EXHIBIT (a)(1)(A)
MERCATOR SOFTWARE, INC.
OFFER TO EXCHANGE OUTSTANDING OPTIONS
TO PURCHASE SHARES OF COMMON STOCK OF
MERCATOR SOFTWARE, INC.
FOR NEW OPTIONS UNDER THE 1997 EQUITY INCENTIVE PLAN
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THIS OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
5:00 P.M., EASTERN DAYLIGHT SAVINGS TIME, ON FRIDAY, OCTOBER 19, 2001,
UNLESS MERCATOR EXTENDS THE OFFER
================================================================================
Mercator Software, Inc. is offering to exchange all outstanding stock options
to purchase shares of our Common Stock granted under the Mercator Software, Inc.
1997 Equity Incentive Plan (the "EIP") held by eligible individuals for new
options we will grant under the EIP. An "eligible individual" refers to all
holders of outstanding stock option grants, except for senior and corporate vice
presidents and directors. We are making this offer upon the terms and subject
to the conditions set forth in this offer to exchange and in the related letter
of transmittal (which together, as they may be amended or supplemented from time
to time, constitute the "offer"). The number of shares of Common Stock subject
to new options to be granted to each option holder will be equal to one-half the
number of shares subject to the options properly tendered by such option holder
and accepted for exchange by us. We will grant the new options on or about the
first business day that is at least six months and one day following the date we
cancel the options accepted for exchange. You may only tender options for all
or none of the shares of Common Stock subject to an individual grant. If you
tender an option grant for exchange, you will be required to also tender all
subsequent option grants with a lower exercise price that you received during
the six months immediately prior to the date we accept tendered options for
exchange.
This offer is not conditioned upon a minimum number of options being tendered
to Mercator. This offer is subject to conditions that we describe in Section 6
of this offer to exchange.
If you tender options for exchange, we will grant you new options under the
EIP and enter into a new option agreement between us and you, all as more fully
described in the offer. The exercise price of the new options will equal the
fair market value of our Common Stock on the date of the grant. The new options
will expire on the tenth anniversary of the date of grant, unless terminated
earlier according to the terms and provisions of the new stock option agreement
to be entered into between you and Mercator, one-third to vest immediately upon
grant and the remaining options to vest at a schedule of two-ninths of the
remaining options per year for each of the following three years. The terms
of the new options are described in Section 8 of this offer to exchange.
ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR
BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD
TENDER YOUR OPTIONS FOR EXCHANGE. YOU MUST MAKE YOUR OWN DECISION WHETHER TO
TENDER YOUR OPTIONS.
Shares of our Common Stock are quoted on the Nasdaq National Market under the
symbol "MCTR." Prior to February 7, 2000 our stock traded on the Nasdaq under
the symbol "TSFW". Our Common Stock began trading on the Nasdaq National Market
on July 2, 1997. Prior to that time, there was no public market for our Common
Stock. The table (in Section 7) sets for the fiscal periods indicated the high
and low reported sale prices for our Common Stock as reported by the Nasdaq
National Market. The stock prices have been adjusted to reflect a two-for-one
stock split that occurred on April 5, 1999. On September 10, 2001, the last
reported sale price of the Common Stock on the Nasdaq National Market was $2.02
per
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share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON
STOCK BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR BY ANY STATE SECURITIES COMMISSION.
NEITHER THE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS OR WILL PASS UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
You should direct questions about this offer or requests for assistance or for
additional copies of the offer to exchange or the letter of transmittal to Linda
Austin, Mercator Software, Inc., 45 Danbury Road, Wilton, Connecticut, 06897-
0840 (telephone: (203) 563-1260).
IMPORTANT
If you wish to tender your options for exchange, you must complete and sign
the letter of transmittal in accordance with its instructions, and mail, fax or
hand deliver it and any other required documents to us at Mercator Software,
Inc., 45 Danbury Road, Wilton, Connecticut, 06897-0840, Attn: Linda Austin
(facsimile number: (203) 761-8537) prior to the expiration date.
We are not making this offer to, nor will we accept any tender of options from
or on behalf of, option holders in any jurisdiction in which the offer or the
acceptance of any tender of options would not be in compliance with applicable
laws of such jurisdiction. However, we may, at our discretion, take any actions
necessary for us to make this offer to option holders in any such jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS
TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THE OFFER. YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR INCORPORATED
HEREIN BY REFERENCE. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION
OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE
INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT AND IN THE RELATED
LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO
YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION,
REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.
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TABLE OF CONTENTS
Page
SUMMARY TERM SHEET........................................................ 1
INTRODUCTION.............................................................. 6
THE OFFER................................................................. 6
1. NUMBER OF OPTIONS; EXPIRATION DATE................................... 6
2. PURPOSE OF THE OFFER................................................. 7
3. PROCEDURES FOR TENDERING OPTIONS..................................... 8
4. WITHDRAWAL RIGHTS.................................................... 9
5. ACCEPTANCE OF OPTIONS FOR EXCHANGE
AND ISSUANCE OF NEW OPTIONS....................................... 9
6. CONDITIONS OF THE OFFER.............................................. 11
7. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS................... 12
8. SOURCE AND AMOUNT OF CONSIDERATION;
TERMS OF NEW OPTIONS.............................................. 12
9. INFORMATION CONCERNING MERCATOR...................................... 16
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE OPTIONS.............................. 17
11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING
CONSEQUENCES OF THE OFFER............................................ 17
12. LEGAL MATTERS; REGULATORY APPROVALS.................................. 18
13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES........................ 18
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT........................... 20
15. FEES AND EXPENSES.................................................... 21
16. ADDITIONAL INFORMATION............................................... 21
17. FORWARD LOOKING STATEMENTS; MISCELLANEOUS............................ 21
SCHEDULE A Information Concerning the Directors and Executive Officers of
Mercator
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SUMMARY TERM SHEET
The following are answers to some of the questions that you may have about
this offer. We urge you to read carefully the remainder of this offer to
exchange and the accompanying letter of transmittal because the information in
this summary is not complete and additional important information is contained
in the remainder of this offer to exchange and the letter of transmittal. We
have included references to the relevant sections of this offer to exchange
where you can find a more complete description of the topics in this summary.
. WHAT SECURITIES ARE WE OFFERING TO EXCHANGE?
We are offering to exchange all stock options that are outstanding under the
Mercator 1997 Equity Incentive Plan (the "EIP") held by eligible individuals for
new options under the EIP on the basis of one new option for two outstanding
options. (Section 1)
. WHO QUALIFIES AS AN ELIGIBLE INDIVIDUAL?
An "eligible individual" refers to all holders of outstanding stock option
grants, except for senior and corporate vice presidents and directors. Special
considerations may apply to employees located outside of the United States,
including but not limited to Australia, the United Kingdom, Sweden, Germany,
France, Singapore and Hong Kong. In some of these countries, the application of
local taxation rules may have an impact on the grant of new options. IF YOU ARE
AN EMPLOYEE OUTSIDE OF THE UNITED STATES, WE RECOMMEND THAT YOU CONSULT WITH
YOUR OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF THE OFFER UNDER THE
LAWS OF THE COUNTRY IN WHICH YOU LIVE AND WORK. (Section 1)
. WHY ARE WE MAKING THE OFFER?
Many of our outstanding options, whether or not they are currently
exercisable, have exercise prices that are significantly higher than the current
market price of our Common Stock. We believe these options are unlikely to be
exercised in the foreseeable future. By making this offer to exchange
outstanding options for new options that will (1) have an exercise price equal
to the fair market value of our Common Stock on the grant date and (2) vest over
three years at a rate of one-third to vest immediately upon grant and the
remaining options to vest at a schedule of two-ninths of the remaining options
per year for each of the following three years, we intend to provide our
employees with the benefit of owning options that over time may have a greater
potential to increase in value, create better performance incentives for
employees and thereby maximize stockholder value. (Section 2)
. WHY DON'T WE SIMPLY REPRICE THE CURRENT OPTIONS?
"Repricing" existing options would result in variable accounting for such
options, which would require us, for financial reporting purposes, to record
additional compensation expense each quarter until such repriced options are
exercised, cancelled or expired. (Section 11)
. WHY CAN'T I JUST BE GRANTED ADDITIONAL OPTIONS?
Because of the large number of options eligible for this offer to exchange, a
total grant of new options without cancellation of the outstanding options they
are meant to replace would have a negative dilutive impact on our outstanding
shares and earnings per share. Additionally, Mercator has a limited pool of
options available under the EIP, and we must conserve our currently available
options for new hires and ongoing grants. (Section 2)
. WHAT IS THE DEFINITION OF A GRANT?
A grant is an award of stock options.
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. WHAT ARE THE CONDITIONS TO THE OFFER?
The offer is not conditioned upon a minimum number of options being tendered.
However, the offer is subject to a number of other conditions with regard to
events that could occur prior to the expiration of the offer. These events
include a change in accounting principles, a lawsuit challenging this tender
offer, a third-party tender offer for our Common Stock or an acquisition
proposal, or a change in your employment status with Mercator. These and
various other conditions are more fully described in Section 6. (Section 6)
. ARE THERE ANY ELIGIBILITY REQUIREMENTS I MUST SATISFY AFTER THE EXPIRATION
DATE OF THE OFFER TO RECEIVE THE NEW OPTIONS?
To receive a grant of new options pursuant to the offer and under the terms of
the EIP, you must be an employee of Mercator or one of our subsidiaries from the
date you tender options through the date we grant the new options. As discussed
below, we will not grant the new options until on or about the first business
day that is at least six months and one day following the date we cancel the
options accepted for exchange. IF YOU ARE NOT AN EMPLOYEE OF MERCATOR OR ONE OF
OUR SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE
NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS OR ANY OTHER CONSIDERATION IN
EXCHANGE FOR YOUR TENDERED OPTIONS THAT WE HAVE ACCEPTED FOR EXCHANGE.
PARTICIPATION IN THE OFFER DOES NOT CONFER UPON YOU THE RIGHT TO REMAIN IN THE
EMPLOY OF MERCATOR OR ANY OF OUR SUBSIDIARIES. (Section 5)
. HOW MANY NEW OPTIONS WILL I RECEIVE IN EXCHANGE FOR MY TENDERED OPTIONS?
We will grant you new options to purchase a number of shares of our Common
Stock which is equal to one-half of the number of shares of Common Stock subject
to the options you tender and which we accept for exchange. (Section 1)
. IF I CHOOSE TO TENDER OPTIONS FOR EXCHANGE, DO I HAVE TO TENDER ALL MY
OPTIONS?
You must tender a full option grant. We are not accepting partial tenders of
an individual option grant. For example, if you hold an option to purchase
3,000 shares of Common Stock at an exercise price of $35.00 per share, you must
either tender all or none of such options; you cannot tender only part of the
option and retain the remainder of the option. On the other hand, if you have
multiple option grants, you may choose not to tender all of your grants. You
will, however, be subject to a "six month look-back" that will require you to
tender all option grants that you received during the six months immediately
prior to the date we accept tendered options for exchange if those grants were
made subsequent to, and have an exercise price lower than the exercise price of,
the grant(s) that you tender. For example, if you received an option grant on
May 4, 2000 with an exercise price of $30.50 per share and a grant on June 15,
2001 with an exercise price of $2.25 and you wanted to tender your May 4, 2000
option grant, you would also be required to tender your June 2001 grant for
exchange. (Section 1)
. WHEN WILL I RECEIVE MY NEW OPTIONS?
