL COMMITMENTS
Capital commitments as at 31 December were as follows:
2000 1999
(Pounds)'000 (Pounds)'000
Authorised and contracted for - 403
------------ ------------
32. POST BALANCE SHEET EVENTS
On 28 February 2001, the Company made its preliminary announcement of its
results for the year ended 31 December 2000. The loss before tax for the year
reported was (Pounds)128,944,000. Certain adjustments to the figures reported in
the preliminary announcement have been made:
(Pounds)'000
Original loss before tax per preliminary announcement (128,944)
Impairment adjustment (see below) (2,249)
Reclassification of capital development costs relating to ISD (501)
------------
Loss before tax per financial statements (131,694)
============
60
On 30 April the Group announced its intention to refocus its activities on the
Web Services Division, with the resultant sale and closure of its e-commerce
activities, comprising OfficeShopper and Sparza, and curtailment of head office
activities.
The decision to refocus the activities of the business as described above
provided evidence of an impairment in value that had occurred prior to the
balance sheet date. An impairment review of the carrying value of the fixed
assets held in the balance sheet at 31 December 2000 has been performed and an
adjustment to the carrying value was made as follows.
The impairment of fixed assets was calculated as follows:
Original Carrying Revised
31 December value 31 December
2000 adjustments 2000
(Pounds)'000 (Pounds)'000 (Pounds)'000
Fixed Assets
Intangible assets 295 (295) -
Goodwill 2,621 (257) 2,364
Tangible assets 2,398 (953) 1,445
Investments 1,344 (744) 600
------------ ----------- -----------
6,658 (2,249) 4,409
============ =========== ===========
A change was also made to the exceptional loss on the disposal of ISD as a
result of a reclassification of capitalised development costs. The effect of
this change has also been detailed above.
The Group is proposing a placing and open offer of 270,000,000 new Ordinary
Shares of 1p each subject to approval by the shareholders at an Extraordinary
General Meeting of the Company to be held on 6 July 2001. The estimated proceeds
of the Placing and Open Offer of approximately (Pounds)12.0 million net of
expenses, are required for the Group to be able to continue in operational
existence for the foreseeable future.
On 12 June 2001, the Company negotiated a secured (Pounds)1.5 million bridging
facility which is to be repaid from the proceeds of the placing and open offer.
61
PART VI
PRO FORMA STATEMENT OF NET ASSETS
Set out below is an unaudited pro forma statement of consolidated net assets of
Bright Station reflecting the Proposals. It has been based on the unaudited
consolidated balance sheet of Bright Station as at 31 March 2001 adjusted for
the impact of the Proposals. The statement has been prepared to illustrate the
impact of the Proposals on the net assets of the Group as shown in its interim
financial statements at 31 March 2001 as if the transaction had occurred at that
date. It is prepared for illustrative purposes only using accounting policies in
place at 31 December 2000 and 31 March 2001 and, because of its nature, may not
give a true picture of Bright Station's financial position or results.
Adjustments
------------------------------ Pro forma
31 March Net Closure statement of
2001/(1)/ proceeds/(2)/ costs/(3)/ net assets
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Fixed assets
Goodwill 2,355 - - 2,355
Tangible assets 1,908 - - 1,908
Investments 600 - - 600
------------ ------------ ------------ ------------
4,843 - - 4,843
------------ ------------ ------------ ------------
Current assets
Debtors 4,748 - (1,432)/(a)/ 3,316
Cash at bank and in hand/(5)/ 7,414 12,000 (1,398)/(b)/ 18,016
------------ ------------ ------------ ------------
12,162 12,000 (2,830) 21,332
Creditors: amounts falling due within
one year (6,537) - (490)/(c)/ (7,027)
------------ ------------ ------------ ------------
Net current assets 5,625 12,000 (3,320) 14,305
------------ ------------ ------------ ------------
Total assets less current liabilities 10,468 12,000 (3,320) 19,148
Creditors: amounts falling due after more
than one year (17) - - (17)
------------ ------------ ------------ ------------
Net assets 10,451 12,000 (3,320) 19,131
============ ============ =========== ============
Notes
/(1)/ Extracted without material adjustment from the interim results for the
three months ended 31 March 2001 as set out in Part IV of this document.
/(2)/ Net proceeds from the Placing and Open Offer are assumed to be
(Pounds)12.0 million. This reflects the issue of 270 million New Ordinary
Shares at a price of 5 (pence) each, less approximately (Pounds)1.5
million being the cash costs and expenses of the Placing and Open Offer.
/(3)/ Anticipated closure costs relating to non-Smartlogik businesses are
classified as follows:
(Pounds)'000
(a) write-off of certain irrecoverable trade debtors comprising Sparza,
OfficeShopper and head office 494
write-off of irrecoverable prepayments including pre-paid licence
fees, rental costs, accrued income 938
------------
1,432
============
(b) redundancy and other payments in respect of employees and certain
directors and related fees and expenses
(c) liability to certain directors to be settled in shares in lieu of
amounts payable for termination of contracts
(4) The pro forma statement of net assets does not reflect trading or any other
activities, other net asset movements and movements in working capital of
the Group since 31 March 2001.
(5) The disposal of certain OfficeShopper assets is not reflected above as the
impact is not significant.
(6) No adjustment has been made for any event save as disclosed above.
62
[LETTERHEAD OF PRICEWATERHOUSECOPPERS]
The Directors
Bright Station plc
The Communications Building
48 Leicester Square London WC2H 7DB
PricewaterhouseCoopers
1 Embankment Place
London WC2N 6RH
13 June 2001
Dear Sirs
We report on the pro forma statement of net assets set out in Part VI of the
Prospectus of Bright Station dated 13 June 2001, which has been prepared, for
illustrative purposes only, to provide information about how the Proposals might
have affected the net assets of the Group as at 31 March 2001.
Responsibility
It is the responsibility solely of the Directors of Bright Station to prepare
the pro forma statement of net assets in accordance with paragraph 12.29 of the
Listing Rules of the UK Listing Authority.
It is our responsibility to form an opinion, as required by the Listing Rules of
the UK Listing Authority, on the pro forma statement of net assets and to report
our opinion to you. We do not accept any responsibility for any reports
previously given by us on any financial information used in the compilation of
the pro forma statement of net assets beyond that owed to those to whom those
reports were addressed by us at the dates of their issue.
Basis of opinion
We conducted our work in accordance with the Statements of Investment Circular
Reporting Standards and the Bulletin 1998/8 "Reporting on pro forma financial
information pursuant to the Listing Rules" issued by the Auditing Practices
Board. Our work, which involved no independent examination of any of the
underlying financial information, consisted primarily of comparing the
unadjusted financial information with the source documents, considering the
evidence supporting the adjustments and discussing the pro forma statement of
net assets with the directors of the Bright Station.
Our work has not been carried out in accordance with auditing standards
generally accepted in the United States of America and accordingly should not be
relied upon as if it had been carried out in accordance with those standards.
Opinion
In our opinion:
(a) the pro forma statement of net assets has been properly compiled on the
basis stated;
(b) such basis is consistent with the accounting policies of Bright Station;
and
(c) the adjustments are appropriate for the purposes of the pro forma statement
of net assets as disclosed pursuant to paragraph 12.29 of the Listing Rules
of the UK Listing Authority.
Yours faithfully
PricewaterhouseCoopers
Chartered Accountants
63
PART VII
ADDITIONAL INFORMATION
1. Responsibility
The Directors and Proposed Directors of the Company, whose names appear on page
4 and page 87 of this document, accept responsibility for the information
contained in this document. To the best of the knowledge and belief of the
Directors and Proposed Directors (who have taken all reasonable care to ensure
that such is the case) the information contained in this document is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
2. Proposed and Continuing Directors
The Proposed and Continuing Directors of the Company are:
David Jefferies (age 67) Non-executive Chairman
From 1989 to 1999 David Jefferies was Chairman of National Grid Group plc and
from 1992 to 1999 he was both Director and Chairman of Viridian Group plc
(formerly Northern Ireland Electricity). He led the expansion of the National
Grid Group in the USA and in South America and was responsible for the
foundation of Energis Telecommunications in 1992. Both Viridian Group plc and
National Grid Group plc listed on the London Stock Exchange during his
directorship and chairmanship respectively.
David had previously been Chairman of London Electricity, from 1981 to 1986. He
is currently Chairman of 24/Seven, the utility service provider, Chairman of
Costain Group plc, a member of the Board of the Strategic Rail Authority, and
Chairman of the Indo-British partnership, designed to promote bi-lateral trade
with India.
Stephen Hill (age 45) Chief Executive Officer
Prior to joining Smartlogik in June 2000, Stephen was Managing Director (Europe)
for Inktomi Corporation. He helped to establish Inktomi as a market-leading
Internet-infrastructure software company in Europe. Previously, Stephen held a
number of international management roles including Gentia Software (VP
International), Interleaf Inc (VP International and a member of the Executive
Board) and Oracle Corporation (General Manager).
Simon Canham (age 36) Chief Financial Officer
Prior to joining Smartlogik in October 2000, Simon was Finance Director for
Ridgeway Systems and Software, where he helped secure multi-million financing
from venture capitalists. Prior to that, Simon has held positions with Cadence
Design Systems (European Services Financial Director), Gibb International (Group
Accountant) and PricewaterhouseCoopers (Management Consultant).
Robert Lomnitz (age 36) Executive Director
Prior to joining Smartlogik in an executive capacity, Robert was responsible for
Corporate Venturing for the Company, focusing particularly on business
development and investment opportunities synergistic to Smartlogik's operational
activities and growth strategy.
Before joining the Company, Robert was Director of Internet Investments at
Baltic Asset Management, part of the Luxembourg-based investment group.
Previously, Robert had founded a number of his own successful, entrepreneurial
businesses, as well as managing his own and third party funds to take advantage
of both technology and non-technology investment opportunities in the US, Europe
and Asia.
From 1991 to 1993 he worked as Business Development Manager and General Counsel
at Societe Anonyme des Minerais, having qualified as an attorney at White & Case
in New York. Robert received an MBA at INSEAD, a law degree from Boston
University School of Law, and his undergraduate degree from Brown University.
James Bair (age 57) Non-executive Director
James Bair is Senior Vice-President of Strategy Partners International, one of
the Europe's leading information technology consultancies. He is a world-
renowned expert in the fields of knowledge management and content management
with over 30 years of experience in the software industry. He also serves on the
advisory boards for WebMap, Inc., CompreCorp, Inc. and the Syracuse University
School of Information Studies.
Prior to joining Strategy Partners in 1999, James was Research Director, Gartner
Group, where he funded and led the knowledge management technology practice. He
founded Cooperative Systems Consultancy and co-founded Knowledgen, Inc. He was a
senior manager at Xerox Corporation, and has held management positions at
Hewlett-Packard and Bell-Northern Research. In the 1970s, he was a Senior
Scientist at Stanford Research Institute, serving on the team that invented the
mouse, hypertext and windows.
James has consulted to over 100 major enterprises including Microsoft, Bank of
America and AT&T.
64
The business address for each of the Proposed Directors and the Continuing
Director is The Communications Building, 48 Leicester Square, London WC2H 7DB.
3. The Company
The Company, whose registered office and principal place of business is at The
Communications Building, 48 Leicester Square, London WC2H 7DB, was incorporated
and registered in England and Wales on 27 February 1985 as a private limited
company pursuant to the Companies Acts 1948 to 1981 (registered number 1890236)
under the name Mapola Limited. On 27 March 1985 the name of the Company was
changed to M.A.I.D Systems Limited. On re-registration as a public limited
company on 10 February 1994 the Company's name was changed to M.A.I.D plc. The
Company was admitted to the Official List on 25 March 1994. On 17 November 1997,
the Company changed its name to The Dialog Corporation plc. On 5 May 2000, the
Company changed its name to Bright Station plc. The principal legislation under
which the Company operates is the Companies Act 1985 as amended (the "Act").
