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ANNEX A
[TUCKER CLEARY LETTERHEAD]
September 1, 1999
Board of Directors
Effective Management Systems, Inc.
12000 West Park Place
Milwaukee, Wisconsin 53224
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders (the "Stockholders") of shares of common stock, par
value $0.01 per share (the "Common Stock") of Effective Management Systems, Inc.
(the "Company") of the consideration to be received by the Stockholders pursuant
to the terms of the draft Agreement and Plan of Merger dated as of August 30,
1999 (the "Merger Agreement") by and among the Company, IFS Americas, Inc.
("Parent") and IFS Acquisition, Inc., a wholly-owned subsidiary of Parent
("Purchaser"). Pursuant to the Merger Agreement, Purchaser will offer to
purchase all of the issued and outstanding Common Stock in a cash tender offer
(the "Tender Offer") and, following completion of the Tender Offer, Purchaser
will be merged (the "Merger") with and into the Company and the Company will
become a wholly-owned subsidiary of Parent. The Tender Offer and the Merger are
collectively referred to herein as the "Acquisition".
Under the Merger Agreement, Purchaser will offer to purchase all of the
issued and outstanding shares of the Common Stock in the Tender Offer for $4.50
per share, net to the seller in cash (the "Offer Consideration"). Upon
consummation of the Merger, any shares of the Common Stock not acquired in the
Tender Offer will be converted into the right to receive the Offer
Consideration.
In arriving at our opinion, we have reviewed, among other things, the
Merger Agreement and certain business and financial information relating to the
Company, including certain financial projections, estimates and analyses
provided to us by the Company. We have also reviewed and discussed with
representatives of the Company's management the business and prospects of the
Company, the history of the discussions between the Company and Industrial &
Financial Systems, IFS AB, the parent corporation of Parent, which led to the
negotiation of the Acquisition, the alternatives to the Acquisition which were
considered by the Company and the Company's efforts to effectuate such
alternatives. In arriving at our opinion, we have considered (a) the recent
operating performance and financial condition and current cash position of the
Company; (b) certain projections by the Company's management of its operating
performance, financial position and weekly cash flow for the period July 1, 1999
to August 30, 1999; (c) a historical review of the Company's stock market price
and trading history; (d) certain financial and stock market data relating to the
Company in comparison to similar data for other publicly held companies
considered by Tucker Anthony Cleary Gull to be generally comparable to the
Company; (e) a comparison of the purchase price premium to be paid for the
Common Stock based on the Offer Consideration to certain other similar
transactions; (f) certain publicly available information concerning the nature
and terms of certain transactions that Tucker Anthony Cleary Gull believed to be
relevant to the Acquisition on a comparative basis; (g) an unleveraged,
after-tax discounted cash flow analysis of the Company; and (h) such other
information, financial studies and analyses and financial, economic and market
data as we deemed relevant and appropriate.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. We have not made an independent
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Effective Management Systems, Inc.
Fairness Opinion Letter
September 1, 1999
Page 2
evaluation or appraisal of any assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluation or
appraisal. With respect to the financial projections, estimates and analyses
provided to us by the Company, we have assumed, with your permission, that all
such information was reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of the Company as to future
financial performance and was based upon the historical performance of the
Company and estimates and assumptions which were reasonable at the time made and
which remain reasonable for the date hereof. Finally, we have assumed that the
executed Merger Agreement will be in the same form as the draft Merger Agreement
reviewed by us, and that the Tender Offer and the Merger will be consummated on
the terms described in the Merger Agreement, without any waiver of any material
term or condition, and that obtaining any necessary regulatory or third party
approval for the Tender Offer and the Merger will not have an adverse effect on
any of the parties. Our opinion is based on economic, monetary and market
conditions existing on the date hereof.
We have not been requested to evaluate the reasonableness, adequacy, or
feasibility of Parent's plans for financing the Acquisition and this opinion
assumes that Parent has, or at closing will have, financing adequate to complete
the Acquisition in accordance with the Merger Agreement. We note that the
obligations of Parent to consummate the Acquisition pursuant to the Merger
Agreement are subject to several conditions. We have not been asked to evaluate
the likelihood that any such conditions will be satisfied and this opinion
assumes that none of such conditions will adversely affect Parent's willingness
or ability to consummate the Acquisition in accordance with the terms of the
Merger Agreement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Offer Consideration to be received by the Stockholders in the
Tender Offer and the subsequent Merger pursuant to the Merger Agreement is fair,
from a financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of the Company
in this transaction pursuant to an engagement letter dated August 26, 1999.
Under the engagement letter we will receive a fee for our services, payable when
this opinion is delivered to the Company's Board of Directors, which is not
contingent upon the contents of this opinion or the approval or consummation of
the Acquisition. In addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. The Company has
agreed to reimburse Tucker Anthony Cleary Gull for its reasonable and properly
documented expenses incurred in connection with the performance of its services
under the engagement letter.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors of the Company in connection
with its consideration of the Acquisition. We are not making any recommendation
regarding whether or not it is advisable for Stockholders to tender their shares
of the Common Stock in the Tender Offer. We have not been requested to opine as
to, and our opinion does not in any manner address, the Company's underlying
business decision to proceed with or consummate the Acquisition, or whether
stockholders should vote in favor of the Merger.
Very Truly Yours,
TUCKER ANTHONY CLEARY GULL