We will grant the new options on or about the first business day that is at
least six months and one day after the date we cancel the options tendered and
accepted for exchange. HOWEVER, IF YOU ARE NOT AN EMPLOYEE OF MERCATOR OR ONE
OF MERCATOR'S SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE
GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR
TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU WILL ALSO NOT
RECEIVE ANY OTHER CONSIDERATION FOR THE OPTIONS TENDERED IF YOU ARE NOT AN
EMPLOYEE FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW
OPTIONS. (Section 5)
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. WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE OF
THE OFFER?
If we were to grant the new options on any date that is earlier than six
months and one day after the date we cancel the options tendered and accepted
for exchange, we would be required to record compensation expense against our
earnings for financial reporting purposes. By deferring the grant of the new
options for at least six months and one day, we believe we will not have to
record such a compensation expense. (Section 5)
. WHY DO I HAVE TO SURRENDER OPTIONS GRANTED IN THE LAST SIX MONTHS?
If Mercator were to allow employees to keep options granted within six months
of the old option cancellation date, it would result in variable accounting for
such options, which may require us to record additional compensation expense
each quarter until the new options are exercised, cancelled or expired. This
significant adverse accounting consequence would prevent Mercator from making
the Offer to Exchange. (Section 11)
. CAN I CANCEL THE UNEXERCISED PORTION OF AN OPTION THAT I HAVE ALREADY
PARTIALLY EXERCISED?
Yes. Any remaining outstanding, unexercised eligible option is eligible to be
cancelled. In order to participate, you must elect to cancel all remaining
options in any grant. The new grant will be one-for-two, but only in replacement
of cancelled options. (Section 1)
. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE?
We understand that this will be a challenging decision for all employees. The
program does carry considerable risk, and there are no guarantees of our future
stock performance. So, the decision to participate must be each individual's
personal decision, and it will depend largely on each individual's assessment of
the individual's existing stock option package and assumptions about the future
overall economic environment, the performance of the Nasdaq National Market, our
stock price and our business. (Section 2)
. IF I TENDER OPTIONS IN THE OFFER, WILL I BE ELIGIBLE TO RECEIVE OTHER
OPTION GRANTS BEFORE I RECEIVE MY NEW OPTIONS?
If we accept options you tender in the offer, we may defer until the grant
date of the new options our grant to you of any other options (such as annual,
bonus or promotional options) for which you may be eligible between the date
hereof and the new option grant date. We may defer the grant to you of these
other options if we determine it is necessary for us to do so to avoid (1)
requiring you to tender these options due to the "six month look-back" and (2)
incurring compensation expense against our earnings because of accounting rules
that could apply to these interim option grants as a result of the offer. If
you do not tender options in the offer, however, we may grant you promptly
following the expiration of the offer options that you were eligible to receive
between the date hereof and the expiration date. (Sections 5 and 11)
. HOW MANY NEW OPTIONS WILL I RECEIVE IN EXCHANGE FOR MY TENDERED OPTIONS?
We will grant you new options to purchase the number of shares of our Common
Stock which is equal to one-half the number of shares of Common Stock subject to
the options you tender and which we accept. (Section 1)
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. WHAT WILL THE TERMS OF MY NEW OPTIONS BE?
All of the new options granted pursuant to this offer will be granted under
the EIP. The terms of the new options will be subject to the terms and
conditions of the EIP and a new stock option agreement to be entered into
between you and us, which will be substantially in the form of exhibit (d)(2) to
the Tender Offer Statement on Schedule TO that we filed with the Securities and
Exchange Commission on September 17, 2001. Note that even if you tender all of
your options granted under the EIP, certain provisions of your existing stock
option agreement under the EIP, including the provisions relating to your
employment with Mercator, will continue. These provisions include your
agreements to maintain the confidentiality of Mercator's proprietary information
and not to compete against Mercator or its subsidiaries. (Section 8)
. WHAT WILL THE EXERCISE PRICE OF THE NEW OPTIONS BE?
The exercise price of the new options will be equal to the last reported sale
price of our Common Stock on the Nasdaq National Market on the date we grant the
new options. Accordingly, we cannot predict the exercise price of the new
options. HOWEVER, BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL AT LEAST SIX
MONTHS AND ONE DAY AFTER THE DATE WE CANCEL TENDERED OPTIONS ACCEPTED FOR
EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF
YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR
OUR COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS. (Section 8)
. WHEN WILL THE NEW OPTIONS VEST?
The new options will have a three year annual vesting schedule that begins on
the grant date of the new options. One-third of the new options will vest
immediately upon grant. The remaining two-thirds of the new options will vest at
a rate of two-ninths (2/9) per year for each of the following three years.
. WILL I HAVE TO PAY TAXES IF I EXCHANGE MY OPTIONS IN THE OFFER?
If you exchange your current options for new options, we believe you will not
be required under current law to recognize income for U.S. federal income tax
purposes at the time of the exchange. Further, at the date of grant of the new
options, we believe you will not be required under current law to recognize
income for U.S. federal income tax purposes. WE RECOMMEND THAT YOU CONSULT WITH
YOUR OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF TENDERING OPTIONS
PURSUANT TO THE OFFER. Again, special considerations may apply to employees
located outside of the United States, including but not limited to Australia,
the United Kingdom, Sweden, Germany, France, Singapore and Hong Kong. In some of
these countries, the application of local taxation rules may have an impact upon
the grant of new options. IF YOU ARE AN EMPLOYEE BASED OUTSIDE OF THE UNITED
STATES, WE RECOMMEND THAT YOU CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE THE
TAX CONSEQUENCES OF THE OFFER UNDER THE LAWS OF THE COUNTRY IN WHICH YOU LIVE
AND WORK. (Section 13)
. IF THE OPTIONS I TENDER ARE INCENTIVE STOCK OPTIONS, WILL MY NEW OPTIONS BE
INCENTIVE STOCK OPTIONS?
If the options you tender were intended to be Incentive Stock Options, your
new options will be granted as Incentive Stock Options to the extent they
qualify under the Internal Revenue Code. Under current law, for options to
qualify as Incentive Stock Options, the value of the shares subject to options
that first become exercisable by the option holder in any calendar year cannot
exceed $100,000. The value of the shares subject to the options is measured on
the date the options are granted. The excess options are deemed to be non-
qualified (non-incentive) stock options. (Section 8).
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. WHAT HAPPENS TO OPTIONS THAT I CHOOSE NOT TO TENDER?
Options that you choose not to tender for exchange will remain outstanding
and retain their current exercise price and current vesting schedule. We do not
believe that our offer to you will change any of the terms of an eligible
Incentive Stock Option, which you do not tender in the offer. However, the IRS
may characterize our offer to you as a "modification" of those Incentive Stock
Options, even if you decline the offer. The effect of a successful assertion by
the IRS that your Incentive Stock Options were modified depends on whether the
exercise price of your eligible Incentive Stock Options is equal to, higher or
lower than the price of the Company's stock on September 17, 2001. If your
exercise price per share is equal to or higher than the price of the Company's
Common Stock on September 17, 2001, the offer would extend the period you would
have to hold the shares purchased under those options in order to qualify all of
the gain on a subsequent sale of those shares as long-term capital gain. That
extended holding period for long-term capital gain would require that any
taxable sale or other disposition of the shares not take place until the later
of (i) two years from the date of the deemed modification of your Incentive
Stock Options or (ii) one year from the date you exercise those shares. In
addition, such a deemed modification may also cause a portion of your Incentive
Stock Options to be treated as nonqualified stock options upon exercise and
affect the amount of other stock options granted to you that may qualify as
Incentive Stock Options under the $100,000 calendar year limit discussed above.
If the exercise price of your eligible Incentive Stock Option is lower than the
price of the company's shares of Common Stock on September 17, 2001, your option
would cease to qualify as an Incentive Stock Option. (Section 13).
. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER OPTIONS IN THE OFFER? CAN
THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED IF IT IS EXTENDED?
You have until 5:00 P.M., Eastern Daylight Savings time, on Friday, October
19, 2001 to tender your options in the offer. Although we may, in our
discretion, extend the offer at any time, we cannot assure you that the offer
will be extended or, if extended, for how long. If we extend the offer, we will
make a company-wide announcement of the extension no later than 9:00 a.m. on the
next business day following the previously scheduled expiration date. If we
extend the offer, we will delay the acceptance of any options that have been
tendered and the grant date of the new options. (Section 14)
. HOW DO I TENDER MY OPTIONS?
If you decide to tender your options, you must deliver, before the offer
expires, a properly completed and duly executed letter of transmittal and any
other documents required by the letter of transmittal to Mercator Software,
Inc., 45 Danbury Road, Wilton, Connecticut 06897, Attn: Linda Austin (facsimile
number: (203) 761-8537). (Section 3)
. DURING WHAT PERIOD OF TIME MAY I WITHDRAW PREVIOUSLY TENDERED OPTIONS?
You may withdraw your tendered options at any time before the offer expires.
Because we are not accepting partial tenders of an individual option grant, you
may only withdraw options for all of the shares of Common Stock subject to an
individual grant. To withdraw tendered options, you must deliver to us at the
address or facsimile number listed above a written notice of withdrawal with the
required information while you still have the right to withdraw the tendered
options. Once you have withdrawn options, you may re-tender options only by
again following the delivery procedures described above by the expiration date.
(Section 4)
. WHAT DO WE AND OUR BOARD OF DIRECTORS THINK OF THE OFFER?
Although our board of directors has approved this offer, neither we nor our
board of directors makes any recommendation as to whether or not you should
tender your options. You must make your own decision whether to tender options.
For questions regarding tax implications or other investment-related questions,
you should talk to your own legal counsel, accountant and/or financial advisor.
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. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
For additional information or assistance, you should contact:
Linda Austin
Mercator Software, Inc.
45 Danbury Road
Wilton, Connecticut 06897
telephone number: (203) 563-1260.
INTRODUCTION
Mercator Software, Inc. is offering to exchange all outstanding stock options
to purchase shares of our Common Stock granted under the Mercator Software, Inc.
1997 Equity Incentive Plan (the "EIP") held by eligible individuals for new
options we will grant under the EIP. An "eligible individual" refers to all
holders of outstanding stock option grants, except for senior and corporate vice
presidents and directors. We are making this offer upon the terms and subject to
the conditions set forth in this offer to exchange and in the related letter of
transmittal (which together, as they may be amended or supplemented from time to
time, constitute the "offer"). If you tender options for exchange, we will grant
you new options under the EIP and a new option agreement between us and you. All
tendered options accepted by us pursuant to this offer will be canceled.
This offer is not conditioned upon a minimum number of options being tendered.
This offer is subject to conditions that we describe in Section 6 below.
As of September 17, 2001, options to purchase 7,258,394 shares of our Common
Stock were issued and outstanding under the EIP, of which options to purchase
3,271,361 shares of our Common Stock, constituting 45.1%, were held by eligible
individuals.