4. Share Capital
(a) The authorised and issued share capital of the Company as at 11 June 2001
(being the latest practicable date prior to the publication of this
document) was:
Ordinary Shares of 1(pence) each
Authorised Issued
(Pounds) Number (Pounds) Number
2,500,000 250,000,000 1,733,275 173,327,461
(b) During the three years preceding the date of this document there have been
the following changes in the authorised and issued share capital of the
Company:
(i) Pursuant to the Share Option Schemes referred to in paragraph (h)
below, between 11 June 1998 and 11 June 2001, 1,025,778 Ordinary
Shares were issued, credited as fully paid at subscription prices
between 43(pence) and 188.5(pence) per Ordinary Share;
(ii) On 19 November 1998, the Company issued 694,025 new Ordinary Shares
credited as fully paid (at an effective subscription price of
166(pence) per new Ordinary Share) as part of the consideration for
the acquisition of Write Works Limited. Further consideration of
428,796 new Ordinary Shares credited as fully paid, at a value of
96(pence) per share was issued to the vendors on 11 May 2000. Final
consideration including 712,959 new Ordinary Shares credited as fully
paid, representing a value of 18.8(pence) per share, was issued to the
vendors on 17 April 2001;
(iii) The Company operated a defined contribution pension scheme in the US
(the 401(k) Investment Savings Plan). From 11 May 1998 to 5 May 2000,
the Company matched employee contributions under the Plan partially
with the allotment of new Ordinary Shares valued at market price at
the time of issue and subsequently converted into ADSs. A total of
455,856 Ordinary Shares have been issued, credited as fully paid at
subscription prices between 57(pence) and 184(pence) during the period
at a combined market value of (Pounds)464,810;
(iv) On 30 November 1999, the Company issued 3,012,936 new Ordinary Shares,
credited as fully paid (at an effective subscription price of
83(pence) per new Ordinary Share) as consideration for the acquisition
of the remaining 30 per cent interest in Muscat not already held by
the Company;
(v) On 5 May 2000, JIYU Holdings Ltd, a private investment company
unconnected to any of the Company's existing shareholders or
investors, subscribed for 7,038,123 new Ordinary Shares at a price of
170.5(pence) per share;
(vi) Following the sale of the Company's ISD division to Thomson Finance
SA, Thomson Corporation agreed to subscribe for 9,297,290 new Ordinary
Shares at 170.5(pence) per share; and
(vii) Patrick Sommers, a Director of the Company at the time of the ISD
sale, was allotted 285,444 new Ordinary Shares, which were
subsequently converted into ADSs. The shares were credited as fully
paid, representing a value of 168(pence) per share.
(c) Pursuant to the first resolution set out in the notice of EGM at the end of
this document, it is proposed to:
(i) increase the Company's authorised share capital from (Pounds)2,500,000
to (Pounds)6,500,000 by the creation of an additional 400,000,000 New
Ordinary Shares in connection with the Proposals (an increase of 160
per cent.). At a placing price of 5(pence) per new Ordinary Share, the
issue pursuant to the Placing and Open Offer will result in a premium
of 4(pence) per share;
65
(ii) authorise the Directors pursuant to section 80 of the Act until 31
August 2001 to allot relevant securities (as defined in section 80 of
the Act) up to an aggregate nominal amount of (Pounds)2,985,419 for
the purposes of the Proposals and otherwise until 5 July 2006 to
allot relevant securities up to an aggregate nominal amount of
(Pounds)1,557,444 (which will represent approximately 33 per cent of
the Company's enlarged issued share capital following completion of
the Proposals);
(iii) empower the Directors pursuant to section 95 of the Act to allot
equity securities (as defined in section 94 of the Act) pursuant to
the authorities referred to in paragraph (ii) above as if section
89(1) of the Act did not apply to such allotment, such power expiring
at such times as such authorities expire, and such allotment being
limited to the allotment of equity securities pursuant to the
Proposals, a rights issue or other pre-emptive offer to Shareholders
and otherwise up to an aggregate nominal amount of (Pounds)233,617
(which will represent approximately 5 per cent of the Company's
enlarged issued share capital following completion of the Placing and
Open Offer).
(d) Save as provided in paragraph (c) above, the provisions of section 89(1) of
the Act (which, to the extent not disapplied pursuant to section 95 of the
Act confer on Shareholders rights of pre-emption in respect of the
allotment of equity securities which are, or are to be paid up in cash)
apply to the authorised but unissued share capital of the Company. The
Directors consider that the issue price of 5(pence) per New Ordinary Share
is justifiable by reference to the Company's current financial position as
described in Part I of this document, in relation to the current market
price for the existing Ordinary Shares.
(e) Immediately following Admission, the authorised share capital of the
Company will be (Pounds)6,500,000 divided into 650,000,000 Ordinary Shares
of which 467,233,196 will be in issue. There will remain (Pounds)1,827,668
of authorised but unissued share capital consisting of 182,766,804 Ordinary
Shares, equal to approximately 28 per cent of the authorised share capital
of the Company. A total of 55,789,304 Ordinary Shares will be reserved for
issue under options under the terms of the Share Option Schemes described
in paragraph 6 below and under warrants described in this paragraph 4.
(f) The Ordinary Shares are and the New Ordinary Shares will be in registered
form and will be issued in certificated and uncertificated form.
(g) The New Ordinary Shares will, on Admission, rank pari passu with all of the
other issued Ordinary Shares in the capital of the Company.
(h) As at 11 June 2001 (being the latest practicable date prior to the
publication of this document) there were outstanding options under the
Company's Share Option Schemes over a total of 10,147,664 Ordinary Shares.
The Company has granted options to Directors and employees to subscribe for
Ordinary Shares under the Share Option Schemes as follows:
Scheme Option Price (pence) No. of Shares Normal Exercisable Dates
SAYE Scheme
SAYE Scheme 180.00 5,750 01/06/01-30/11/01
SAYE Scheme 137.00 9,820 01/07/01-31/12/01
SAYE Scheme 137.00 7,554 01/07/03-31/12/03
SAYE Scheme 99.00 23,679 01/07/02-31/12/02
SAYE Scheme 99.00 21,135 01/07/04-31/12/04
SAYE Scheme 53.00 106,372 01/12/03-31/05/04
SAYE Scheme 53.00 20,376 01/12/05-31/05/06
SAYE Scheme 19.50 416,297 01/06/04-30/11/04
SAYE Scheme 19.50 110,769 01/06/06-30/11/06
SAYE Scheme 721,752 01/06/01-30/11/06
Unapproved Scheme
Unapproved Scheme 248.00 7,500 04/10/98-04/10/02
Unapproved Scheme 175.00 15,000 28/02/99-28/02/03
Unapproved Scheme 287.00 25,000 16/08/99-16/08/03
Unapproved Scheme 188.50 52,920 14/03/00-14/03/04
Unapproved Scheme 199.50 7,500 26/03/00-26/03/04
Unapproved Scheme 158.00 344,550 09/04/01-09/04/05
Unapproved Scheme 173.00 150,000 30/04/01-30/04/05
Unapproved Scheme 170.00 10,000 08/09/01-08/09/05
Unapproved Scheme 150.00 610,000 08/10/01-08/10/05
Unapproved Scheme 121.00 228,060 01/04/02-01/04/06
Unapproved Scheme 90.50 61,550 02/07/02-02/07/06
Unapproved Scheme 93.50 512,450 04/05/03-04/05/07
Unapproved Scheme 2,024,530 04/10/98-04/05/07
66
Scheme Option Price (pence) No. of Shares Normal Exercisable Dates
Executive Scheme
Executive Scheme 110.00 350,454 24/03/97-24/03/04
Executive Scheme 248.00 37,500 04/10/98-04/10/05
Executive Scheme 188.50 22,080 14/03/00-14/03/07
Executive Scheme 158.00 163,450 09/04/01-09/04/08
Executive Scheme 121.00 121,940 01/04/02-01/04/09
Executive Scheme 90.50 33,450 02/07/02-02/07/09
Executive Scheme 74.00 20,000 25/08/02-25/08/09
Executive Scheme 93.50 363,550 04/05/03-04/05/10
Executive Scheme 69.50 47,000 05/09/03-05/09/10
Executive Scheme 1,159,424 24/03/97-05/09/10
Muscat Unapproved Scheme
Muscat Unapproved Scheme 44.00 128,270 01/10/00-01/10/04
Muscat Unapproved Scheme 59.00 44,231 01/01/01-01/01/05
Muscat Unapproved Scheme 67.00 103,206 01/04/01-01/04/05
Muscat Unapproved Scheme 67.00 36,859 01/09/01-01/09/05
Muscat Unapproved Scheme 312,566 01/10/00-01/09/05
Super Options
Unapproved 400.00 1,525,000 02/07/02-02/07/06
Scheme Exercise price (pence) No. of restricted shares Normal Exercisable Dates
LTIP
LTIP Fixed at time of exercise 2,441,176 29/09/03-29/10/03
LTIP Fixed at time of exercise 260,000 19/12/03-19/01/04
LTIP 2,701,176 29/09/03-19/01/04
Options over American Depositary Shares in US Dollars
Option Price No.*
Scheme (US cents) of Shares Normal Exercisable Dates
US Stock Option Plan
US Stock Option Plan 275.00 47,000 09/04/99-09/04/08
US Stock Option Plan 297.00 30,000 30/04/99-30/04/08
US Stock Option Plan 247.50 380,000 08/10/99-08/10/08
US Stock Option Plan 200.00 85,000 01/04/00-01/04/09
US Stock Option Plan 143.75 200,000 02/07/00-02/07/09
US Stock Option Plan 146.09 232,000 04/05/01-04/05/10
US Stock Option Plan 974,000 09/04/99-04/05/10
Super Options
US Stock Option Plan 643.50 400,000 02/07/02-02/07/06
Individual Arrangements
Individual arrangements 372.50 26,844 14/11/98-14/11/04
Individual arrangements 295.30 16,928 08/09/99-08/09/05
Individual arrangements 262.80 285,444 05/05/01-05/05/07
Individual Arrangements 329,216 14/11/98-05/05/07
*Note US options are shown as Ordinary Share equivalent - actual options are
over American Depositary
Shares (one ADS = 4 Ordinary Shares)
Total US Option Plans 1,703,216
Total non-US Option Plans 5,743,272
Total non-US LTIPs 2,701,176
----------
Grand Total 10,147,664
----------
As disclosed in paragraph 9(e)(i) below, David Mattey and Daniel Wagner have
agreed, pursuant to the terms of their termination agreements, to surrender all
of their respective options, over 1,199,650 and 1,013,794 Ordinary Shares
respectively, under the Share Option Schemes.
The Group also has options outstanding under subsidiary schemes, full details of
which are set out in paragraph 6 below.
67
(i) In connection with a new term facility of $25 million agreed between the
Company and Chase Manhattan Bank International Limited ("Chase") in May
1999, the Company issued to Chase between May 1999 and November 1999 a
total of 3 million warrants to subscribe Ordinary Shares in the Company.
1.5 million of those warrants entitle Chase to subscribe Ordinary Shares at
any time before 11 October 2002 (the "2002 Warrants"). The remaining 1.5
million warrants entitle Chase to subscribe Ordinary Shares at any time up
to 14 May 2004 (the "2004 Warrants"). The subscription price for an
Ordinary Share on exercise of a Warrant is 90.6(pence).
In relation to both the 2002 Warrants and the 2004 Warrants, the number of
warrants and/or the exercise price may be adjusted on the occurrence of
certain events including, on any capital reorganisation of the Company or
on any distribution of assets to shareholders or on any issue of Ordinary
Shares for cash at less than "Fair Market Value". For these purposes, "Fair
Market Value" means (whilst the Ordinary Shares are listed) the average of
the daily market prices for an Ordinary Share for the 30 consecutive
dealing days commencing 45 dealing days before the relevant date. The
warrant instruments in relation to the 2002 Warrants and the 2004 Warrants
are being made available for inspection in accordance with paragraph 16
below.