THE OFFER
1. NUMBER OF OPTIONS; EXPIRATION DATE.
Upon the terms and subject to the conditions of the offer, we will exchange,
on the basis of one new option for every two outstanding options properly
tendered and not validly withdrawn in accordance with Section 4 before the
"expiration date," as defined below, all outstanding options under the EIP for
new options to purchase Common Stock under the EIP held by eligible individuals.
An "eligible individual" refers to all holders of outstanding stock option
grants, except for senior and corporate vice presidents and directors. We will
not accept partial tenders of options for any portion of the shares subject to
an individual option grant. Therefore, you may only tender options for all of
the shares of Common Stock subject to a particular option grant. If you tender
an option grant for exchange, you will be required to also tender all subsequent
option grants with a lower exercise price that you received during the six
months immediately prior to the date we accept tendered options for exchange.
If your options are properly tendered and accepted for exchange, unless we
terminate this offer pursuant to the terms and conditions hereof, you will be
entitled to receive on the date of the first meeting of the stock option
committee of our board of directors held on or about the first business day that
is at least six months and one day after the date we cancel the options accepted
for exchange new options to purchase the number of shares of our Common Stock
that is equal to one-half the number of shares subject to the options that you
tender and which we accept, subject to adjustments for any stock splits, stock
dividends and similar events that occur prior to the grant date of the new
options. However, we will not issue any options exercisable for fractional
shares. Instead, we will round down to the nearest whole number. IF YOU ARE NOT
AN EMPLOYEE OF MERCATOR OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU TENDER
OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW
OPTIONS OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR
6
TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. PARTICIPATION IN THE
OFFER DOES NOT CONFER UPON YOU THE RIGHT TO REMAIN IN THE EMPLOY OF MERCATOR OR
ANY OF OUR SUBSIDIARIES. This means that if you die or quit or we terminate your
employment prior to the date we grant the new options, you will not receive
anything for the options that you tendered and we canceled.
Special considerations may apply to employees located outside of the United
States, including but not limited to Australia, the United Kingdom, Sweden,
Germany, France, Singapore and Hong Kong. In some of these countries, the
application of local taxation rules may have an impact upon the new grant. IF
YOU ARE AN EMPLOYEE OUTSIDE OF THE UNITED STATES, WE RECOMMEND THAT YOU CONSULT
WITH YOUR OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF THE OFFER UNDER
THE LAWS OF THE COUNTRY IN WHICH YOU LIVE AND WORK.
We are also reserving the right, in the event of a merger or similar
transaction after the expiration date, to take any actions we deem necessary or
appropriate to complete a transaction that our board of directors believes is in
the best interest of our company and our stockholders. This could include
terminating your right to receive replacement options under this offer to
exchange. If we were to terminate your right to receive replacement options
under this offer in connection with such transaction, employees who have
tendered options for cancellation pursuant to this offer would not receive
options to purchase securities of the acquiror or any other consideration for
their tendered options. We presently have no plans or proposals that relate to
or would result in an acquisition of Mercator. Section 2 of this offer to
exchange describes our future plans.
The term "expiration date" means 5:00 P.M., Eastern Daylight Savings time, on
Friday, October 19, 2001, unless and until we, in our discretion, have extended
the period of time during which the offer will remain open, in which event the
term "expiration date" refers to the latest time and date at which the offer, as
so extended, expires. See Section 14 for a description of our rights to extend,
delay, terminate and amend the offer.
For purposes of the offer, a "business day" means any day other than a
Saturday, Sunday or U.S. Federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern Time.
2. PURPOSE OF THE OFFER.
We issued the options outstanding under the EIP to:
. provide our employees an opportunity to acquire or
increase a proprietary interest in us, thereby creating a
stronger incentive to expend maximum effort for our growth
and success; and
. encourage our employees to continue their employment by us.
Many of our outstanding options, whether or not they are currently
exercisable, have exercise prices that are significantly higher than the current
market price of our Common Stock. We believe these options are unlikely to be
exercised in the foreseeable future. By making this offer to exchange
outstanding options for new options that will (1) have an exercise price equal
to the fair market value of our Common Stock on the grant date and (2) one-third
to vest immediately upon grant and the remaining options to vest at a schedule
of two-ninths of the remaining options per year for each of the following three
years, we intend to provide our employees with the benefit of owning options
that over time may have a greater potential to increase in value, create better
performance incentives for employees and thereby maximize stockholder value.
Subject to the foregoing, and except as otherwise disclosed in this offer or
in our filings with the SEC, we presently have no plans or proposals that relate
to or would result in:
(a) any extraordinary corporate transaction, such as a material merger,
reorganization or liquidation, involving us or any of our subsidiaries;
7
(b) any purchase, sale or transfer of a material amount of our assets or the
assets of any of our subsidiaries;
(c) any material change in our present dividend rate or policy, or our
indebtedness or capitalization;
(d) any change in our present board of directors or management, including a
change in the number or term of directors or to fill any existing board
vacancies or to change any executive officer's material terms of employment;
(e) any other material change in our corporate structure or business;
(f) our Common Stock not being authorized for quotation in an automated
quotation system operated by a national securities association;
(g) our Common Stock becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act;
(h) the suspension of our obligation to file reports pursuant to Section
15(d) of the Securities Exchange Act;
(i) the acquisition by any person of any material amount of our securities or
the disposition of any material amount of our securities; or
(j) any change in our certificate of incorporation or bylaws, or any actions
which may impede the acquisition of control of us by any person.
Neither we nor our board of directors makes any recommendation as to whether
you should tender your options, nor have we authorized any person to make any
such recommendation. You are urged to evaluate carefully all of the information
in this offer to exchange and to consult your own legal, investment and/or tax
advisors. You must make your own decision whether to tender your options for
exchange.
We understand that this will be a challenging decision for all employees. The
program does carry considerable risk, and there are no guarantees of our future
stock performance. So, the decision to participate must be each individual
employee's personal decision, and it will depend largely on each employee's
assessment of the employee's existing stock option package and assumptions about
the future overall economic environment, the performance of the Nasdaq National
Market, our stock price and our business.
3. PROCEDURES FOR TENDERING OPTIONS.
Proper Tender of Options. To validly tender your options pursuant to the
offer, you must, in accordance with the terms of the letter of transmittal,
properly complete, duly execute and deliver to us the letter of transmittal, or
a facsimile thereof, along with any other required documents. We must receive
all of the required documents at Mercator Software, Inc., 45 Danbury Road,
Wilton, Connecticut 06897, Attn: Linda Austin, before the expiration date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING LETTERS OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS, IS AT YOUR ELECTION AND RISK. IF YOU DELIVER BY
MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED
AND PROPERLY INSURE THE MATERIALS. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ENSURE TIMELY DELIVERY. DELIVERY BY EMAIL WILL NOT BE ACCEPTED.
---
Determination of Validity; Rejection of Options; Waiver of Defects; No
Obligation to Give Notice of Defects. We will determine, in our sole
discretion, all questions as to form of documents and the validity,
8
form, eligibility, including time of receipt, and acceptance of any tender of
options. Our determination of these matters will be final and binding on all
parties. We reserve the right to reject any or all tenders of options that we
determine are not in appropriate form or that we determine are unlawful to
accept. Otherwise, we will accept properly and timely tendered options that are
not validly withdrawn. We also reserve the right to waive any of the conditions
of the offer or any defect or irregularity in any tender with respect to any
particular options or any particular option holder. No tender of options will be
deemed to have been properly made until all defects or irregularities have been
cured by the tendering option holder or waived by us. Neither we nor any other
person is obligated to give notice of any defects or irregularities in tenders,
nor will anyone incur any liability for failure to give any such notice.
Our Acceptance Constitutes an Agreement. Your tender of options pursuant to
the procedures described above constitutes your acceptance of the terms and
conditions of the offer. OUR ACCEPTANCE FOR EXCHANGE OF YOUR OPTIONS TENDERED
BY YOU PURSUANT TO THE OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN US AND
YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER.
Subject to our rights to extend, terminate and amend the offer, we currently
expect that we will accept promptly after the expiration of the offer all
properly tendered options that have not been validly withdrawn.
4. WITHDRAWAL RIGHTS.
You may only withdraw your tendered options in accordance with the provisions
of this Section 4.
You may withdraw your tendered options at any time before the expiration date.
If the offer is extended by us beyond that time, you may withdraw your tendered
options at any time until the extended expiration of the offer.
To validly withdraw tendered options, you must deliver to us at the address
set forth in Section 3 a written notice of withdrawal, or a facsimile thereof,
with the required information, while you still have the right to withdraw the
tendered options. The notice of withdrawal must specify the name of the option
holder who tendered the options to be withdrawn, the grant date, exercise price,
and total number of option shares subject to each option to be withdrawn.
Except as described in the following sentence, the notice of withdrawal must be
signed by the option holder who tendered the options to be withdrawn exactly as
such option holder's name appears on the option agreement or agreements
evidencing such options. If the signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or another
person acting in a fiduciary or representative capacity, the signer's full title
and proper evidence of the authority of such person to act in such capacity must
be indicated on the notice of withdrawal. Because we are not accepting partial
tenders of an individual option grant, you may only withdraw options for all or
none of the shares of Common Stock subject to an individual grant.
You may not rescind any withdrawal. Any options you withdraw will thereafter
be deemed not properly tendered for purposes of the offer, unless you properly
re-tender those options before the expiration date by following the procedures
described in Section 3.
Neither we nor any other person is obligated to give notice of any defects or
irregularities in any notice of withdrawal, nor will anyone incur any liability
for failure to give any such notice. We will determine, in our discretion, all
questions as to the form and validity, including time of receipt, of notices of
withdrawal. Our determination of these matters will be final and binding.
5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS.
Upon the terms and subject to the conditions of this offer and as promptly as
practicable following the expiration date, we expect to accept for exchange and
cancel options properly tendered and not validly withdrawn before the expiration
date. If we cancel options accepted for exchange, you will be granted new
options on the date of the first meeting of the stock option committee of the
Mercator board of directors
9
held on or after the first business day that is at least six months and one day
following the date we cancel options accepted for exchange. If the offer is
extended, then the grant date of the new options will also be extended. If we
were to grant the new options on any date which is earlier than six months and
one day after the date we cancel the options tendered for exchange, we would be
required for financial reporting purposes to record a variable compensation
expense against our earnings.
We intend to continue to review the option grants of all employees from time
to time as part of our normal compensation program. As a result of this review,
we may decide to grant you additional options. If we accept and cancel the
options you tender in connection with the offer, the grant date and the pricing
of any additional options that we may decide to grant to you will be deferred
until a date that is at least six months and one day from the expiration of this
offer. If we granted new, additional options to you in that period, the
accounting rules would treat them as granted in exchange for the surrendered
grant, and we would be subject to the variable accounting rules. As a result,
the stock option committee of our board of directors does not plan to grant any
additional options until after such date, including additional grants to
employees who do not elect to participate in this exchange offer. However, the
stock option committee reserves the right to decide to grant additional options
to certain employees on a case-by-case basis during this period.
Your new options will entitle you to purchase a number of shares of our Common
Stock which is equal to one-half the number of shares subject to the options or
portion thereof you tender, subject to adjustments for any stock splits, stock
dividends and similar events.
PLEASE NOTE, HOWEVER, THAT IF YOU ARE NOT AN EMPLOYEE OF MERCATOR SOFTWARE,
INC. OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE
DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE
FOR YOUR TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL
NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR TENDERED OPTIONS IF YOU ARE NOT AN
EMPLOYEE FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW
OPTIONS. Certain employee leaves of absence that are approved by us in advance
will be deemed to constitute continued employment.
We are also reserving the right, in the event of a merger or similar
transaction after the expiration date, to take any actions we deem necessary or
appropriate to complete a transaction that our board of directors believes is in
the best interest of our company and our stockholders. This could include
terminating your right to receive replacement options under this offer to
exchange. IF WE WERE TO TERMINATE YOUR RIGHT TO RECEIVE REPLACEMENT OPTIONS
UNDER THIS OFFER IN CONNECTION WITH SUCH TRANSACTION, EMPLOYEES WHO HAVE
TENDERED OPTIONS FOR CANCELLATION PURSUANT TO THIS OFFER WOULD NOT RECEIVE
OPTIONS TO PURCHASE SECURITIES OF THE ACQUIROR OR ANY OTHER CONSIDERATION FOR
THEIR TENDERED OPTIONS. We presently have no plans or proposals that relate to
or would result in an acquisition of Mercator. Section 2 of this offer to
exchange describes our future plans.
For purposes of the offer, we will be deemed to have accepted for exchange
options that are validly tendered and not properly withdrawn, if and when we
give oral or written notice to the option holders of our acceptance for exchange
of such options, which may be by press release. Subject to our rights to extend,
terminate and amend the offer, we currently expect that we will accept promptly
after the expiration of the offer all properly tendered options that are not
validly withdrawn. After we accept tendered options for exchange, we will send
each tendering option holder a letter indicating the number of shares subject to
the options that we have accepted for exchange, the corresponding number of
shares that will be subject to the new options and the expected grant date of
the new options.
10
6. CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the offer, we may terminate or amend
the offer, or postpone our acceptance and cancellation of any options tendered
for exchange, in each case, subject to Rule 13e-4(f)(5) under the Securities
Exchange Act of 1934, as amended, if at any time on or after September 17, 2001
and prior to the expiration date (1) any of the following events has occurred,
or has been determined by us to have occurred, and, (2) in our reasonable
judgment in any such case and regardless of the circumstances giving rise
thereto, including any action or omission to act by us, the occurrence of such
event or events makes it inadvisable for us to proceed with the offer or with
such acceptance and cancellation of options tendered for exchange:
(a) there shall have been threatened or instituted or be pending any action
or proceeding by any government or governmental, regulatory or administrative
agency, authority or tribunal or any other person, before any court, authority,
agency or tribunal that directly or indirectly challenges the making of the
offer, the acquisition of some or all of the tendered options pursuant to the
offer, the issuance of new options, or otherwise relates in any manner to the
offer or that, in our reasonable judgment, could materially and adversely affect
the business, condition (financial or other), income, operations or prospects of
Mercator or our subsidiaries, or otherwise materially impair in any way the
contemplated future conduct of our business or the business of any of our
subsidiaries or materially impair the contemplated benefits of the offer to us;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered, amended,
enforced or deemed to be applicable to the offer or Mercator or any of our
subsidiaries, by any court or any authority, agency or tribunal that, in our
reasonable judgment, would or might directly or indirectly:
(1) make the acceptance for exchange of, or issuance of new options for,
some or all of the tendered options illegal or otherwise restrict or prohibit
consummation of the offer or otherwise relates in any manner to the offer;
(2) delay or restrict our ability, or render us unable, to accept for
exchange, or issue new options for, some or all of the tendered options;
(3) materially impair the contemplated benefits of the offer to us; or
(4) materially and adversely affect the business, condition (financial or
other), income, operations or prospects of Mercator or our subsidiaries, or
otherwise materially impair in any way the contemplated future conduct of our
business or the business of any of our subsidiaries or materially impair the
contemplated benefits of the offer to us;
(c) there shall have occurred any change, development, clarification or
position taken in generally accepted accounting principles which could or would
require us to record compensation expense against our earnings in connection
with the offer for financial reporting purposes;
(d) a tender or exchange offer with respect to some or all of our Common
Stock, or a merger or acquisition proposal for us, shall have been proposed,
announced or made by another person or entity or shall have been publicly
disclosed; or
(e) any change or changes shall have occurred in the business, condition
(financial or other), assets, income, operations, prospects or stock ownership
of Mercator or our subsidiaries that, in our reasonable judgment, is or may be
material to Mercator or our subsidiaries or materially impairs or may materially
impair the contemplated benefits of the offer to us.
The conditions to the offer are for our benefit. We may assert them in our
discretion regardless of the circumstances giving rise to them prior to the
expiration date. We may waive them, in whole or in part, at any time and from
time to time prior to the expiration date, in our discretion, whether or not we
waive any
11
other condition to the offer. Our failure at any time to exercise any of these
rights will not be deemed a waiver of any such rights. The waiver of any of
these rights with respect to particular facts and circumstances will not be
deemed a waiver with respect to any other facts and circumstances. Any
determination we make concerning the events described in this Section 6 will be
final and binding upon all persons.
We are also reserving the right, in the event of a merger or similar
transaction after the expiration date, to take any actions we deem necessary or
appropriate to complete a transaction that our board of directors believes is in
the best interest of our company and our stockholders. This could include
terminating your right to receive replacement options under this offer to
exchange. If we were to terminate your right to receive replacement options
under this offer in connection with such transaction, employees who have
tendered options for cancellation pursuant to this offer would not receive
options to purchase securities of the acquiror or any other consideration for
their tendered options.
7. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS.
Our Common Stock is traded on the Nasdaq National Market under the symbol
"MCTR." Our Common Stock began trading on Nasdaq on July 2, 1997, in connection
with the initial public offering of our Common Stock. The following table shows,
for the periods indicated, the high and low sales prices per share of our Common
Stock as reported by the Nasdaq National Market.
FISCAL YEAR ENDING DECEMBER 31, 2001
HIGH LOW
First Quarter.................................. 11.313 3.50
Second Quarter................................. 3.51 1.51
Third Quarter (through September 10, 2001)..... 2.41 1.85
FISCAL YEAR ENDING DECEMBER 31, 2000
HIGH LOW
First Quarter.................................. 142.00 49.00
Second Quarter................................. 79.50 29.00
Third Quarter ................................. 69.00 13.766
Fourth Quarter................................. 15.438 2.96
As of September 10, 2001, the last trading day prior to this offer to
purchase, the last reported sale price of our Common Stock, as reported by the
Nasdaq National Market, was $2.02 per share and there were 30,550,469 shares
outstanding.
WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK
BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS.
8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS.
Consideration. We will issue new options to purchase Common Stock under the
EIP in exchange for outstanding eligible options properly tendered and accepted
for exchange by us. The number of shares of Common Stock subject to new options
to be granted to each option holder will be equal to one-half the number of
shares subject to the options tendered by such option holder and accepted for
exchange, subject to adjustments for any stock splits, stock dividends and
similar events. If we receive and accept tenders of all outstanding eligible
options, we expect to grant new options to purchase a total of 1,635,680 shares
of our Common Stock.
Terms of New Options. The new options will be issued under the EIP and a new
stock option agreement to be entered into between you and us, which you will
receive when the new options are granted. The new stock option agreement will be
substantially the same as the form option agreement attached as
12
exhibit (d)(2) to the Tender Offer Statement on Schedule TO that we filed with
the SEC on September 17, 2001. Except with respect to the exercise price, term
and certain other terms specified in the offer, the terms and conditions of the
new options will be substantially the same as the terms and conditions of the
options tendered for exchange.
Even if you tender all of your options granted under the EIP, your existing
stock option agreement under the EIP, including the provisions relating to your
employment with Mercator, will continue. These provisions include your
agreements to maintain the confidentiality of Mercator's proprietary information
and not to compete against Mercator or its subsidiaries. Your existing stock
option agreement under the EIP will govern any additional options granted to you
as part of our normal compensation program.
The issuance of new options under this offer will not create any contractual
or other right of the recipients to receive any future grants of stock options
or benefits in lieu of stock options or any right of continued employment.
The following description of the EIP and the new stock option agreement to
which each new option will be subject is only a summary, and may not be
complete. For complete information please refer to the copies of the EIP and the
stock option agreement that have been filed with the SEC as exhibits to the
Tender Offer Statement on Schedule TO. You may also contact us at Mercator via
facsimile at 203-761-8537 to request copies of the EIP or the form of the new
option agreement, which will be provided at our expense.
The following description summarizes the material terms of the EIP and the
options granted under the EIP.
General. The maximum number of shares of Common Stock available for issuance
pursuant to the exercise of options granted under the EIP plan is currently
9,700,000. This number may be increased only by our board of directors and
approved by our stockholders, in accordance with applicable state law. The
maximum number of shares subject to options that may be awarded to one person in
any twelve month period under the EIP is 300,000, other than new employees of
Mercator or a subsidiary of Mercator who are eligible to receive up to a maximum
of 1,000,000 shares in the calendar year in which they commence their
employment.
The EIP permits the granting of options intended to qualify as Incentive
Stock Options under the Internal Revenue Code and the granting of options that
do not qualify as Incentive Stock Options. If the options you tender were
intended to be Incentive Stock Options, your new options will be granted as
Incentive Stock Options to the extent they qualify under the Internal Revenue
Code. For options to qualify as Incentive Stock Options, the value of the shares
subject to options that first become exercisable by the option holder in any
calendar year cannot exceed $100,000. The value of the shares subject to options
is measured on the date the options are granted. The excess options are deemed
to be non-qualified stock options. If the options you tender for exchange were
not intended as Incentive Stock Options, your new options will not be Incentive
Stock Options. For more information related to the possible U.S. federal income
tax consequences if you exchange any options pursuant to this offer, see Section
13 of this offer. Special considerations may apply to employees located outside
of the United States, including but not limited to Australia, the United
Kingdom, Sweden, Germany, France, Singapore and Hong Kong. In some of these
countries, the application of local taxation rules may have an impact upon the
new grant. IF YOU ARE AN EMPLOYEE OUTSIDE OF THE UNITED STATES, WE RECOMMEND
THAT YOU CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF
THE OFFER UNDER THE LAWS OF THE COUNTRY IN WHICH YOU LIVE AND WORK.
Administration. The EIP is administered by the stock option committee of our
board of directors and provides the committee with broad discretion to fashion
the terms of grants of options, including type, size and exercise price, as it
deems appropriate.
Exercise and Termination of Awards. The terms and conditions applicable to the
exercise of awards and the events or occurrences which may trigger the
acceleration, termination or forfeiture of the new options under the EIP are set
forth in the new stock option agreement. The new stock option agreement will be
13
substantially the same as the form option agreement attached as exhibit (d)(2)
to the Tender Offer Statement on Schedule TO that we filed with the SEC on
September 17, 2001.
Term. Subject to terms in the new stock option agreement and the EIP providing
for earlier termination of the option, the new option will terminate on the
tenth anniversary of the date of grant of the new option. Terms of the new stock
option agreement providing for termination of the option include, without
limitation, termination of the option within specified periods of time after
(i) termination of your employment with Mercator and (ii) your death.
No awards may be made under the EIP after May 7, 2007. Although shares of
Common Stock may be issued after May 7, 2007 pursuant to awards made on or prior
to that date, no shares of our Common Stock will be issued under the EIP after
May 7, 2017.