(j) On 12 November 1999, warrants to subscribe an aggregate of 6 million
Ordinary Shares (the "2009 Warrants") were issued to the Company's senior
lenders, including to Chase Manhattan Bank, ABN AMRO Bank, NM Rothschild &
Sons, the Bank of Scotland and the Royal Bank of Scotland (the "Banks").
The 2009 Warrants were issued in consideration of the Banks agreeing to
relax the covenant arrangements in connection with the refinancing of the
Company's senior debt. The 2009 Warrants may be exercised, in whole or in
part, at any time, during the period commencing on 12 November 1999 and
expiring at 11.59 p.m. on 12 November 2009. The subscription price for an
Ordinary Share on exercise of a Warrant is 90.6(pence).
The terms of the 2009 Warrants contain provisions to protect the holders of
those warrants and for adjusting the subscription price and the number of
shares which are the subject of the 2009 Warrants in certain circumstances
to take into account alterations to the share capital of the Company in the
same way described above in relation to the 2002 Warrants and the 2004
Warrants. The warrant instruments relating to the 2009 Warrants are being
made available for inspection in accordance with paragraph 16 below.
(k) On the assumption that the Placing and Open Offer proceeds, the number of
Warrants in issue and the exercise price of such Warrants (in the case of
each of the tranches of Warrants described above) will be adjusted on the
following basis:
(i) the exercise price will be adjusted by multiplying the latest exercise
price in respect of each of the Warrants by a fraction of which the
numerator is the number of Ordinary shares in issue immediately prior
to the Placing and Open Offer plus the number of Ordinary Shares which
the aggregate consideration receivable by the Company in respect of
the Placing and Open Offer would purchase at the Fair Market Value (as
defined below) and the denominator is the number of Ordinary Shares in
issue immediately prior to the Placing and Open Offer plus the number
of Ordinary Shares issued pursuant to the Placing and Open Offer; and
(ii) the aggregate number of Ordinary Shares which can be subscribed under
the Warrant shall be adjusted by multiplying the number of Ordinary
Shares which would be issuable upon the future exercise of the
outstanding Warrants by the fraction of which the numerator is the
exercise price before the Placing and Open Offer and the denominator
is the exercise price after such issue (as adjusted pursuant to (i)
above).
The "Fair Market value" for the purposes of the above adjustment will be
the average of the daily market prices for an Ordinary Share for 30
consecutive dealing days commencing 45 days before such date. Holders of
Warrants will be formally notified of the adjustment on the above basis
following completion of the Placing and Open Offer.
5. Memorandum and Articles of Association
(a) Memorandum of Association
The Memorandum of Association of the Company provides that the Company's
principal objects are to carry on business as a holding and co-ordinating
company of the group of companies of which the Company is for the time being the
holding company and to carry on the business of an investment company. The
objects of the Company are set out in full in clause 4 of the Memorandum of
Association.
(b) Articles of Association
The Articles of Association of the Company which are available for inspection at
the address specified in paragraph 16 below contain, amongst other things,
provisions to the following effect:
68
(i) Dividends
Subject to the Act and every other statute from time to time in force
concerning companies and affecting the Company (together the "Statutes"),
the Company may by ordinary resolution declare dividends to be paid to
members of the Company according to their rights, but not exceeding the
amount recommended by the directors. If, in the opinion of the directors,
the profits of the Company available for distribution justify such
payments, the directors may from time to time pay interim dividends and may
also pay any fixed rate dividend on the half-yearly or other dates
prescribed for payment. Subject to any special rights attaching to shares,
all dividends will be apportioned and paid proportionately to the amounts
paid up on the shares during any portion or portions of the period in
respect of which the dividend is paid but, if any share is issued on terms
providing that it shall rank for dividend as from a particular date or be
entitled to dividends declared after a particular date, such share shall
rank for or be entitled to dividends accordingly.
All dividends unclaimed may be invested or otherwise used by the directors
for the benefit of the Company until claimed and all dividends unclaimed
after a period of 12 years from the date of declaration of such dividend
shall be forfeited and shall revert to the Company.
(ii) Winding-up
If the Company commences to be wound up, the liquidator may, with the
sanction of an extraordinary resolution of the Company and any other
sanction required by law:
(1) divide among the members in kind the whole or any part of the assets
of the Company (whether they shall consist of property of the same
kind or not) and, for that purpose, set such values as he deems fair
upon any property to be divided and determine how the division shall
be carried out between the members; and
(2) vest the whole or any part of the assets in trustees upon such trusts
for the benefit of members as the liquidator shall with the like
sanction think fit, but no member shall be compelled to accept any
share or other assets upon which there is any liability.
(iii) Voting
Subject to any terms as to voting upon which any shares may be issued, or
may from time to time be held, and to the provisions of the articles,
every member who (being an individual) is present in person or (being a
corporation) is present by a representative not being himself a member
shall have one vote on a show of hands and on a poll every member present
in person or by proxy shall have one vote for every share of which he is
the holder.
(iv) Restrictions on shares
If a member or any person appearing to be interested in shares in the
Company has been duly served with a notice pursuant to Section 212 of the
Act or, having been duly served with such a notice, has in purported
compliance with it made a statement which in the opinion of the directors
is false or misleading in any material particular and has been served with
a further notice by the directors requiring him to supply the correct
information and is in default in supplying to the Company the information
thereby required within a prescribed period after the service of such
notice the directors may serve on such member a notice (a "direction
notice") in respect of the shares in relation to which the default
occurred ("default shares") directing that the member shall not be
entitled to vote at any general meeting or class meeting of the Company in
respect of the default shares or any other shares held by him. Where the
default shares represent at least 0.25 per cent of the issued shares of
the same class the direction notice may in addition direct that any
dividend or other money which would otherwise be payable on such shares
shall be retained by the Company without liability to pay interest, any
election by the member for any scrip dividend alternative in respect of
the default shares shall not be effective and no transfer of any of the
shares held by the member shall be registered unless the member is not
himself in default in supplying the information requested and the transfer
is part only of the member's holding and is accompanied by a certificate
given by the member in a form satisfactory to the directors to the effect
that after due and careful enquiry the member is satisfied that no person
in default is interested in any shares subject to the transfer or the
transfer is an approved transfer (meaning that it is made in acceptance of
a takeover offer or to a bona fide unconnected third party or through a
designated stock exchange). The prescribed period referred to above means
14 days from the date of service of the notice under Section 212 or, as
the case may be, the notice from the directors requiring the correct
information to be supplied.
No member shall be entitled to vote in respect of any share held by him if
any call or other sum payable by him to the Company remains unpaid.
69
(v) Alteration of Share Capital and Variation of Rights
The Company may by ordinary resolution (a) increase its share capital,
(b) consolidate and divide all or any of its share capital into shares of
a larger amount than its existing shares, (c) subject to the Statutes,
sub-divide all or any of its shares into shares of a smaller amount and
may by the resolution decide that one or more of the shares resulting
from the sub-division may have any preference or other advantage as
compared with the others and (d) cancel shares which, at the date of the
passing of the resolution, have not been taken or agreed to be taken by a
person and diminish the amount of its share capital by the amount of the
shares so cancelled.
Subject to the Statutes, the rights attached to any class of shares may
(unless otherwise provided by the terms of the issue of shares of that
class) be varied, modified or abrogated, whether or not the Company is
being wound up, either (a) in such manner (if any) as may be provided by
such rights or (b) in the absence of any such provision either with the
consent in writing of the holders of three-quarters in nominal value of
the issued shares of the class or with the sanction of an extraordinary
resolution passed at a separate general meeting of the holders of the
shares of the class (but not otherwise). At every such separate general
meeting the necessary quorum shall be at least two persons holding or
representing by proxy at least one-third in nominal value of the issued
shares of the class (but so that at any adjourned meeting any holder of
shares of the class present in person or by proxy shall be a quorum).
(vi) Transfer of Shares
Any member may transfer all or any of his shares by an instrument of
transfer in any usual or common form or in any other form which the
directors may approve. Where the Statutes and/or regulations made
pursuant thereto allow, shares in the Company may be transferred without
a written instrument pursuant to procedures adopted for the purpose by
the directors. Any instrument of transfer of a share shall be signed by
or on behalf of the transferor and, except in the case of fully-paid
shares, by or on behalf of the transferee. The directors may in their
absolute discretion and without giving any reason refuse to register any
transfer of shares (not being fully paid shares). The directors may also
refuse to register a transfer of shares unless the instrument of
transfer:
(1) is lodged (duly stamped if so required by law in order to be
registered) at the Company's registered office or at such other place
as the directors may appoint accompanied by the relevant share
certificate(s);
(2) is in respect of only one class of share; and
(3) is in favour of not more than four persons jointly.
A member may transfer all or part of his uncertificated shares and the
Company shall register the transfer of any uncertificated shares in
accordance with any applicable statutory provision. The directors may, in
their absolute discretion and without giving any reason for their
decision, refuse to register any transfer of an uncertificated share
where permitted by any applicable statutory provision. If the directors
refuse to register a transfer of an uncertificated share they shall,
within two months of the date on which the transfer instruction relating
to such a transfer was received by the Company, send to the transferee
notice of the refusal.
(vii) Borrowing Powers
Subject as provided below, the directors may exercise all the powers of
the Company to raise or borrow money and to mortgage or charge its
undertaking, property and assets (including uncalled capital) or any part
thereto and, subject to the Statutes, to issue debentures, debenture
stocks and other securities, whether outright or as collateral security,
for any debt, liability or obligation of the Company or of any third
party.
The directors must however restrict the borrowings of the Company and, so
far as they are able, of its subsidiary undertakings, so as to secure the
aggregate amount from time to time remaining undischarged of all moneys
borrowed by the Company and its subsidiary undertakings (excluding
amounts borrowed by any of them from any other) shall not without the
previous sanction of an ordinary resolution of the Company exceed an
amount equal to three times the aggregate of the amount paid up or
credited as paid up on the issued share capital of the Company and the
amount standing to the credit of the consolidated capital and revenue
reserves (including any share premium account and capital redemption
reserve) of the Company and its subsidiary undertakings but adjusted as
set out in the Articles.
(viii) Directors
Emoluments and expenses of Directors
The remuneration of the directors for their ordinary activities as such
shall not in aggregate exceed (Pounds)250,000 per annum or such higher
amount as may from time to time be determined by ordinary
70
resolution of the Company. Such remuneration shall be divisible among the
directors as they may agree or, failing agreement, equally, except that
any director who shall hold office for part only of the period in respect
of which such remuneration is payable shall be entitled only to rank in
such division for a proportion of remuneration related to the period
during which he has held office. Any director who holds any executive
office or who serves on any committee of the directors or who otherwise
performs services in which the opinion of the directors are outside the
scope of the ordinary duties of a director, may be paid such extra
remuneration by way of salary, commission or otherwise, as the directors
may determine. The directors shall have power to provide benefits whether
by payment of gratuities, pensions or otherwise to (or to any family
members or dependants of) any director or ex-director who holds or has
held any executive position or agreement for service with the Company or
any associated company and for the purpose of providing any such benefits
to contribute to any scheme or fund or to pay premiums. The directors may
purchase and maintain insurance for, or for the benefit of, any persons
who are or were directors, officers, employees or auditors of the Company
or any associated company or who are or were trustees of any pension fund
or profit sharing or employees' share scheme in which employees of the
Company or any associated company are interested.
Restrictions on voting
Subject as provided below a director may not vote in respect of any
contract or arrangement or any other proposal whatsoever in which he has
any material interest otherwise than by virtue of his interest in shares
or debentures or other securities of, or otherwise in or through, the
Company. A director may not be counted in the quorum at a meeting in
relation to any resolution on which he is not entitled to vote.