Exercise Price. The exercise price of the new options to be granted pursuant
to the offer will be equal to the last reported sale price of our Common Stock
on the Nasdaq National Market on the date of grant. HOWEVER, BECAUSE WE WILL NOT
GRANT NEW OPTIONS UNTIL AT LEAST SIX MONTHS AND ONE DAY AFTER THE DATE WE CANCEL
TENDERED OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER
EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU
OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO
TENDER YOUR OPTIONS.
Vesting and Exercise. The stock option committee has the authority to
determine at what time or times each option may be exercised and the period of
time, if any, after retirement, death, disability or termination of employment
during which options may be exercised. The exercisability of options may be
accelerated by the stock option committee. The new options will have a vesting
schedule of one-third to vest immediately upon grant and the remaining options
to vest at a schedule of two-ninths of the remaining options per year for each
of the following three years. Vesting of the new options shall immediately
cease upon termination of your employment with Mercator.
Payment of Exercise Price. In accordance with the applicable stock option
agreement, exercise of the new options may be made, in whole or in part, by
delivery of a written notice to us which is accompanied by payment in full of
the applicable exercise price. Payment of the option exercise price for the new
options may be made by delivery of cash, valid check, shares of Mercator Common
Stock owned by you, or in such other manner as permitted by our board of
directors.
Amendment and Termination of the EIP. Our board may amend or terminate the
option plans at any time and in any manner, subject to certain restrictions.
No Stockholder Rights and Employment Rights. A participant shall have no
stockholder rights with respect to the shares of our Common Stock subject to his
or her outstanding option grants until such shares are purchased in accordance
with the EIP and the option agreement evidencing such option. Nothing in the EIP
confers upon the participant any right to continue in our employ.
Registration of Option Shares. All shares of Common Stock issuable upon
exercise of options under the EIP, including the shares that will be issuable
upon exercise of all new options to be granted pursuant to the offer, have been
registered under the Securities Act of 1933, as amended, on a registration
statement on Form S-8 filed with the SEC. Unless you are one of our affiliates,
you will be able to sell your option shares free of any transfer restrictions
under applicable securities laws.
Tax Consequences. You should refer to Section 13 for a discussion of the U.S.
Federal income tax consequences of accepting or rejecting the new options under
this offer to exchange. Special considerations may apply to employees located
outside of the United States, including but not limited to Australia, the United
Kingdom, Sweden, Germany, France, Singapore and Hong Kong. In some of these
countries, the application of local taxation rules may have an impact upon the
new grant. IF YOU ARE AN EMPLOYEE OUTSIDE OF THE UNITED STATES, WE RECOMMEND
THAT YOU CONSULT WITH YOUR
14
OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF THE OFFER UNDER THE LAWS OF
THE COUNTRY IN WHICH YOU LIVE AND WORK.
Method of Exercising Options. After the new options begin vesting, the option
holder may exercise the options in accordance with the terms of the EIP and the
option holder's option agreement by providing to us (1) a written notice
identifying the option and stating the number of shares of Common Stock that the
option holder desires to purchase and (2) payment in full of the option price
per share for the shares of Common Stock then being acquired by certified or
cashier's check payable to the order of Mercator in full payment for the shares
of Common Stock being purchased. We may also in our discretion provide for
alternate means of exercise of the options.
Prohibition Against Transfer. The EIP provides, in general, that the options,
and the rights and privileges conferred by them, are personal to the option
holder and may not be transferred otherwise than by will or by the laws of
descent and distribution. However, the stock option committee may, in its
discretion, permit a holder of a non-qualified stock option to transfer the non-
qualified stock option to certain persons or entities on certain terms and
conditions as set forth in the EIP.
Termination of Employment. IF YOU ARE NOT AN EMPLOYEE OF MERCATOR OR ONE OF
OUR SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE
NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS OR ANY OTHER CONSIDERATION IN
EXCHANGE FOR YOUR TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. This
means that if you die, quit or we terminate your employment prior to the date we
grant the new options, you will not receive anything for your cancelled options
that you tendered. After the grant date of the new options, if the option
holder ceases to be an employee of Mercator for any reason other than disability
or death, then the option holder shall have until the earlier of (1) the
expiration date of such option, or (2) three (3) months from the date of
termination of the option holder's employment to exercise the options to the
extent to which the option holder would otherwise have been entitled to exercise
the option on or prior to the date of such termination. To the extent the
option holder is not entitled to exercise the options prior to the date of the
option holder's termination, such outstanding and unexercised option shall
immediately lapse and the option holder shall have no further rights with
respect to it, effective as of the date of termination of the option holder's
employment.
After the date of grant of the new options, if the option holder's employment
with Mercator is terminated due to disability or death, the options shall be
exercisable the earlier of (1) the expiration date of such option, or (2) no
later than twelve months after disability or death to the extent to which the
option holder would otherwise be entitled to exercise the options on or prior to
the date of such termination. To the extent the option holder is not entitled to
exercise any portion of the options prior to the date of the option holder's
termination due to disability or death, such unexercised portion of the options
shall immediately lapse, effective as of the date of termination of the option
holder's employment on account of disability or death.
Effect of Change of Control. Under the terms of the EIP, if we merge or are
consolidated with, or sell substantially all of our assets or stock to, another
entity following the grant date of the new options, the new options will
automatically vest for one additional year and may also be assumed, converted or
replaced by the surviving corporation (if any), which assumption, conversion or
replacement will be binding on all option holders. In lieu of assuming,
converting or replacing such new options, the surviving corporation may
substitute equivalent options or provide substantially similar consideration to
the new option holders as was provided to stockholders (after taking into
account the existing provisions of the new options and the one year additional
vesting). If such surviving corporation (if any) refuses to assume or
substitute new options, as provided above, such new options will automatically
vest for one additional year and will expire on such transaction at such time
and on such conditions as the stock option committee will determine. The EIP
does not govern the new options prior to the grant date of the new options. If
we were to enter a change of control transaction after the expiration date and
before the grant date of the new options, we reserve the right to take any
actions we deem necessary or appropriate to complete a transaction that our
board of directors believes is in the best interest of our company and our
stockholders. This could include terminating your right to receive replacement
options under this offer to exchange. IF WE WERE TO
15
TERMINATE YOUR RIGHT TO RECEIVE REPLACEMENT OPTIONS UNDER THIS OFFER IN
CONNECTION WITH SUCH TRANSACTION, EMPLOYEES WHO HAVE TENDERED OPTIONS FOR
CANCELLATION PURSUANT TO THIS OFFER WOULD NOT RECEIVE OPTIONS TO PURCHASE
SECURITIES OF THE ACQUIROR OR ANY OTHER CONSIDERATION FOR THEIR TENDERED
OPTIONS. We presently have no plans or proposals that relate to or would result
in an acquisition of Mercator. Section 2 of this offer to exchange describes our
future plans.
Our statements in this offer concerning the EIP and the new options are merely
summaries and do not purport to be complete. The statements are subject to, and
are qualified in their entirety by reference to, all provisions of the EIP and
the form of option agreement under the EIP, each of which is filed as an exhibit
to the Tender Offer Statement on Schedule TO, of which this offer to exchange is
a part. See Section 16 for a discussion of how to obtain copies of the EIP and
form of option agreement.
9. INFORMATION CONCERNING MERCATOR.
Mercator Software, Inc., is a leading provider of software and services that
help customers achieve speed, flexibility, efficiency, and return on investment
in existing technology. We do this by integrating technologies and transactions
throughout the extended enterprise and with trading partners and customers. In
combination with our software, professional staff and strategic trading
partners, we enable companies to integrate electronic transactions and computer
applications across the entire value chain of business activities and
information technology including back-office systems, Web applications,
traditional electronic commerce applications, electronic marketplaces and
electronic exchanges. Mercator products and services solve incompatibilities in
data formats and semantics by providing a single, standards-based architecture
that can be applied to all business integration requirements, including
business-to-business, consumer-to-business, and internal application-to-
application integration.
Customers of our integration software and services include banks and brokerage
institutions, insurance companies, telecommunications companies, and large-scale
manufacturing and retail operations. We also sell our products and services
through strategic partners to third party customers including Internet market
makers, channel masters, group purchasing organizations and application service
providers.
We were originally incorporated in Connecticut in 1985 as TSI International Ltd.
and reincorporated in Delaware in 1993 as TSI International Software Ltd.
Effective April 3, 2000, we officially changed our name to Mercator Software,
Inc. Our principal executive offices are located at 45 Danbury Road, Wilton,
Connecticut 06897, and the telephone number is (203) 761-8600.
From inception through 1996 we operated primarily as a private domestic software
company with limited direct sales activities in the United Kingdom and Canada.
In 1997 we completed our initial public offering, which raised $25 million, and
opened a sales office in France. In 1998 we completed a secondary public
offering, which raised $22 million, and acquired certain assets of Software
Consulting Partners, a consulting firm with expertise in the implementation of
enterprise resource planning systems, for $5.5 million in Common Stock and
assumed liabilities.
In 1999 we acquired the Braid Group Limited, a provider of integration software
products for straight-through processing of financial transactions in the
international banking and securities markets, for $30 million in cash and
approximately $80 million in Common Stock and stock options, excluding
approximately $20 million in contingent consideration to be paid upon the
achievement of certain criteria. Braid was based in the United Kingdom with
operations in the Asia Pacific area. We subsequently opened a sales office in
Germany. Also, in 1999 we acquired Novera Software Inc., a developer of Web
application solutions, for approximately $58 million in Common Stock and stock
options.
Prior to January 1, 2001 the Company classified its business activities into two
reportable segments: Domestic and International; our international revenues
represented 37% of our total revenue. Effective January 1, 2001, the Company
restructured its operations into three reportable segments: Americas (North
America, Central and South America) including corporate, EMEA (Europe, Middle
East & Africa) and APAC (Asia Pacific).
16
In June 2001 Mercator entered into a $15 million credit facility with Silicon
Valley Bank. This facility is secured by certain receivables and will be capped
at $10 million until Mercator generates positive EBITDA in a fiscal quarter. As
of September 10, 2001 Mercator has not borrowed any amounts against this
facility. The facility requires Mercator to issue either additional equity or
subordinated debt resulting in net proceeds to Mercator of at least $5 million
by September 30, 2001. Accordingly, Mercator has engaged an investment banker to
help us accomplish this capitalization event.
Mercator believes that current cash and cash equivalent balances, combined
with net cash generated from operations, should be sufficient to meet
anticipated needs for working capital and capital expenditures by December 31,
2001. However, recognizing there could be a shortfall in cash during the
remainder of the year, Mercator has established the credit facility with Silicon
Valley Bank. Mercator is also exploring other financial alternatives to support
growth opportunities and other needs that may exceed cash resources available
from operations and the credit facility, and to fulfill the requirement of the
credit facility. However, any projections of future cash needs and cash flows
are subject to substantial uncertainty. Any such additional financing will
likely involve the sale of additional equity or securities convertible or
exchangeable into equity, which would result in additional dilution to
Mercator's stockholders. In addition, Mercator may, from time to time, consider
the acquisition of or investment in complementary businesses, products, services
and technologies, which might impact Mercator's liquidity requirements or
require Mercator to issue debt or additional equity securities. There can be no
assurance that financing will be available in amounts or on terms acceptable to
Mercator, or at all.