Notwithstanding the foregoing, a director shall (in the absence of some
other material interest than is indicated below) be entitled to vote (and
be counted in the quorum) in respect of any resolution concerning any of
the following matters:
(aa) any contract or arrangement for the giving of any security,
guarantee or indemnity to a third party in respect of a debt or
obligation of the Company or any of its subsidiary undertakings for
which he himself has assumed responsibility in whole or in part
under a guarantee or indemnity or by the giving of security;
(bb) any contract or arrangement for the giving of any security,
guarantee or indemnity to him in respect of money lent to, or
obligations incurred or undertaken by him at the request of, or for
the benefit of, the Company or any of its subsidiary undertakings;
(cc) any contract or arrangement with him to subscribe for shares,
debentures or other securities of the Company or any of its
subsidiary undertakings issued or to be issued pursuant to any offer
or invitation to members or debenture holders or any class thereof
of the Company or any of such subsidiary undertakings or to the
public or any section thereof or to underwrite or sub-underwrite any
shares, debentures or other securities of the Company or any of such
subsidiary undertakings;
(dd) any contract or arrangement concerning any other company in which he
is interested, directly or indirectly, and whether as an officer,
shareholder, creditor or otherwise howsoever, provided that
(directly or indirectly) he is not the holder or beneficially
interested in one per cent. or more of the issued shares of any
class of the equity share capital of such company or of the voting
rights available to members of such company;
(ee) any proposal concerning the effecting or maintenance of insurance
for the benefit of directors or persons who include directors under
which he may benefit.
For the above purposes, an interest of a person who is connected with a
director shall be treated as an interest of the director
Retirement of Directors by rotation
At each annual general meeting, one-third of the directors from time to
time (or, if their number is not a multiple of three, the number nearest
to but not exceeding one-third) shall retire from office by rotation. The
directors to retire by rotation shall be those who have been longest in
office since their last appointment but as between persons who became or
were last appointed directors on the same day, those to retire shall
(unless they otherwise agree among themselves) be determined by lot.
6. Share Option Schemes
(a) 1994 Executive Stock Option Scheme
In March 1994, the Company adopted the Inland Revenue approved 1994 Executive
Stock Option Scheme (the "Executive Scheme"). Under the terms of the Executive
Scheme, options to acquire Ordinary Shares may be granted at the discretion of
the Remuneration Committee of the Board to any employee, including full-time
employee directors. The exercise price is determined at the date of grant of an
option and shall not be less than
71
the higher of the par value of an Ordinary Share and the closing market price of
an Ordinary Share on the day preceding the date of grant. Options under the
Executive Scheme generally become exercisable on the third anniversary of the
date of grant and lapse on the tenth anniversary of the date of grant. The
number of options which can be granted under the Executive Scheme and the
aggregate exercise price of options available to any individual under an
approved scheme was limited to (Pounds)30,000 in the Finance Act 1996.
(b) 1994 Unapproved Executive Share Option Scheme
In March 1994, the Company adopted the 1994 Unapproved Executive Share Option
Scheme (the "Unapproved Scheme"). Under the terms of the Unapproved Scheme,
options to subscribe for Ordinary Shares may be granted at the discretion of the
Remuneration Committee of the Board to any employee, including full-time
employee directors. The exercise price is determined at the date of grant of an
option and shall not be less than the higher of the par value of an Ordinary
Share and the closing market price of an Ordinary Share on the day preceding the
date of grant. Options under the Unapproved Scheme generally become exercisable
on the third anniversary of the date of grant and lapse on the seventh
anniversary of the date of grant. The number of shares over which options may be
granted under the Unapproved Scheme is consistent with institutional investor
guidelines on overall limits applicable to employee share schemes.
(c) 1994 Savings Related Share Option Scheme
In March 1994, the Company adopted the 1994 Savings Related Share Option Scheme
("SAYE Scheme") which was subsequently approved by the Inland Revenue. Under the
rules of the SAYE scheme, employees and full-time employee directors with more
than six months' service are eligible to participate. All options are linked to
a contractual savings scheme. Participants may save between (Pounds)5 and
(Pounds)250 per month over a three or five year period at the end of which they
are granted a tax-free bonus. Participants may withdraw from their savings
contract at any time (although their options will then lapse) and are not
obliged to exercise their options at the date of maturity. The exercise price is
determined at the date of grant of options and shall not be less than the higher
of the par value of an Ordinary Share and 85 per cent of the market value of an
Ordinary Share at the date of invitation. Options under the SAYE scheme become
exercisable on the bonus date and remain exercisable for a period of six months.
The number of shares over which options may be granted under the SAYE Scheme is
consistent with institutional investor guidelines on overall limits applicable
to a company's employee share schemes.
(d) 1997 US Stock Option Plan
In November 1997, the Company adopted the 1997 US Stock Option Plan (the
"USSOP") which provides for the grant of both incentive and non-statutory stock
options over the Company's American Depository Shares (ADSs). Incentive stock
options granted under the USSOP are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue code of 1986,
as amended (the "Code"). Non-statutory stock options granted under the USSOP are
intended not to qualify as incentive stock options under the Code. Under the
terms of the USSOP, options to acquire ADSs may be granted by the Remuneration
Committee of the Board of Directors to any US resident employees, including
full-time employee Directors. The exercise price of incentive stock and non-
statutory stock options under the USSOP may not be less than the fair market
value of the ADSs subject to the option on the date of grant, and in some cases,
may not be less than 110 per cent of such fair market value. Options granted
under the USSOP vest in cumulative increments as determined by the Remuneration
Committee of the Board and lapse no later than the tenth anniversary of the date
of grant. The number of shares over which options may be granted under the USSOP
is consistent with the institutional investor guidelines on overall limits
applicable to employee share schemes.
(e) 1998 US Employee Stock Purchase Plan
In June 1998 the Company adopted the 1998 US Employee Stock Purchase Plan (the
"ESPP") which provides for the grant of "Rights" to purchase ADSs in the
Company. The Rights are intended to qualify as options issued under "employee
stock purchase plans" as defined in Section 423(b) of the United States Internal
Revenue Code of 1986, as amended (the "Code"). During the period June 1998 to 4
May 2000, all US resident employees including full-time employee directors were
eligible to participate. Rights under an offering were linked to accumulated
payroll deductions over the course of the offering. Participants were entitled
to withdraw from the ESPP at any time during an offering, although their Rights
would then lapse. The purchase price of the ADSs was not less than 85 per cent
of the fair market value of ADSs on the offering date or the purchase date,
which ever was the lower. The purchase price included any UK stamp duty reserve
tax payable with respect of the issue of ADSs. Under US law an individual may
not purchase more than $25,000 worth of ADSs (as determined by the fair market
value on the offering date). The number of shares over which Rights may be
granted under the ESPP is consistent with institutional investor guidelines in
respect of overall limits applicable to employee share schemes. All rights to
acquire ADSs under the ESPP matured on completion of the sale of ISD to Thomson
Corporation, whereupon 42 employees exercised their options.
72
(f) Individual US arrangements
Between 1997 and 1998 options over ADSs were granted at the prevailing market
value to Richard Swank, in his capacity as a Non-executive Director of The
Dialog Corporation, the Company's North American subsidiary. Additionally, on 5
May 2000, Patrick Sommers was granted an option over ADSs under an individual
arrangement pursuant to a bonus agreement in respect of the sale of the
Information Services Division to Thomson Corporation.
(g) Muscat Unapproved Scheme
The remaining 30 per cent of the issued share capital of Muscat Limited was
acquired in December 1999. Prior to the transaction, various Muscat employees
held a total of 436 options over shares in Muscat Limited at exercise prices
ranging from (Pounds)627 to (Pounds)1,100. Under the 1998 Muscat Unapproved
Share Option Scheme, these employees were offered, and accepted a total of
642,822 replacement options over ordinary shares of Bright Station plc at
exercise prices ranging from 43(pence) to 67(pence) per share.
(h) Long Term Incentive Plan
In September 2000, the Company adopted the Long Term Incentive Plan (LTIP).
Under the rules of the LTIP, key executives selected by the Remuneration
Committee may receive a deferred promise by the Company to provide shares at no
cost. Awards under the LTIP will normally vest at the end of the "Restricted
Period" of three years, following the achievement of predetermined performance
criteria and on payment by the employee to the Company of any employers'
National Insurance liability arising thereon. There are two performance criteria
associated with all awards made to date: (1) the performance of the Company's
share price over the Restricted Period must equal or exceed the performance of
the techMark All Share Index for the same period, and (2) the proportion of the
award released at the end of the Restricted Period is determined as detailed
below:
Company's final average share price at the
end of the Restricted Period Percentage of award released
Less than 180(pence) 0%
180(pence) 25%
Between 180(pence) and 220(pence) Proportionate release between 25% and 100%
220(pence) and above 100%
(i) Subsidiary Company Share Options
On 5 September 2000, the Company adopted discretionary share option schemes in
respect of four designated subsidiaries: OfficeShopper, Smartlogik, Sparza and
WebTop, for the incentivisation and benefit of key management and staff within
each company.
Under the schemes, which are administered by the Board of Bright Station,
eligible employees may be granted options to acquire ordinary shares in the
relevant subsidiary at a price no less than the higher of:
(a) the aggregate nominal value of the ordinary shares under option; or
(b) the aggregate market value of the ordinary shares under option at the date
of grant as determined by the Board.
1/12 of the number of options granted vest at three monthly intervals following
the date of grant, becoming fully vested on the third anniversary of grant.
Where a participant ceases to hold office within the Group, their vested options
remain exercisable for a period of three years, unless they leave for a
specified reason such as misconduct. However, neither employees nor former
employees may exercise their options unless pre-determined performance criteria
are met.
The aggregate number of shares issued and issuable pursuant to the subsidiary
share option schemes may not exceed 15% of the subsidiary's issued share capital
in any consecutive ten year period. Options not exercised before the expiry of
ten years from the date of grant shall lapse.
At 11 June 2001, the following options were outstanding over ordinary shares of
subsidiary companies:
OfficeShopper Unapproved Scheme
Options
Date of Grant Exercise price outstanding
13/10/2000 (Pounds)0.17 3,000,000
-----------
Total 3,000,000
===========
73
Smartlogik Unapproved Scheme
Options
Date of Grant Exercise price outstanding
13/10/2000 (Pounds)2.67 3,227,998
30/11/2000 (Pounds)2.67 372,083
-----------
Total 3,600,081
===========
WebTop.com Unapproved Scheme
Options
Date of Grant Exercise price outstanding
13/10/2000 (Pounds)0.84 1,240,247
13/10/2000 (Pounds)0.75 1,600,000
30/11/2000 (Pounds)0.84 922,500
-----------
Total 3,762,747
===========
No grants were made under the Sparza Unapproved Scheme.
As disclosed in paragraph 9(a)(ii) below, it is intended that, following
Admission, Stephen Hill, Simon Canham and Robert Lomnitz will surrender their
respective options under the Smartlogik Unapproved Scheme and will be granted
options under the Bright Station Share Option Schemes.
Other than in relation to Daniel Wagner and David Mattey, all outstanding
options under the Bright Station schemes will be retained pursuant to their
terms.
It is not intended to grant any further options under any of the subsidiary
share option schemes.
7. Subsidiaries
The Company is the holding company of the Group and, on Admission, will have the
following principal subsidiaries (each of which, unless indicated otherwise, has
the same registered office as the Company and is consolidated in the financial
information included elsewhere in this document)(companies which are indented
are not direct subsidiaries):
Name and registered office Country of Proportion of Principal
incorporation equity held activity
Bright Station Contracts Ltd England 100% 1
KMK DigiTex Co. Ltd Japan 100% 2
Bright Station Ventures Ltd England 100% 3
Bright Station Symphony Ltd England 100% 4
OfficeShopper.com Holdings plc England 100% 5
OfficeShopper.com Ltd England 100% 5
Smartlogik Holdings plc England 100% 6
Smartlogik Ltd England 100% 7
Smartlogik Inc* US 100% 7
WebTop Search Ltd England 100% 8
Sparza Ltd England 100% 5
WebTop.com Holdings plc England 100% 6
Key:
1. Dormant company
2. Dormant company in process of liquidation
3. Investment company
4. Provision of hosting services
5. Discontinued operation
6. Holding company
7. Provision of knowledge management technology
8. Provision of indexing and search technology
* Registered office 1013 Center Road, Wilmington, New Castle, Delaware, USA.
74
8. Principal Premises
Details of the principal properties of the Group are set out below:
Area Current
Location and Use Tenure (sq. ft.) Annual Rent
Corporate Head office
1st Floor Leasehold 14,332 (Pounds)451,460
The Communications Building to 28 April 2004
48 Leicester Square
London WC2H 7DB
Technology Centre
Part 2nd Floor, Block D Leasehold 5,620 (Pounds)123,640
The Westbrook Centre to 28 March 2015
Milton Road
Cambridge CB4 1YG
Bright Station Contracts (Trade UK) operations
Part 4th Floor Leasehold 4,600 (Pounds) 57,500
Brent House to 13 December 2008
349-357 High Road rent review 14 December 2003
Wembley HA9 6AP break 1 April 2003
OfficeShopper office
West Wing Leasehold 6,300 (Pounds)151,200
Latour House to 19 July 2006
Chertsey Boulevard rent review 20 July 2005
Hanworth Lane
Chertsey KT16 9JX
Smartlogik US offices
Suite 440 Leasehold 3,874 $87,165
601 North Fairfax Street to 31 December 2004
Alexandria
Virginia 22314 USA
2 Embarcardero Center Leasehold 2,910 $276,450
22nd Floor to 30 April 2003
San Francisco
California 94111 USA
9. Directors' and other interests
(a) Directors' interests in the Company
(i) /(1)/ As at 11 June 2001 (being the latest practicable date prior to the
publication of this document), the interests of each of the
Directors and (so far as is known to the Directors or could with
reasonable diligence be ascertained by them) persons connected with
the Directors (within the meaning of section 346 of the Act), in the
share capital of the Company, as required to be notified to the
Company pursuant to sections 324 and 328 of the Act or as required
to be shown in the register maintained under section 325 of the Act
are detailed below.
/(2)/ Without entering into any contractual commitment prior to
application, certain Directors have indicated that they intend to
subscribe for a number of New Ordinary Shares under the Open Offer,
as detailed below. The figures shown "Following Admission" also
reflect the New Ordinary Shares to be issued to Daniel Wagner and
David Mattey in connection with contractual payments referred to in
paragraph 7 of Part I of this document. Robert Lomnitz and Allen
Thomas have expressed an interest in subscribing for a number in
excess of 4 New Ordinary Shares for every 5 existing Ordinary Shares
held, but due to the possibility that excess applications could be
scaled back, oversubscriptions are not included below.
As at 11 June 2001 Following Admission
Number of Percentage of Number of Percentage of
Director Ordinary Shares/(1)/ share capital Ordinary Shares/(2)/ share capital
Ian Barton 479,139 0.28 862,450 0.18
Robert Lomnitz 94,500 0.05 170,100 0.04
David Mattey 2,335,200 1.35 9,690,100 2.07
Patrick Sommers 338,496 0.20 338,496 0.07
Allen Thomas 100,000 0.06 180,000 0.04
Daniel Wagner 17,434,780 10.06 33,836,780 7.24
------------ ---------- ------------ -----------
20,782,115 12.00 45,077,926 9.64
============ ========== ============ ===========
75
(ii) In addition to the interests of the Directors in the issued share capital
of the Company disclosed in paragraph (i) above, the following Options
remained outstanding under the Share Option Schemes as at 11 June 2001,
being the latest practicable date prior to the publication of this
document:
Date of Number of Exercise Exercisable Exercisable Total
grant Ordinary price from to
Shares
I Barton - - - - - -
R Lomnitz 04/05/00 32,000 93.5(pence) 04/05/03 04/05/10
04/05/00 23,000 93.5(pence) 04/05/03 04/05/07
29/09/00 382,353 /(1)/ 29/09/03 29/10/03 437,353
D Mattey* 30/04/98 30,000 173(pence) 30/04/01 30/04/05
08/10/98 120,000 150(pence) 08/10/01 08/10/05
02/07/99 325,000 400(pence) 02/07/02 02/07/06
04/05/00 50,000 93.5(pence) 04/05/03 04/05/07
29/09/00 500,000 /(1)/ 29/09/03 29/10/03
24/03/94 122,727 110(pence) 24/03/97 24/03/04
25/04/01 51,923 19.5(pence) 01/06/06 30/11/06 1,199,650
P Sommers 08/10/98 200,000 150(pence) 08/10/99 08/10/08
02/07/99 600,000 400(pence) 04/05/00 02/07/03
02/07/99 200,000 90(pence) 02/07/00 02/07/09
04/05/00 200,000 93.5(pence) 04/05/01 04/05/10
05/05/00 285,444 170(pence) 05/05/01 05/05/07 1,485,444
A Thomas - - - - - -
D Wagner* 30/04/98 30,000 173(pence) 30/04/01 30/04/05
08/10/98 130,000 150(pence) 08/10/01 08/10/05
24/03/94 163,636 110(pence) 24/03/97 24/03/04
04/05/00 50,000 93.5(pence) 04/05/03 04/05/07
29/09/00 588,235 /(1)/ 29/09/03 29/10/03
25/04/01 51,923 19.5(pence) 01/06/06 30/11/06 1,013,794
-----------
Total 4,136,241
===========
/(1)/ The exercise price of LTIP awards is fixed at the time of exercise,
as described in paragraph 6 above.
* As described in paragraph 9(e)(i) below, David Mattey and Daniel Wagner
have agreed, pursuant to the terms of their termination agreements, to
surrender all of their respective options under the Share Option Schemes.
It is also intended to grant to the Proposed Directors, the Continuing
Director and Alan Jeffries (a consultant of Smartlogik), following
Admission options in respect of Ordinary Shares as follows:
David Jefferies: 2,336,166 Ordinary Shares (0.5 per cent of the enlarged
issued share capital)
Stephen Hill: 18,689,328 Ordinary Shares (4 per cent of the enlarged
issued share capital)
Simon Canham: 7,008,498 Ordinary Shares (1.5 per cent of the enlarged
issued share capital)
Robert Lomnitz: 6,307,648 Ordinary Shares (1.35 per cent of the enlarged
issued share capital)
James Bair: 500,000 Ordinary Shares (0.11 per cent of the enlarged
issued share capital)
Alan Jeffries: 1,800,000 Ordinary Shares (0.39 per cent of the enlarged
issued share capital)
The options will be granted at an exercise price equal to the average of
the closing market price of an Ordinary Share for the 10 dealing days
following the date of this document. The authority of the Directors to
grant share options to Messrs Jefferies, Bair and Jeffries is subject to
shareholder approval being obtained at the EGM.
The grant of these options to Messrs Hill and Canham will be in lieu of
options granted to them over 1,200,000 and 450,000 ordinary shares in
Smartlogik Holdings plc and to Mr. Lomnitz in lieu of options committed to
be granted to him over 450,000 shares in Smartlogik Holdings plc.
(b) Directors' and Proposed Directors' Interests in Contracts
Save as detailed in sub-paragraph (e) below, and in note 9 in Part V of this
document, no Director or Proposed Director has or has had any interest in any
transactions which are or were unusual in their nature or conditions or are or
were significant to the business of the Group and which have been effected by
any member of the Group
76
during the current or immediately preceding financial year of the Company, or,
if effected during an earlier financial year, remain in any respect outstanding
or unperformed.
(c) Directors' and Proposed Directors' other interests
(i) The Directors and Proposed Directors currently hold the following
directorships and have held the following directorships within the five
years prior to the publication of this document (in each case other than in
relation to the Group) and are or were partners in the following firms
within the five years prior to publication of this document:
Current directorships Former directorships
and partnerships: and partnerships:
Allen Lloyd Thomas (61) Blue Ocean Associates plc First Rail Leasing Limited
Eidos plc Kingsmead Underwriting
Moves Group Limited Agency Limited
Ockham Holdings plc
Penna Consulting plc
Prideaux & Associates Limited
Daniel Wagner (37) Fifteen Wedderburn Road 4th Network Inc.
Limited
David Gary Mattey (38) Easynet Group plc Ultratown Investments
Ultratown Limited Limited
Uphill Estates Limited
Patrick Charles Sommers (53) SIRSI Inc Dialog Holdings Ltd
Dialog Multimedia Ltd
Medicus Systems
Corporation
Mini-Data Inc
Profound Ltd
Tesseract Systems Inc
The Dialog Corporation Ltd
Usertec Systems Inc
Virtual Business Information
Ltd
Virtual Intelligence Ltd
Ian Joseph Barton (55) Barton Associates Limited Central Europe Trust
Distributed Information Company Limited
Processing Limited Financial and Commodity
Computer Services Limited
Octagon Information
Industries Limited
Octagon Nominees Limited
Robot (UK) Limited
Wincanton Security Products
Limited
David George Jefferies (67) 24/Seven Utilities Services plc Electricity Association
Costain Group plc Services Limited
Incorporated Benevolent Fund Electricity Pensions Limited
of Institution of Electrical Electricity Pensions Services
Engineers Limited (The) Limited
National Grid International Electricity Pensions Trustee
Limited Limited
Rosemead Estates Limited ESN Holdings Limited
Strategic Rail Authority National Grid Group plc
Viridian Group plc
Stephen James Hill (45) Analytical Applications Limited Interleaf France SA
Interleaf GmbH
Interleaf Italia
Interleaf Schweiz SA
Interleaf UK Limited
Simon Anthony Charles Canham (36) ARIBA AB None
James Henry Bair (57) None None
77
Current directorships Former directorships
and partnerships: and partnerships:
Robert Kurt Lomnitz (36) None Com-poser.com Limited
Continental Ore Company
Limited
Continential Resources
Limited
Coromin Limited
Etraco Limited
Healers World Limited
iVenturi Inc
Schoolsforschools.com Limited
Youreable.com Limited
(ii) No Director or Proposed Director:
(1) has any unspent convictions;
(2) has become bankrupt or entered into any individual voluntary
arrangement;
(3) has been a director with an executive function of any company or a
partner of any firm which, at that time or within 12 months after his
ceasing to be a director or a partner (as the case may be), had a
receiver appointed or went into compulsory liquidation, or creditors
voluntary liquidation or went into administration, or entered into
company or partnership voluntary arrangements or made any composition
or arrangement with its creditors;
(4) has had any public criticism against him by any statutory or
regulatory authority (including recognised professional bodies) or has
been disqualified by a court from acting as a director or acting in
the management or conduct of the affairs of any company.
(d) Substantial interests
(i) As at 11 June 2001 (being the latest practicable date prior to the
publication of this document) the Directors had been notified that the
following persons (other than the Directors themselves) were interested in
three per cent or more of the issued share capital of the Company:
Number of Percentage of
Shareholder Ordinary Shares share capital
Prudential plc 11,858,514 6.84%
Thomson Finance S.A. 9,297,290 5.36%
Merrill Lynch & Co, Inc* 8,099,880 4.67%
Newton Investment Management Limited 6,069,090 3.50%
*During the year ended 31 December 2000, JIYU Holdings Limited transferred
its holding of 7,038,123 shares to BD Holdings Limited, another company
within the same group. These shares are presently held in a pool account
operated by NY Nominees Ltd, of which the ultimate parent company is
Merrill Lynch & Co, Inc.
(ii) In addition to those disclosed in paragraph 9(a) above, immediately
following Admission, the following would have notifiable holdings of three
per cent. or more in the issued share capital of the Company if none of the
Qualifying Shareholders applied for New Ordinary Shares under the Open
Offer:
Number of Percentage of
Shareholder Ordinary Shares share capital
Bradshaw Asset Management 50,000,000 10.70
Fidelity 50,000,000 10.70
Electra Fleming 32,000,000 6.85
Shell Pension Fund 32,000,000 6.85
ABN AMRO 20,000,000 4.28
Friends Ivory (Scotland) 18,000,000 3.85
(e) Directors' and Proposed Directors' Service Agreements and Emoluments
(i) The following are particulars of the Directors' and Proposed Directors'
existing service agreements with the Company:
78
Executive Directors
Messrs Wagner and Mattey have entered into service agreements with the Company,
both dated 29 June 1999, and Mr Lomnitz (who originally entered into a service
agreement with Bright Station dated 17 April 2000) has entered into a service
agreement with Smartlogik dated 26 April 2001 (commencing on 1 July 2001), in
relation to the Directors' respective roles in the Group. Each of the Executive
Directors' service agreements continue until the relevant director reaches
retirement age, unless earlier termination occurs.