Financial Information. The information set forth on pages pages 3 through 24
of the company's Quarterly Report on Form 10-Q for its fiscal quarter ended June
30, 2001, 2 through 22 of the company's Quarterly Report on Form 10-Q for its
fiscal quarter ended March 31, 2001, pages 13 through 24 of the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 2000 and is
incorporated herein by reference. See "Additional Information" in Section 16 for
instructions on how you can obtain copies of our SEC reports that contain the
information incorporated by reference herein.
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE OPTIONS.
A list of our directors and executive officers is attached to this offer to
exchange as Schedule A. As of September 17, 2001, our executive officers and
non-employee directors as a group beneficially owned options exercisable within
sixty days of the offer date under the EIP to purchase a total of 1,397,742
shares of our Common Stock, which represented approximately 19.3% of the
shares subject to all options outstanding under the EIP as of that date.
During the past 60 days, we have granted options to purchase 528,500 shares of
our Common Stock with exercise prices per share ranging from $2.02 to $2.41. Of
those, 389,000 options were granted to our executive officers and directors.
During the past 60 days, no options have been exercised.
There have been no transactions in options to purchase our Common Stock or in
our Common Stock which were effected during the past 60 days by Mercator, or to
our knowledge, by any executive officer, director, affiliate or subsidiary of
Mercator.
11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF
THE OFFER.
Options we acquire pursuant to the offer will be canceled and the shares of
Common Stock subject to those options will be returned to the pool of shares
available for grants of new options under the EIP, including for issuance upon
the exercise of new options issued by us pursuant to the offer. To the extent
such shares are not fully reserved for issuance upon exercise of the new options
to be granted in connection with the offer, the shares will be available for
future awards to employees and other eligible plan participants without further
stockholder action, except as required by applicable law or the rules of the
17
Nasdaq National Market or any other securities quotation system or any stock
exchange on which our Common Stock is then quoted or listed.
We believe that we will not incur any compensation expense solely as a result
of the transactions contemplated by the offer because we will not grant any new
options until a business day that is at least six months and one day after the
date that we accept and cancel options tendered for exchange; and the exercise
price of all new options will equal the market value of the Common Stock on the
date we grant the new options. We will also require each option holder to tender
all option grants that he or she received during the six months immediately
prior to the date we accept tendered options for exchange if those grants were
made subsequent to, and have an exercise price lower than the exercise price of,
the grant(s) that such option holder tenders.
We may incur compensation expense, however, if we grant any options to a
tendering option holder having an exercise price less than the exercise price of
any options tendered for exchange by that tendering option holder between the
date hereof and the scheduled new option grant date. We may defer the grant to
you of these other options if we determine it is necessary for us to do so to
avoid (1) requiring you to tender these options due to the "six month look-back"
and (2) incurring compensation expense against our earnings because of
accounting rules that could apply to these interim option grants as a result of
the offer.
12. LEGAL MATTERS; REGULATORY APPROVALS.
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our exchange of
options and issuance of new options as contemplated by the offer, or of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
the acquisition or ownership of our options as contemplated herein. Should any
such approval or other action be required, we presently contemplate that we will
seek such approval or take such other action. We are unable to predict whether
we may determine that we are required to delay the acceptance of options for
exchange pending the outcome of any such matter. We cannot assure you that any
such approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any such approval
or other action might not result in adverse consequences to our business. Our
obligation under the offer to accept tendered options for exchange and to issue
new options for tendered options is subject to conditions, including the
conditions described in Section 6.
13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of the material U.S. Federal income tax
consequences of the exchange of options pursuant to the offer. This discussion
is based on the Internal Revenue Code, its legislative history, Treasury
Regulations and administrative and judicial interpretations as of the date of
the offer, all of which are subject to change, possibly on a retroactive basis.
This summary does not discuss all of the tax consequences that may be relevant
to you in light of your particular circumstances, nor is it intended to be
applicable in all respects to all categories of option holders.
If you exchange outstanding incentive or nonqualified stock options for new
options, you will not be required to recognize income for U.S. Federal income
tax purposes at the time of the exchange. We believe that the exchange will be
treated as a non-taxable exchange. At the date of grant of the new options, you
will not be required to recognize additional income for U.S. Federal income tax
purposes. The grant of options is not recognized as taxable income.
If the options you tender were intended to be Incentive Stock Options, your
new options will be granted as Incentive Stock Options to the extent they
qualify under the Internal Revenue Code. Under current law, for options to
qualify as Incentive Stock Options, the value of the shares subject to options
that first become exercisable by the option holder in any calendar year cannot
exceed $100,000. The value of the shares subject to options is measured on the
date the options are granted. The excess options are deemed to be non-qualified
stock options. If the options you tender were not intended as Incentive Stock
Options, your new options will not be Incentive Stock Options.
18
U.S. Federal Income Tax Consequences for Outstanding Incentive Stock Options.
You will not be subject to any current income tax if you elect to tender your
Incentive Stock Options and accept new options. In addition, we do not believe
that our offer to you will change any of the terms of your eligible Incentive
Stock Options which you do not tender in the offer. However, the IRS may
characterize the offer as a "modification" of those Incentive Stock Options that
you do not tender for cancellation. The effect of a successful assertion by the
IRS that your Incentive Stock Options were modified depends on whether the
exercise price of your exercisable Incentive Stock Options is equal to, higher
or lower than the price of the company's stock on September 10, 2001. If your
current ISO exercise price per share is equal to or higher than the price of the
company's Common Stock on September 10, 2001, the offer would extend the period
you would have to hold the shares purchased under those options in order to
qualify all of the gain on a subsequent sale of those shares as long-term
capital gain. That extended holding period for long-term capital gain would
require that any taxable sale or other disposition of the shares not take place
until the later of (i) two years from the date of the deemed modification of
your Incentive Stock Options or (ii) one year from the date you exercise those
shares. In addition, such a deemed modification may also cause a portion of your
Incentive Stock Options to be treated as nonqualified stock options upon
exercise and affect the amount of other stock options granted to you that may
qualify as Incentive Stock Options under the $100,000 calendar year limit
discussed above. If the exercise price for your eligible Incentive Stock Options
is lower than the price of the company's shares of Common Stock on September 10,
2001, your option would cease to qualify as an Incentive Stock Option and the
options would be taxable as non-qualified options once you exercise.
While the tender and cancellation of your Incentive Stock Options will not
give rise to any tax consequences, you should refer to the tax discussion below
regarding "U.S. Federal Income Tax Consequences of Nonqualified Stock Options,"
because some of your new options may not qualify as Incentive Stock Options or
some of your Incentive Stock Options not tendered may cease to qualify as
Incentive Stock Options, in which case your options would be subject to
different tax treatment than your eligible options.
Under current law you should not have realized taxable income when the
Incentive Stock Options were granted to you under the option plans. In addition,
you generally will not realize taxable income when you exercise an Incentive
Stock Option. However, your alternative minimum taxable income will be increased
by the amount that the aggregate fair market value of the shares you may
purchase under the option, which is generally determined as of the date you
exercise the option, exceeds the aggregate exercise price of the option. Except
in certain circumstances that are described in your option plan and option
agreement, such as your death or disability, if an option is exercised more than
three months after your employment is terminated, the option will not be treated
as an Incentive Stock Option and is subject to taxation under the rules
applicable to nonqualified stock options that are discussed below.
If you dispose of Common Stock that you acquired by exercising an Incentive
Stock Option, the tax consequences of the disposition depend on whether the
disposition is "qualifying" or "disqualifying." The disposition of the Common
Stock is qualifying if it is made after the later of: (a) two years from the
date the Incentive Stock Option was granted or (b) at least one year after the
date the Incentive Stock Option was exercised.
If the disposition of the Common Stock you received when you exercised
Incentive Stock Options is qualifying, any excess of the sale price over the
exercise price of the option will be treated as long-term capital gain taxable
to you at the time of the sale. If the disposition is not qualifying, which we
refer to as a "disqualifying disposition," the excess of the fair market value
of the Common Stock on the date the option was exercised over the exercise price
will be taxable income to you at the time of the sale. Of that income, the
amount up to the excess of the fair market value of the Common Stock at the time
the option was exercised over the exercise price will be ordinary income for
income tax purposes and the balance, if any, will be long or short-term capital
gain, depending on whether or not the Common Stock was sold more than one year
after the option was exercised.
19
If you sell Common Stock you received when you exercised an Incentive Stock
Option in a qualifying disposition, we will not be entitled to a deduction equal
to the gain you realize when you completed that sale. However, if you sell, in a
disqualifying disposition, Common Stock you received when you exercised an
Incentive Stock Option, we will be entitled to a deduction equal to the amount
of compensation income taxable to you.
U.S. Federal Income Tax Consequences of Nonqualified Stock Options. Under
current law, you typically will not realize taxable income upon the grant of a
non-incentive or nonqualified stock option. However, when you exercise the
option, the difference between the exercise price of the option and the fair
market value of the shares subject to the option on the date of exercise will be
treated as taxable compensation income to you, and you will be subject to
withholding of income and employment taxes at that time. We will generally be
entitled to a deduction equal to the amount of compensation income taxable to
you.
The subsequent sale of the shares acquired pursuant to the exercise of a non-
qualified stock option generally will give rise to capital gain or loss equal to
the difference between the sale price and the sum of the exercise price paid for
the shares plus the ordinary income recognized with respect to the shares, and
these capital gains or losses will be treated as long-term capital gains or
losses if you held the shares for more than one year following exercise of the
option.
WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO COUNTRY,
STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.
IF YOU CHOOSE NOT TO EXCHANGE ALL OF YOUR ELIGIBLE OPTIONS, WE ALSO RECOMMEND
THAT YOU CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES
ATTRIBUTABLE TO THE EXERCISE OF THE ELIGIBLE OPTIONS YOU DO NOT EXCHANGE AND TO
THE SUBSEQUENT SALE OF COMMON STOCK PURCHASED UNDER THESE OPTIONS.
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
We expressly reserve the right, in our discretion, at any time and from time
to time, and regardless of whether or not any event set forth in Section 6 has
occurred or is deemed by us to have occurred, to extend the period of time
during which the offer is open and thereby delay the acceptance for exchange of
any options by giving oral or written notice of such extension to the option
holders and making a public announcement thereof.
We also expressly reserve the right, in our reasonable judgment, prior to the
expiration date to terminate or amend the offer and to postpone our acceptance
and cancellation of any options tendered for exchange upon the occurrence of any
of the conditions specified in Section 6, by giving oral or written notice of
such termination or postponement to the option holders and making a public
announcement thereof. Our reservation of the right to delay our acceptance and
cancellation of options tendered for exchange is limited by Rule 13e-4(f)(5)
promulgated under the Securities Exchange Act, which requires that we must pay
the consideration offered or return the options tendered promptly after
termination or withdrawal of a tender offer.
Amendments to the offer may be made at any time and from time to time by
public announcement of the amendment. In the case of an extension, the amendment
must be issued no later than 9:00 a.m., Eastern Daylight Savings time, on the
next business day after the last previously scheduled or announced expiration
date. Any company-wide announcement made pursuant to the offer will be
disseminated promptly to option holders in a manner reasonably designed to
inform option holders of such change. Any company-wide announcement most likely
would be made by e-mail.