The service agreements for Messrs Wagner and Mattey may be terminated by either
the relevant employer or the relevant Executive Director, giving not less than
12 months' notice and that of Mr Lomnitz by giving not less than 3 months'
notice. The Company or Smartlogik, as applicable, is entitled to terminate these
agreements without notice in certain circumstances, including reasons of serious
misconduct or failure by the Executive Director to satisfactorily perform his
duties under the service agreement.
The current annual salaries for Messrs Wagner, Mattey and Lomnitz are
(Pounds)200,000, (Pounds)170,000 and (Pounds)130,000 respectively. Messrs Wagner
and Mattey's service agreements also provide that the Company may, in its sole
discretion, pay to the Executive Director a bonus of such amount as the Board of
Directors of the Company may determine. These Executive Directors are also
entitled to (i) reimbursement in respect of all reasonable expenses incurred in
the proper performance of their duties; (ii) a company car or a cash sum in lieu
of a car; and (iii) participation in any pension scheme and permanent health
insurance and medical expenses schemes operated by the Company from time to
time.
The service agreements for Messrs Wagner and Mattey contain change of control
provisions, whereby on a change of control the relevant Director shall be paid:
(i) a sum of money equal to the gross annual salary and benefits being paid
immediately prior to the date of the change of control; and
(ii) a bonus equal to 75 per cent. of the gross annual salary being paid
immediately prior to the date of the change of control.
Additionally, in the event that the relevant Directors' share options do not
automatically become exercisable upon the change of control, certain share
options granted to the Director will become capable of exercise upon the
termination of employment. The change of control provisions are in all other
respects in the same terms as those set out below on page 80 for Messrs Hill,
Canham and Lomnitz.
All the Executive Directors' service agreements contain certain post-employment
restrictions which would prevent the Executive Directors from engaging in
activities which compete with the business of the Company.
Compensation for loss of office
David Mattey and Daniel Wagner have entered into termination agreements with the
Company dated 13 June 2001 under which, conditionally on Admission, David Mattey
is entitled to a payment of (Pounds)274,337 for loss of office (representing
what remains of 12 months' notice in respect of salary, car allowance, payments
in respect of his pension scheme and permanent health insurance and medical
expenses schemes and a payment of (Pounds)85,000 for effecting the restructuring
and assisting with the fund raising) and Daniel Wagner is entitled to a payment
of (Pounds)220,100 for loss of office, representing what remains of 12 months'
notice in respect of salary, car allowance and payments in respect of his
pension scheme and permanent health insurance and medical expenses schemes.
At the request of the Board and the Proposed Directors and as part of the
Proposals, the agreements provide for both David Mattey and Daniel Wagner to
receive Ordinary Shares at the Issue Price valued at these amounts, in lieu of
cash payments, in order to reduce the cash expenses of the Company in relation
to the Proposals. Under the agreements, Messrs Mattey and Wagner also agree to
surrender all options under the Share Option Schemes.
Non-Executive Directors
Messrs Thomas, Barton, and Sommers have entered into letters of appointment with
the Company which are terminable at the will of the parties. The letters of
appointment entitle Messrs Thomas, Barton, and Sommers to be paid an annual fee
of (Pounds)65,000, (Pounds)25,000 and $60,000 (approximately (Pounds)44,000)
respectively plus reasonable expenses incurred in the proper performance of
their duties.
The Board has agreed to compensate Ian Barton for his time spent in assisting
the Company with the Proposals, beyond his usual commitment to the Company as a
non-executive director. This compensation is payable at the rate of (Pounds)700
per day for each day in excess of the three days a month for which Mr Barton is
engaged with the Company's affairs.
79
Messrs Thomas, Barton and Sommers have each entered into a deed of resignation
with the Company, effective on and conditional upon Admission. In the letters,
each Director confirms that he has no claim for compensation or otherwise
against the Company in respect of the termination, other than accrued fees
and/or expenses as at the date of Admission.
Proposed Directors
Stephen Hill is a party to an agreement with the Company dated 13 June 2001,
under which, conditional on Admission, he will be appointed as Chief Executive
Officer of Bright Station. The agreement may be terminated by either party
giving to the other not less than 12 months' notice in writing. The salary
currently payable under this agreement is (Pounds)150,000 per annum, and the
agreement provides for the payment of a guaranteed bonus of (Pounds)75,000 and a
discretionary bonus of up to (Pounds)75,000. He is also entitled to be paid his
reasonable expenses incurred by the proper performance of his duties, and to
participate in any pension scheme and permanent health and medical expenses
insurance schemes operated by the Company from time to time. The agreement
contains certain post-employment restrictions which would prevent Mr Hill from
engaging in activities which compete with the business of the Company.
Simon Canham is a party to an agreement with the Company dated 13 June 2001
under which, conditional on Admission, he will be appointed as Chief Financial
Officer of Bright Station. The agreement may be terminated by either party
giving to the other not less than 12 months' notice in writing, and the salary
currently payable under this agreement is (Pounds)120,000 per annum, together
with a bonus of up to (Pounds)30,000, based on management objectives. Mr Canham
is also entitled to a car allowance of up to (Pounds)600 per month. The
agreement is, in all other respects, on the same terms as the agreement with
Stephen Hill.
Robert Lomnitz has entered into an agreement with the Company dated 13 June 2001
under which, conditional on Admission, he will be appointed as Director of
Business Development of Bright Station. The agreement may be terminated by
either party giving to the other not less than 12 months' notice in writing, and
the salary currently payable under this agreement is (Pounds)130,000 per annum,
together with a bonus of up to (Pounds)130,000, based on the achievement of
management objectives. The agreement is, in all other respects, on the same
terms as the agreement with Stephen Hill.
Messrs Hill and Canham have also entered into letter agreements with the Company
dated the same date as this document (conditional on Admission) and Mr Lomnitz
has entered into a letter agreement with the Company dated 2 January 2001
whereby in the event of any person (or any persons acting in concert within the
meaning of the City Code on Takeovers and Mergers) acquiring direct or indirect
control of a Controlling Interest (as defined below) in the Company and who was
not or were not in possession of that control at the date of this document, they
shall be entitled to terminate their employment by serving not less than one
month's notice of termination on the Company at any time during the period of 12
months after the date of the said acquisition, in which event, the relevant
Directors shall be paid:
(i) a sum of money equal to the gross annual salary and benefits being paid
immediately prior to the date of the said acquisition; and
(ii) a bonus equal to 50 per cent. of the gross annual salary being paid
immediately prior to the date of the said acquisition.
The relevant Directors' health care benefits will also be maintained by the
Company for a period of twelve months from the termination of employment or, if
such cover is not available from the Company's insurers, the Directors will be
paid an amount equal to the cost of such cover.
Additionally, in the event that the relevant Directors' share options do not
automatically become exercisable upon the change of control, all share options
granted to the Director under the Company's 1994 Executive Share Option Scheme
will become capable of exercise upon the termination of employment and will
remain so for a period of twelve months after the date of termination of
employment.
For the purpose of these arrangements, "Controlling Interest" means an interest
(within the meaning of Part I of Schedule 13 to the Companies Act 1985) in any
shares in the capital of the Company conferring in aggregate 50 per cent. or
more of the total voting rights conferred by all the shares in the capital of
the Company from time to time in issue and conferring the right to vote at all
general meetings of the Company or any other interest which directly or
indirectly leads to a majority control of the Board of Directors.
David Jefferies has entered into a letter of appointment with the Company dated
13 June 2001 whereby, conditional on Admission, he will act as a non-executive
director of the Company. The appointment is terminable on 12 months' written
notice by either party. Mr Jefferies will be paid an annual fee of
(Pounds)30,000 for his services.
James Bair has entered into a letter of appointment with the Company dated 13
June 2001 whereby, conditional on Admission, he will act as a non-executive
director of the Company. The appointment is terminable on 1 month's written
notice by either party. Mr Bair will be paid an annual fee of US$25,000
(approximately (Pounds)18,000) for his services.
80
(ii) The aggregate remuneration of the Directors and Proposed Directors
(including bonuses and compensation for loss of office) and benefits in
kind during the last completed financial year ended 31 December 2000
amounted to (Pounds)1,979,245.
10. Litigation
(i) No member of the Group is or has been involved in any legal or
arbitration proceedings which may have, or have had, during the twelve
months preceding the date of this document a significant effect on the
Group's financial position nor are any such proceedings pending or
threatened.
11. Material Contracts
Save as disclosed in this paragraph 11, no contracts have been entered into by
companies comprised within the Group otherwise than in the ordinary course of
business which (a) have been entered into in the two years immediately preceding
the date of this document and which are or may be material and/or (b) contain
provisions under which any such company has any obligation or entitlement which
is material to the Group as at the date of this document:
(i) On 10 November 1999, the Company entered into an agreement with
International Computers Limited ("ICL") to outsource the operations of
its data centre in Palo Alto, California for a period of seven years. In
connection with this transaction, the Company sold certain assets in the
Palo Alto data centre with a net book value of (Pounds)3,475,000 in
return for cash of (Pounds)3,058,000 and a reduction in outsourcing
charges of (Pounds)1,451,000. As part of the agreement referred to in
paragraph 11(v) below, Thomson Holdings Inc assumed full responsibility
for all obligations under this agreement. The agreement is due to be
novated from the Company to Thomson Holdings Inc;
(ii) On 24 March 2000, the Company launched a cash tender offer and consent
solicitation relating to its $180,000,000 11 per cent. Senior
Subordinated Notes due 2007 details of which were published in the
listing particulars issued by the Company on 3 April 2000;
(iii) an agreement dated 13 October 1999 between the Company and the holders of
the shares in Muscat Limited, details of which were published in the
listing particulars issued by the Company on 3 April 2000;
(iv) the instruments creating the 2002 Warrants, 2004 Warrants and 2009
Warrants summarised in paragraph 4(i) and (j) above;
(v) an Agreement dated 23 March 2000 for the Sale of Information Services
Division, details of which were published in the listing particulars
issued by the Company on 3 April 2000;
(vi) a Software Licence and Maintenance Agreement between the Company and
Thomson Holdings Inc., details of which were published in the listing
particulars issued by the Company on 3 April 2000;
(vii) a subscription agreement dated 23 March 2000 between the Company and Jiyu
Holdings, details of which were published in the listing particulars
issued by the Company on 3 April 2000;
(viii) an agreement dated 6 July 2000 between OfficeShopper.com Ltd
("OfficeShopper") and Philip Saunders, trading as Fairway, whereby
OfficeShopper acquired the business of Fairway as a going concern
together with the assets, property, rights and undertakings in relation
to the Fairway business (excluding leased property and book debts). The
consideration for the acquisition was (Pounds)395,000, payable in four
instalments. The first cash instalment of (Pounds)245,000 was paid on
completion of the contract being July 2000. The remaining three
instalments of (Pounds)50,000 each are payable in July 2001, 2002 and
2003 respectively provided that the business meets annual turnover
targets of (Pounds)1,080,000 and Philip Saunders remains an employee of
the business. Since this agreement most of the assets of OfficeShopper
have been sold (see sub-paragraph (xii) below) and Philip Saunders has
resigned. As a result the Company does not foresee having to meet these
payments;
(ix) On 27 May 2000 Sparza Limited ("Sparza") purchased selected assets
(including intellectual property rights) of Boo.com Group Limited and
Boo.com Ireland Limited ("Boo.com") for a consideration of
(Pounds)250,000. At the date of the agreement, provisional liquidators
had been appointed in respect of both Boo.com Group Limited and Boo.com
Ireland Limited. In addition, Sparza employed those employees of Boo.com
who were employed in relation to online retailing technology products.
For those Boo employees that Bright Station employed following the Boo
acquisition, Bright Station did so under the terms of their existing Boo
employment contracts and invited them to join the Bright Station private
pension scheme under the same levels of contribution enjoyed by them
whilst Boo employees. Sparza agreed to indemnify Boo.com and others in
respect of any claims arising from the employment or former employment of
the Boo employees by Boo;
81
(x) On 15 December 2000 Sparza and Bright Station entered into an agreement
with Spicers Limited whereby Sparza sold computer hardware and other
equipment necessary for the support or development of the Oscarnet
Software System ("Oscarnet") (an online purchasing and control system for
office products). The consideration comprised:
- (Pounds)75,070 for the assets; and
- (Pounds)25,000 bonus for the seamless transition of the Oscarnet
software (paid)
Upon completion of the sale on 18 December 2000, Bright Station granted
Spicers Limited an exclusive perpetual licence to use the Oscarnet
software in consideration of (Pounds)150,000.
The agreement contained standard warranties in connection with the sale,
from Sparza and Bright Station in favour of Spicers Limited;
On 5 June 2001, the Company entered into a further agreement with Spicers
Limited, who have been a material supplier to Bright Station trading as
OfficeShopper, whereby the Company agreed to transfer all Oscarnet
products and intellectual property to Spicers and to make a payment
(following Admission) to Spicers of (Pounds)300,000 in full and final
settlement of existing trade debts and all present liabilities and future
claims.
(xi) On 27 December 2000 Bright Station obtained, in connection with a licence
agreement between Oridean and Sparza Holdings Ltd, warrants, exercisable
at Bright Station's option, issued by Oridean Inc, a Delaware
Corporation, ("Oridean") to purchase:
- 20 per cent of the Outstanding Capital Stock of Oridean at a purchase
price per share obtained by dividing (1) the sum of $10,000,000 and (2)
cash proceeds received from additional investment in Oridean, by the
company's Outstanding Capital Stock. The additional investment related
to Oridean's additional funding requirements, yet to be obtained by
Oridean. The price of the warrants is dependant upon the amount of
additional funding obtained by Oridean. The price of the Bright Station
warrants will be calculated as a percentage of the valuation of Oridean
based upon the amount of Oridean dilution against funds received; and
- 35 per cent of the Outstanding Capital Stock of Oridean at a purchase
price per share obtained by dividing the Company's valuation by the
Outstanding Capital Stock. The Company's Valuation shall be the the
lesser of (a) $18,000,000 and (b) the cash proceeds received from
additional investment or the aggregate valuation determined by
multiplying the Outstanding Capital Stock by the lowest price per share
paid for Outstanding Capital Stock. The warrant is able to be exercised
at any time prior to 31 December 2003.
The warrant agreements contain certain warranties and an Indemnity from
Oridean in favour of Bright Station.
On 28 December 2000, Sparza Holdings Limited entered into a value added
reseller licence agreement with Oridean, whereby Oridean granted to
Sparza Holdings a licence to develop, resell and sub-licence Oridean's
software and hardware products. The agreement contained warranties in
connection with the licence from Oridean in favour of Sparza Holdings,
together with an indemnity from Sparza Holdings in favour of Oridean
(other than in respect of intellectual property infringement claims by
third parties regarding the Oridean products);
(xii) On 9 May 2001, OfficeShopper entered into an agreement with Howarine
Calvert Ltd, trading as Inkwell Direct, regarding the sale of the name,
customer list and debtor book of OfficeShopper, for consideration of up
to (Pounds)450,000, payable in cash. The net book value of the assets
transferred as the date of the agreement was (Pounds)357,000.
(Pounds)195,000 of the consideration was payable within 30 days of the
date of the agreement, with the balance based on the recoverability of
debtor balances and the gross profit of OfficeShopper over the following
18 months;
(xiii) Smartlogik is a party to a consultancy agreement with PeopleTech Limited
("PeopleTech") dated 19 February 2001, whereby PeopleTech agreed to
provide marketing consultancy services to Smartlogik. The services of
Alan Jeffries are provided to Smartlogik under this agreement. Smartlogik
agreed to pay to PeopleTech a fee of (Pounds)1,000 per day for the
consultant's services, together with the consultant's reasonable expenses
incurred in the proper performance of his duties. Either party may
terminate the agreement by giving not less than 20 working days notice in
writing to the other party;
(xiv) Hoare Govett has entered into, as agent for the Company, letters dated 29
May 2001 with institutional investors, pursuant to which the investors
have conditionally agreed to subscribe the Placing Shares ("Placing
Letters").
The Placing Letters provide that the Placing is conditional upon, amongst
other things:
82
- commitments for at least (Pounds)13.5 million (gross) of funds being
received by the Company under the Placing;
- this document, in Hoare Govett's reasonable opinion, being and
remaining until Admission accurate and not misleading in any material
respect;
- in Hoare Govett's reasonable opinion, there being no information in or
omissions from this document which are materially inconsistent with the
information in the presentation made by the Company to investors;
- the Resolutions being passed at the EGM without material amendment;
- prior to Admission, certain insolvency events not having occurred; and
- Admission becoming effective by no later than 31 August 2001.
No commission will be paid to investors under the Placing Letters in
respect of their participation in the Placing.
The Placing Letters contain certain representations from the investors
regarding compliance with laws and other matters.
The total placing commitment in each Placing Letter is divided into
Ordinary Shares which are placed firm, and Ordinary Shares which are
subject to clawback under the Open Offer. The commitments made by
investors under the Placing Letters are irrevocable, subject only to the
conditions being satisfied or waived;
(xv) On 23 May 2001, Hoare Govett entered into an engagement letter with the
Company, pursuant to which Hoare Govett has agreed to act as broker to
the Company in connection with the Placing (the "HG Engagement Letter").
The Company has agreed to pay Hoare Govett a commission of 7 per cent. of
gross funds raised under the Placing. Hoare Govett has agreed that
(Pounds)700,849.75 of this commission will be used to subscribe for
14,016,995 New Ordinary Shares at the Issue Price. In the event that
commitments from investors to subscribe the Placing Shares are secured
but the Placing does not complete, the Company has agreed to pay Hoare
Govett a fee of (Pounds)300,000. The Placing and Open Offer has not been
underwritten.
The HG Engagement Letter contains an indemnity from the Company in favour
of Hoare Govett. Either party may terminate the engagement, by giving
written notice to the other which will be effective on receipt;
(xvi) An engagement letter agreement dated 29 May 2001 between af Partners
Limited ("afp") and the Company under which afp agreed to assist the
Company to secure bridge financing. Under this agreement the Company paid
afp an engagement fee of (Pounds)30,000 and has agreed to pay an
additional fee of 5 per cent. of the funds raised under the bridge
financing together with afp's reasonable out of pocket expenses;
(xvii) A bridge facility agreement dated 12 June 2001 between the Company and
antfactory Investments BV ("antfactory") under which antfactory has
agreed to make available to the Company a bridge facility of up to
(Pounds)1,500,000. Drawdown may be made in three equal tranches of
(Pounds)500,000 no later than 13 July 2001. The loan is fully repayable
by 13 July 2001 or earlier on the occurrence of certain events of
default. Interest is payable on the outstanding amount of the loan from
time to time at the rate of 5 per cent. above LIBOR on the first tranche,
7 per cent. above LIBOR on the second tranche and 9 per cent. above LIBOR
on the third tranche. A commitment fee equal to 3 per cent. of the total
amount available under the facility and a contribution of (Pounds)15,000
towards antfactory's legal and other expenses are payable on first
drawdown of the loan or, if no drawdown occurs, on demand by antfactory.
A drawdown fee of (Pounds)50,000 is payable on the drawdown of each
tranche. The loan is secured, inter alia, by a debenture dated 12 June
2001 in favour of antfactory creating first fixed and floating charges
over the assets of the Company and by guarantees dated 12 June 2001 from
each of Smartlogik Holdings plc and Smartlogik Limited. These guarantees
are in turn secured by debentures dated 12 June 2001 creating first fixed
and floating charges over the assets of Smartlogik Holdings plc and
Smartlogik Limited in favour of antfactory. As a condition precedent to
drawdown of the second tranche, the loan must be further secured by
either, at the Company's option, (i) a guarantee from Bright Station
Ventures Limited (supported by a first charge in favour of antfactory
over the 22,969 shares in the capital of eFinancial News.com Limited
owned by and registered in the name of Bright Station Ventures Limited
(the "eFN Shares")); or (ii) in the event that the eFN Shares are sold
prior to the second tranche being drawn down, deposit of the proceeds of
such sale (which will not be less than the sum of (Pounds)68,000) into an
escrow account maintained by the Company's solicitors ("Escrow Account").
Receivables collected by the Company, other than certain defined
receivables, are, at the option of the Company, to be paid into the
Escrow Account as cash collateral or, if used as working capital, will
reduce the undrawn amount of the facility;
83
(xviii) The security documents described in the preceding paragraph; and
(xix) The Company and the Directors and Proposed Directors have entered into a
sponsorship agreement PricewaterhouseCoopers Corporate Finance ("PwC")
dated 13 June 2001 pursuant to which PwC agreed to act as sponsor in
relation to the Proposals. The sponsorship agreement entitles PwC to
terminate the agreement in the event of a material breach of warranty.
All of the Company, the Directors Proposed Directors give to PwC
warranties although, in the case of the Directors and Proposed
Directors, their liability is subject to financial limits in the usual
way. The Company also gives to PwC an indemnity respect of liabilities
incurred by PwC in relation to the Proposals, except to the extent that
their liability arises as a result of PwC's negligence or default.
12. Working Capital
If Shareholders do not approve the Proposals, your Board believes that the Group
would be unable to raise sufficient funding from alternative sources in the time
available and that the Company would have to take appropriate steps under UK and
US insolvency procedures.
The Company considers that, having regard to the Bridging Facility and the net
proceeds of the Placing and open Offer, the Group has sufficient working capital
for its present requirements, that is, for at least the next twelve months from
the date of publication of this document.
13. Indebtedness
(a) As at close of business on 18 May 2001, the Company's indebtedness was:
(Pounds)'000
Finance leases
13
------------
Total 13
============
(b) Save as disclosed above and apart from intra-group liabilities, none of
the companies who are members of the Group had, at the close of business
on 18 May 2001, any loan capital outstanding (whether issued or created
but unissued), term loans or other borrowings or indebtedness in the
nature of borrowing, including bank overdrafts, liabilities under
acceptances (other than normal trade bills) or acceptance credits, hire
purchase commitments, obligations under finance leases, guarantees or
other contingent liabilities.
(c) At the close of business on 18 May 2001, the Company had cash balances of
(Pounds)2.2 million.
14. Significant Changes
Save as disclosed in Part I of this document, there has been no significant
change in the financial or trading position of the Group since 31 March 2001,
the date to which the last unaudited interim accounts were prepared.
15. General
(a) The total costs and expenses of, and incidental to, the Proposals which
are payable by the Company, including professional fees, printing and
advertising costs are estimated to amount to (Pounds)1.5m (exclusive of
VAT) including total remuneration to financial intermediaries of
(Pounds)nil.
(b) PricewaterhouseCoopers, Chartered Accountants and Registered Auditors,
has given, and has not withdrawn, its written consent to the issue of
this document with the inclusion herein of its letter and the references
to such letter and to itself in the form and context in which they appear
and have authorised the contents of its letter for the purposes of
section 152(1)(e) of the Financial Services Act 1986.
(c) PricewaterhouseCoopers Corporate Finance has given, and has not
withdrawn, its written consent to the issue of this document with the
inclusion herein of the references to it in the form and context in which
they appear.
(d) Hoare Govett Ltd has given, and has not withdrawn, its written consent to
the issue of this document with the inclusion herein of the references to
it in the form and context in which they appear.
(e) The financial information set out in this document relating to the Group
does not constitute statutory accounts of the Group within the meaning of
section 240 of the Act. PricewaterhouseCoopers of 1 Embankment Place,
London WC2N 6RH has made a report under section 235 of the Act upon the
statutory accounts of the Group in respect of each financial year to
which the financial information relates. These reports were unqualified
and did not contain a statement under section 237(2) or (3) of the Act.