If we materially change the terms of the offer or the information concerning
the offer, or if we waive a material condition of the offer, we will extend the
offer to the extent required by Rules 13e-4(d)(2) and
20
13e-4(e)(3) under the Securities Exchange Act. These rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer, other than a
change in price or a change in percentage of securities sought, will depend on
the facts and circumstances, including the relative materiality of such terms or
information.
15. FEES AND EXPENSES.
We will not pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of options pursuant to this offer to exchange.
16. ADDITIONAL INFORMATION.
With respect to the offer, we have filed with the SEC a Tender Offer Statement
on Schedule TO, of which this offer to exchange is a part. This offer to
exchange does not contain all of the information contained in the Schedule TO
and the exhibits to the Schedule TO. We recommend that you review the Schedule
TO, including its exhibits, and the following materials which we have filed with
the SEC before before making a decision on whether to tender your options:
(a) Our annual report on Form 10-K for the year ended December 31, 2000;
(b) Our quarterly reports on Form 10-Q for the quarters ended March 31,
2001 and June 30, 2001;
(c) The description of our Common Stock contained in the registration
statement on Form S-3, filed May 15, 2000, including any amendment or
report filed for the purpose of updating such description;
(d) Our registration statement on Form S-8, filed April 19, 2001; and
(e) Any document that we file with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act after the date of this offer
to exchange and before the termination of this offer. Information in
these filings will be deemed to be incorporated by reference as of the
date we make the filing.
These filings, our other annual, quarterly and current reports, our proxy
statements and our other SEC filings may be examined, and copies may be
obtained, at the following SEC public reference rooms at Judiciary Plaza, 450
Fifth Street, N.W., Room 2120, Washington D.C. 20549; and at its regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and at 7 World Trade Center, New York, New York
10048. Copies of such materials may also be obtained (1) at no charge from our
Web site at http://www.Mercator.com or (2) by mail, upon payment of the SEC's
customary charges, from the SEC's Public Reference Room at Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549. Information about the operation of
this public reference room can be obtained by calling the SEC at 1-800-SEC-0330.
The SEC also maintains a Web site at http://www.sec.gov that contains reports,
proxy statements and information statements and other information regarding
registrants, including Mercator, that file electronically with the SEC.
17. FORWARD LOOKING STATEMENTS; MISCELLANEOUS.
This offer to exchange contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 as amended, and
Section 27A of the Securities Act of 1933, as amended, that involve risks and
uncertainties. When used in this filing words such as "anticipate," "believe,"
"estimate," "expect," "future," "intend," "plan," and similar expressions as
they relate to Mercator Software are included to identify forward-looking
statements. Our actual results may differ significantly from the results
discussed in the forward-looking statements as a result of certain factors
including those set forth below and elsewhere in this document.
Our quarterly and annual operating results are volatile and difficult to predict
and may cause our stock price to fluctuate.
Our quarterly and annual operating results have varied significantly in the past
and are expected to do so in the future. We believe that you should not rely on
period to period comparisons of our results of operations
21
as they are not necessarily indications of our future performance. In some
future periods, our results of operations may be below the expectation of public
market analysts and investors. In this case, the price of our common stock would
likely decline.
Our revenues and results of operations are difficult to forecast and depend on a
variety of factors. These factors include the following:
. the size, timing and terms of individual license transactions;
. the sales cycle for our products;
. demand for and market acceptance of our products and related
services, particularly our Mercator products;
. our ability to expand, and market acceptance of, our professional
services business;
. the timing of our expenditures in anticipation of product
releases or increased revenue;
. the timing of product enhancements and product introductions by
us and our competitors;
. market acceptance of enhanced versions of our existing products
and of new products;
. changes in pricing policies by us and our competitors;
. variations in the mix of products and services sold by us;
. the mix of channels through which our products and services are
sold;
. our success in penetrating international markets;
. the buying patterns and budgeting cycles of customers;
. personnel changes, our ability to attract and retain qualified
sales, professional services and research and development
personnel and the rate at which this personnel becomes
productive; and
. general economic conditions.
We have historically derived a substantial portion of our revenues from the
licensing of our software products, and we anticipate that this trend will
continue for the foreseeable future. Software license revenues are difficult to
forecast for a number of reasons, including the following:
. we typically do not have a material backlog of unfilled orders,
and revenues in any quarter substantially depend on orders booked
and shipped in that quarter;
. the length of the sales cycles for our products can vary
significantly from customer to customer and from product to
product and can be as long as nine months or more;
22
. the terms and conditions of individual license transactions,
including prices and discounts, are often negotiated based on
volumes and commitments, and may vary considerably from customer
to customer;
. We have generally recognized a substantial portion of our
quarterly software licensing revenues in the last month of each
quarter.
Accordingly, the cancellation or deferral of even a small number of purchases
of our products could harm our business.
It would be difficult for us to adjust our spending if we experience any revenue
shortfalls.
Our future revenues will also be difficult to predict and we could fail to
achieve our revenue expectations. Our expense levels are based, in part, on our
expectation of future revenues, and expense levels are, to a large extent, fixed
in the short term. We may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. If revenue levels are below
expectations for any reason, our operating results are likely to be harmed. Net
income may be disproportionately affected by a reduction in revenue because a
large portion of our expenses are related to headcount that cannot be easily
reduced without harming our business.
In addition, we currently intend to increase our operating expenses by
expanding our research and product development staff, particularly research and
development personnel to be devoted to our Mercator product line, increasing our
sales and marketing and professional services operations, expanding distribution
channels, and hiring personnel in other operating areas. We expect to experience
a significant time lag between the date professional services, sales, and
technical personnel are hired and the date these employees become fully
productive. The timing of expansion and the rate at which new technical,
professional services, and sales personnel become productive as well as the
timing of the introduction and success of new distribution channels could cause
material fluctuations in our results of operations. Furthermore, to the extent
increased operating expenses precede or are not subsequently followed by
increased revenues, our business could be harmed.
We may experience seasonal fluctuations in our revenues or results of
operations.
While we have not historically experienced any significant seasonal
fluctuations in our revenues or results of operations, it is not uncommon for
software companies to experience strong fourth quarters followed by weaker first
quarters, in some cases with sequential declines in revenues or operating
profit. We believe that many software companies exhibit this pattern in their
sales cycles primarily due to customers' buying patterns and budget cycles. We
may display this pattern in future years.
We depend on the sales of our Mercator products and related services.
We introduced our Mercator products in 1993. In recent years, a significant
portion of our revenue has been attributable to licenses of our Mercator
products and related services, and we expect that revenue attributable to our
Mercator products and related services will continue to represent a significant
portion of our total revenue for the foreseeable future. Accordingly, our future
operating results significantly depend on the market acceptance and growth of
our Mercator product line and enhancements of these products and services.
Market acceptance of our Mercator product line may not increase or remain at
current levels, and we may not be able to successfully market our Mercator
product line or develop extensions and enhancements to this product line on a
long-term basis. In the event that our current or future competitors release new
products that provide, or are perceived as providing, more advanced features,
greater functionality, better performance, better compatibility with other
systems or lower prices than our Mercator product line, demand for our products
and services would likely decline. A decline in demand for, or market acceptance
23
of, our Mercator product line would harm our business.
We may experience difficulties in developing and introducing new or enhanced
products necessitated by technological changes.
Our future success will depend, in part, upon our ability to anticipate
changes, to enhance our current products and to develop and introduce new
products that keep pace with technological advancements and address the
increasingly sophisticated needs of our customers. Our products may be rendered
obsolete if we fail to anticipate or react to change.
Development of enhancements to existing products and new products depends, in
part, on a number of factors, including the following:
. the timing of releases of new versions of applications systems by
vendors;
. the introduction of new applications, systems or computing
platforms;
. the timing of changes in platforms;
. the release of new standards or changes to existing standards;
and
. changing customer requirements.
Our product enhancements or new products may not adequately meet the
requirements of the marketplace or achieve any significant degree of market
acceptance. In addition, our introduction or announcement, or by one or more of
our current or future competitors, of products embodying new technologies or
features could render our existing products obsolete or unmarketable. Our
introduction or announcement of enhanced or new product offerings or by our
current or future competitors may cause customers to defer or cancel purchases
of our existing products. Any deferment or cancellation of purchases could harm
our business.
We could experience delays in developing and releasing new products or product
enhancements.
We may experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products or product enhancements.
We have in the past experienced delays in the introduction of product
enhancements and new products and we may experience delays in the future.
Furthermore, as the number of applications, systems and platforms supported by
our products increases, we could experience difficulties in developing, on a
timely basis, product enhancements which address the increased number of new
versions of applications, systems or platforms served by our existing products.
If we fail, for technological or other reasons, to develop and introduce product
enhancements or new products in a timely and cost-effective manner or if we
experience any significant delay in product development or introduction, our
customers may delay or decide against purchases of our products, which could
harm our business.
The success of our products will also depend upon the success of the platforms
we target.
We may, in the future, seek to develop and market enhancements to existing
products or new products which are targeted for applications, systems or
platforms which we believe will achieve commercial acceptance. This could
require us to devote significant development, sales and marketing personnel, as
well as other resources, to these efforts, which would otherwise be available
for other purposes. We may not be able to successfully identify these
applications, systems or platforms, and even if we do so, they may not achieve
commercial acceptance or we may not realize a sufficient return on our
investment. Failure of
24
these targeted applications, systems or platforms to achieve commercial
acceptance or our failure to achieve a sufficient return on our investment could
harm our business.
We may not successfully expand our sales and distribution channels.
An integral part of our strategy is to expand our indirect sales channels,
including value-added resellers, independent software vendors, systems
integrators and distributors. This channel is accounting for a growing
percentage of our total revenues and we are increasing resources dedicated to
developing and expanding these indirect distribution channels. We may not be
successful in expanding the number of indirect distribution channels for our
products. If we are successful in increasing our sales through indirect sales
channels, we expect that those sales will be at lower per unit prices than sales
through direct channels, and revenue we receive for each sale will be less than
if we had licensed the same product to the customer directly.
Selling through indirect channels may also limit our contact with our
customers. As a result, our ability to accurately forecast sales, evaluate
customer satisfaction and recognize emerging customer requirements may be
hindered.
Even if we successfully expand our indirect distribution channels, any new
value added resellers, independent software vendors, system integrators or
distributors may offer competing products, or have no minimum purchase
requirements of our products. These third parties may also not have the
technical expertise required to market and support our products successfully. If
the third parties do not provide adequate levels of services and technical
support, our customers could become dissatisfied, or we would have to devote
additional resources for customer support. Our brand name and reputation could
be harmed. Selling products through indirect sales channels could cause
conflicts with the selling efforts of our direct sales force.
Our strategy of marketing products directly to end-users and indirectly
through value added resellers; independent software vendors, systems integrators
and distributors may result in distribution channel conflicts. Our direct sales
efforts may compete with those of our indirect channels and, to the extent
different resellers target the same customers, resellers may also come into
conflict with each other. Although we have attempted to manage our distribution
channels to avoid potential conflicts, channel conflicts may harm our
relationships with existing value added resellers, independent software vendors,
systems integrators or distributors or impair our ability to attract new value
added resellers, independent software vendors, systems integrators and
distributors.
Our future success depends on retaining our key personnel and attracting and
retaining additional highly qualified employees.