The report on the financial statements for the year ended 31 December
2000 made reference to a fundamental uncertainty regarding going concern,
as explained in Part V of this document. The statutory accounts for
84
the Group for each such financial period have been delivered to the
Registrar of Companies in England and Wales in accordance with section
242 of the Act.
(f) The mid-market quotations for an Ordinary Share on the first dealing day
of each of the six months preceding the date of this document and the
latest practicable date prior to the publication of this document (as
derived from the London Stock Exchange Daily Official List) were as
follows:
Mid Market
Price
11 June 2001 8 3/4(pence)
1 June 2001 7 1/2(pence)
1 May 2001 11 1/2(pence)
2 A(pence)ril 2001 21(pence)
1 March 2001 29(pence)
1 February 2001 48 1/2(pence)
2 January 2001 24(pence)
16. Documents available for inspection
Copies of the following documents will be available for inspection during normal
working hours on any weekday (Saturdays and public holidays excepted) at the
offices of Theodore Goddard, 150 Aldersgate Street, London EC1A 4EJ for the
period up to and including 6 July 2001:
(a) the Memorandum and Articles of Association of the Company;
(b) the consolidated audited statutory accounts of the Group for the two
years ended 31 December 2000;
(c) the material contracts referred to in paragraph 11 above;
(d) the letters of consent referred to in paragraph 15 above;
(e) the service agreements referred to in paragraph 9 above;
(f) the rules of the Share Option Schemes summarised or referred to in
paragraph 6 above and the rules of the Share Option Schemes showing the
amendments proposed to be made at the EGM;
(g) the warrant instruments in relation to the 2002 Warrants, the 2004
Warrants and the 2009 Warrants.
Dated: 13 June 2001
85
DEFINITIONS
The following definitions apply throughout this document unless the context
otherwise requires:
"Admission" admission of the New Ordinary Shares to the
Official List of the UK Listing Authority
and to trading on the London Stock
Exchange's market for listed securities;
"Application Form" the application form accompanying this
document for use in connection with the
Open Offer
"Board" or "Directors" the directors of the Company
"Bridging Facility" the bridging facility provided to the
Company by antfactory Investments BV, as
described in paragraph 11 of Part VII of
this document
"Bright Station" or the Bright Station plc
"Company"
"Completion" completion of the Placing and Open Offer
and the other Proposals
"Continuing Director" Robert Lomnitz
"Extraordinary General the extraordinary general meeting of Bright
Meeting" or "EGM" Station convened for 10 a.m. on 6 July
2001, notice of which is set out at the end
of this document
"Firm Shares" 131,338,031 new Ordinary Shares which have
been conditionally placed firm at the Issue
Price with institutional and certain other
investors, and which are not subject to the
Open Offer
"Group" Bright Station and its subsidiaries at the
date of this document
"Hoare Govett" Hoare Govett Limited, the Company's broker
and its agent for the purposes of the
Placing
"Issue Price" means 5(pence) per New Ordinary Share
"London Stock Exchange" London Stock Exchange plc
"NASDAQ" NASDAQ National Market
"New Ordinary Shares" the 270,000,000 new Ordinary Shares to be
subscribed pursuant to the Placing and Open
Offer, the 14,016,995 new Ordinary Shares
to be issued to Hoare Govett in connection
with its fees and the 9,888,740 new
Ordinary Shares to be issued to certain
Directors in connection with contractual
payments
"Official List" the official list of the UK Listing
Authority
"Open Offer" the conditional offer to Qualifying
Shareholders, on the terms and subject to
the conditions set out in Parts I and II of
this document and in the Application Form,
to subscribe for the Open Offer Shares
"Open Offer Shares" up to 138,661,969 new Ordinary Shares which
are subject to the Open Offer
"Ordinary Shares" the ordinary shares of 1(pence) each in the
capital of the Company
"Placing" the conditional placing of the Placing
Shares with investors at the Issue Price
86
"Placing Commitments" the commitments from institutions and
certain other to investors subscribe for
the Placing Shares, as announced by the
Company on 31 May 2001
"Placing Shares" the Firm Shares and the Open Offer Shares
"PricewaterhouseCoopers a division of PricewaterhouseCoopers
Corporate Finance"
"Proposals" the Placing and Open Offer, the issue of
New Ordinary Shares to Hoare Govett in
connection with its fees and to certain
Directors in connection with contractual
payments, the proposed change of the
Company's name and the amendments to the
Company's Share Option Schemes
"Proposed Directors" David Jefferies CBE, Stephen Hill, Simon
Canham and James Bair
"Qualifying Shareholders" a holder of Ordinary Shares on the register
of members of the Company on the Record
Date, excluding certain overseas
shareholders who are not entitled to
participate in the Open Offer
"Record Date" close of business on 7 June 2001
"Resolutions" the resolutions to be proposed at the
Extraordinary General Meeting
"Shareholder" a holder of Ordinary Shares
"Share Option Schemes" the Bright Station share option of schemes
as described in paragraph 6 Part VII of
this document
"UK Listing Authority" the Financial Services Authority acting in
its capacity as the competent authority for
the purposes of Part IV of the Financial
Services Act 1986
87
BRIGHT STATION PLC
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the Company will
be held at 150 Aldersgate Street, London EC1A 4EJ on 6 July 2001 at 10 a.m. for
the purpose of considering and, if thought fit, passing the following
resolutions, the first of which will be proposed as a special resolution and the
remaining resolutions as ordinary resolutions:
SPECIAL RESOLUTION
1. THAT, subject to and conditionally upon the admission of the new ordinary
shares of 1 pence each in the issued capital of the Company to the Official
List of the UK Listing Authority and to trading on the London Stock
Exchange's market for listed securities becoming effective ("Admission") as
detailed in the document sent to shareholders of the Company and dated 13
June 2001 (the "Prospectus"):
(a) the authorised share capital of the Company be increased from
(Pounds)2,500,000 to (Pounds)6,500,000 by the creation of an
additional 400,000,000 ordinary shares of 1p each in the capital of
the Company;
(b) the Directors be authorised in accordance with section 80 of the
Companies Act 1985 (the "Act") to exercise all the powers of the
Company to allot relevant securities (as defined in section 80 of the
Act) up to an aggregate nominal amount of (Pounds)2,985,419 for the
purposes of the Placing and Open Offer (as defined in the Prospectus)
and the allotment of relevant securities to Hoare Govett Limited,
David Mattey and Daniel Wagner and to David Jefferies, James Bair and
Alan Jeffries as described in the Prospectus in substitution for and
to the exclusion of all previous allotment authorities granted prior
to this meeting, such authority to expire on 31 August 2001;
(c) the Directors be empowered pursuant to section 95 of the Act to allot
equity securities (as defined in section 94 of the Act) for cash
pursuant to the authority conferred by paragraph (b) of this
Resolution as if section 89(1) of the Act did not apply to any such
allotment, provided that this power shall be limited to the allotment
of equity securities pursuant to the Placing and Open Offer and the
allotment of relevant securities to Hoare Govett Limited, David Mattey
and Daniel Wagner and to David Jefferies, James Bair and Alan Jeffries
as described in the Prospectus and shall expire at such time as such
authority expires;
(d) the Directors be generally and unconditionally authorised in
accordance with section 80 of the Act (in addition and without
limitation to the authority at paragraph (b) of this Resolution but in
substitution for and to the exclusion of all previous allotment
authorities granted prior to this meeting) to exercise all the powers
of the Company to allot relevant securities up to an aggregate nominal
amount of (Pounds)1,557,444, provided that this authority shall expire
on 5 July 2006 save that the Company may before such expiry make any
offer or agreement which would or might require relevant securities to
be allotted after such expiry and the Directors may allot relevant
securities in pursuance of such an offer or agreement as if such
authority had not expired;
(e) the Directors be empowered pursuant to section 95 of the Act to allot
equity securities for cash pursuant to the authority conferred by
paragraph (d) of this resolution as if section 89(1) of the Act did
not apply to any such allotment, provided that this power shall be
limited to the allotment of equity securities:
(i) in connection with any rights issue or other offering of new
equity securities in favour of the holders of equity securities
of the Company where the new equity securities attributable to
the interests of such persons are proportionate (as nearly as may
be) to the respective numbers of the relevant equity securities
shares held by them (subject to such exclusions or other
arrangements as the Directors may deem necessary or expedient in
relation to fractions of such securities, record dates or the
issue and/or transfer and/or holding of any securities in
uncertificated form or legal or practical problems arising under
the laws of, or the requirements of any regulatory body or any
stock exchange in, any territory); and/or
(ii) pursuant to the acceptance of any scrip dividend offer; and/or
88
(iii) pursuant to the terms of warrants to subscribe for equity
securities or any share option scheme or plan or any plan or
option scheme in respect of American Depositary Shares for
employees and directors of the Company approved by the Company
in general meeting; and/or
(iv) (otherwise than pursuant to paragraphs (i), (ii) or (iii) above)
having in the case of relevant shares (as defined for the
purposes of Section 89 of the Act), a nominal amount or, in the
case of other equity securities, giving the right to subscribe
for or convert into relevant shares, having a nominal amount not
exceeding in aggregate (Pounds)233,617,
and shall expire at such time as the general authority conferred on
the Directors by paragraph (d) of this resolution expires save that
the Company may before such expiry make any offer or agreement which
would or might require equity securities to be allotted after such
expiry and the directors may allot equity securities in pursuance of
such an offer or agreement as if such power had not expired; and
(f) the Company's name be changed to "Smartlogik Group plc".
ORDINARY RESOLUTIONS
2. THAT
(a) the amendments to the Company's 1994 Executive Stock Option Scheme,
the 1994 Unapproved Executive Share Option Scheme, the 1994 Savings
Related Share Option Scheme, the 1997 US Stock Option Plan, the 1998
US Employee Stock Purchase Plan and the Long Term Incentive Plan ("the
Share Schemes"), which amendments have been summarised in a document
comprising a prospectus issued by the Company on 13 June 2001 and
being in substantially the same form as the draft amendments shown in
the rules of the respective Share Schemes submitted to the meeting and
signed by the Chairman thereof for the purposes of identification be
and are hereby approved and adopted; and
(b) the Directors be and they are hereby authorised to do all acts and
things that they consider necessary or desirable to carry the
amendments to the respective Share Schemes into effect, including
without limitation, for the purpose of obtaining or maintaining the
approval of any relevant tax authority or compliance by them with any
relevant tax legislation.
3. THAT, subject to and conditionally upon the passing of resolutions 1 and 2
above, the Directors be authorised to grant options to David Jefferies,
James Bair and Alan Jeffries on the terms set out in the document sent to
shareholders of the Company on 13 June 2001.
4. THAT, subject to and conditionally upon the passing of resolutions 1 and 2
above, David Jefferies be appointed a director of the Company.
5. THAT, subject to and conditionally upon the passing of resolutions 1 and 2
above, Stephen Hill be appointed a director of the Company.
6. THAT, subject to and conditionally upon the passing of resolutions 1 and 2
above, Simon Canham be appointed a director of the Company.
7. THAT, subject to and conditionally upon the passing of resolutions 1 and 2
above, James Bair be appointed a director of the Company.
8. THAT, Robert Lomnitz, who was appointed as a director of the Company by the
Board on 22 December 2000, be appointed a director of the Company.
Registered Office: By Order of the Board
The Communications Building Jonathan Ball
48 Leicester Square Company Secretary
London WC2H 7DB
13 June 2001
Notes:
1. A member of the Company entitled to attend and vote at the meeting is
entitled to appoint a proxy to attend and, on a poll, vote in his stead. A
proxy need not be a member of the Company.
2. A proxy form for use in connection with the meeting accompanies the
circular. Additional copies may be obtained from the registered office. The
proxy form and any power of attorney under which it is signed must be
deposited at the address printed on the proxy form not less than 48 hours
before the time appointed for holding the meeting.
3. A person must be registered as the holder of ordinary shares by 12 noon on
4 July 2001 in order for such person to be entitled to attend and vote at
the meeting.
89