Our future success depends in large part on the continued service of our key
sales, professional services and research and development personnel, as well as
senior management. All employees are employed at-will and we have no fixed-term
employment agreements with our employees, which prevents them from terminating
their employment at any time. The loss of the services of any of one or more of
our key employees could harm our business.
Our future success also depends on our ability to attract, train and retain
highly qualified sales, research and development, professional services and
managerial personnel, particularly sales, professional services and research and
development personnel with expertise in enterprise resource planning systems.
Competition for these personnel is intense. We may not be able to attract,
assimilate or retain qualified personnel. We have at times experienced, and we
continue to experience, difficulty in recruiting qualified sales and research
and development personnel, and we anticipate these difficulties will continue in
the future. Furthermore, we have in the past experienced, and in the future we
expect to continue to experience, a significant time lag between the date sales,
research and development and professional services personnel are hired and the
date these employees become fully productive.
We may encounter difficulties in managing our growth.
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Our business has grown in recent periods, with total revenues increasing from
approximately $16.1 million in 1995 to $98.6 million in 1999. We have also
acquired the assets of Software Consulting Partners in November 1998, Braid in
March 1999, and Novera Software, Inc. in September 1999. The growth of our
business has placed, and is expected to continue to place, a strain on our
administrative, financial, sales and operational resources and increased demands
on our systems and controls. For example, we noted an increase in quarterly days
sales outstanding from December 31, 1998 to December 31, 1999 from approximately
109 days to approximately 111 days, and an increase in net accounts receivable
from $18.0 million to $38.3 million.
To deal with these concerns, we have recently implemented, or are in the
process of implementing and will be required to implement in the future, a
variety of new and upgraded operational and financial systems, procedures and
controls. In addition, we intend to hire additional administrative personnel. We
may not be able to successfully complete the implementation and integration of
these systems, procedures and controls, or hire additional personnel, in a
timely manner. The failure of our management to respond to, and manage, our
growth and changing business conditions, or to adapt our operational, management
and financial control systems to accommodate our growth could harm our business.
We may face significant risks in expanding our international operations.
International revenues accounted for 11.8% of our total revenues for 1998
however, as a result of the acquisitions of Braid, and the establishment of a
sales office in Germany during 1999, International revenues accounted for 29.4%
of our total revenues for 1999. Continued expansion of our international sales
and marketing efforts will require significant management attention and
financial resources. We also expect to commit additional time and development
resources to customizing our products for selected international markets and to
developing international sales and support channels.
International operations involve a number of additional risks, including the
following:
. impact of possible recessionary environments in economies outside
the United States;
. longer receivables collection periods and greater difficulty in
accounts receivable collection;
. unexpected changes in regulatory requirements;
. dependence on independent resellers;
. reduced protection for intellectual property rights in some
countries, tariffs and other trade barriers;
. foreign currency exchange rate fluctuations;
. difficulties in staffing and managing foreign operations;
. the burdens of complying with a variety of foreign laws;
. potentially adverse tax consequences; and
. political and economic instability.
To the extent that our international operations expand, we expect that an
increasing portion of our international license and service and other revenues
will be denominated in foreign currencies, subjecting us to fluctuations in
foreign currency exchange rates. We do not currently engage in foreign currency
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hedging transactions. However, as we continue to expand our international
operations, exposures to gains and losses on foreign currency transactions may
increase. We may choose to limit our exposure by the purchase of forward foreign
exchange contracts or similar hedging strategies. The currency exchange strategy
that we adopt may not be successful in avoiding exchange-related losses. In
addition, the above-listed factors may cause a decline in our future
international revenue and, consequently, may harm our business. We may not be
able to sustain or increase revenue that we derive from international sources.
Our success depends upon the widespread use and adoption of the internet and
intranets.
We believe that demand for enterprise application integration solutions, such
as those that we offer, will depend, in part, upon the adoption by businesses
and end-users of the internet and intranets as platforms for electronic commerce
and communications. The internet and intranets are new and evolving, and they
may not be widely adopted, particularly for electronic commerce and
communications among businesses. Critical issues concerning the internet and
intranets, including security, reliability, cost, ease of use and access and
quality of service, remain unresolved at this time, inhibiting adoption by many
enterprises and end-users. If the internet and intranets are not widely used by
businesses and end-users, particularly for electronic commerce, this could harm
our business.
Government regulation and legal uncertainties relating to the internet could
adversely affect our business.
Congress has recently passed legislation and several more bills have recently
been sponsored in both the House and Senate that are designed to regulate
certain aspects of the internet, including on-line content, copyright
infringement, user privacy, taxation, access charges, liability for third-party
activities and jurisdiction. In addition, federal, state, local and foreign
governmental organizations are also considering other legislative and regulatory
proposals that would regulate the internet. Areas of potential regulation
include libel, pricing, quality of products and services, and intellectual
property ownership.
The laws governing the use of the internet, in general, remain largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property; privacy, libel and taxation apply to the internet. In
addition, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. This occurrence may impose additional burdens on companies
conducting business online by limiting how information can flow over the
internet and the type of information that can flow over the internet. The
adoption or modification of laws or regulations relating to the internet could
adversely affect our business.
It is not known how courts will interpret both existing and new laws.
Therefore, we are uncertain as to how new laws or the application of existing
laws will affect our business. In addition, our business may be indirectly
affected by our clients who may be subject to such legislation. Increased
regulation of the internet may decrease the growth in the use of the internet,
which could decrease the demand for our services, increase our cost of doing
business or otherwise have a material adverse effect on our business, results of
operations and financial condition.
Capacity constraints caused by growth in the use of the internet may, unless
resolved, impede further development of the internet to the extent that users
experience delays, transmission errors and other difficulties. Further, the
adoption of the internet for commerce and communications, particularly by those
individuals and companies that have historically relied upon alternative means
of commerce and communication generally requires the understanding and
acceptance of a new way of conducting business and exchanging information. In
particular, companies that have already invested substantial resources in other
means of conducting commerce and exchanging information may be particularly
reluctant or slow to adopt a new internet-based strategy that may make their
existing personnel and infrastructure obsolete. If the necessary infrastructure,
products, services or facilities are not developed, or if the internet does not
become a viable commercial medium, our business, results of operations and
financial condition could be materially and adversely affected.
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The U.S. Omnibus Appropriations Act of 1998 places a moratorium on taxes
levied on internet access from October 1, 1998 to October 21, 2001. However,
states may place taxes on internet access if taxes had already been generally
imposed and actually enforced prior to October 1, 1998. States which can show
they enforced internet access taxes prior to October 1, 1998 and states after
October 21, 2001 may be able to levy taxes on internet access resulting in
increased cost to access to the internet, resulting in a material adverse effect
on our business.
We face significant competition in the market for e-business integration
software.
The market for our products and services is extremely competitive and subject
to rapid change. Because there are relatively low barriers to entry in the
software market, we expect additional competition from other established and
emerging companies.
In the e-business integration market, our Mercator products and related
services compete primarily against solutions developed internally by individual
businesses to meet their specific e-business integration needs. In addition, we
face increasing competition in the e-business integration market from other
third-party software vendors.
Many of our current and potential competitors have longer operating histories,
significantly greater financial, technical, product development and marketing
resources, greater name recognition and larger customer bases than we do. Our
present or future competitors may be able to develop products that are
comparable or superior to those we offer, adapt more quickly than we do to new
technologies, evolving industry trends or customer requirements, or devote
greater resources than we do to the development, promotion and sale of their
products. Accordingly, we may not be able to compete effectively in our target
markets against these competitors.
We expect that we will face increasing pricing pressures from our current
competitors and new market entrants. Our competitors may engage in pricing
practices that reduce the average selling prices of our products and related
services. To offset declining average selling prices, we believe that we must
successfully introduce and sell enhancements to existing products and new
products on a timely basis. We must also develop enhancements to existing
products and new products that incorporate features that can be sold at higher
average selling prices. To the extent that enhancements to existing products and
new products are not developed in a timely manner, do not achieve customer
acceptance or do not generate higher average selling prices, our operating
margins may decline.
We have only limited protection for our proprietary technology.
Our success is dependent upon our proprietary software technology. We do not
currently have any patents and we rely principally on trade secret, copyright
and trademark laws, nondisclosure and other contractual agreements and technical
measures to protect our technology. We also believe that factors such as the
technological and creative skills of our personnel, product enhancements and new
product developments are essential to establishing and maintaining a technology
leadership position. We enter into confidentiality and/or license agreements
with our employees, distributors and customers, and we limit access to and
distribution of our software, documentation and other proprietary information.
The steps that we have taken may not be sufficient to prevent misappropriation
of our technology, and these protections do not preclude competitors from
developing products with functionality or features similar to our products.
Third parties could also independently develop competing technologies that are
substantially equivalent or superior to our technologies. Furthermore, effective
copyright and trade secret protection may be unavailable or limited outside of
the United States. Any failure by or inability of us to protect our proprietary
technology could harm our business.
We may become subject to infringement claims.
Although we do not believe that our products infringe the proprietary rights
of any third parties, third parties might assert infringement claims against us
or our customers in the future. Furthermore, we may initiate claims or
litigation against third parties for infringement of our proprietary rights or
to establish the
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validity of our proprietary rights. Litigation, either as plaintiff or
defendant, would cause us to incur substantial costs and divert management
resources from productive tasks. Any litigation, regardless of the outcome,
could harm our business. Furthermore, parties making claims against us could
secure substantial damages, as well as injunctive or other equitable relief,
which could effectively block our ability to license our products in the United
States or abroad. A large monetary judgment could harm our business.
For further information about these and other risks, uncertainties and
factors, please review the disclosure included under the captions "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Factors that Could Affect our Operations" in our annual report on
Form 10-K for the fiscal year ended December 31, 2000 and "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Outlook" in our quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2001 and "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors that May Affect Future Results" in
our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2001.
Except as otherwise required by federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed circumstances or any
other reason after the date of this offer to exchange.
We are not aware of any jurisdiction where the making of the offer is not in
compliance with applicable law. If we become aware of any jurisdiction where the
making of the offer is not in compliance with any valid applicable law, we will
make a good faith effort to comply with such law. If, after such good faith
effort, we cannot comply with such law, the offer will not be made to, nor will
tenders be accepted from or on behalf of, the option holders residing in such
jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS
TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THE OFFER. YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE
INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED
LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO
YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION,
REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.
Mercator Software, Inc. September 17, 2001
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SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
MERCATOR SOFTWARE, INC.
The directors and executive officers of Mercator Software, Inc. and their
positions and offices as of September 17, 2001, are set forth in the following
table:
NAME POSITION AND OFFICES HELD
---- ----------------------------------
Roy C. King Chairman, Chief Executive Officer, President, Director.
Ken Hall Senior Vice President, Chief Financial Officer and
Treasurer.
David Linthicum Senior Vice President, Research & Development and Chief
Technology Officer.
Eileen Garry Senior Vice President, Chief Marketing Officer.
Robert Farrell President, Americas.
Mark Register President, Asia Pacific.
Paul Orme Senior Vice President, Financial Services.
Gregory O'Brien Senior Vice President, Human Resources.
David Raye Senior Vice President, Customer Care.
Ron Smith Vice President, Worldwide Operations.
Gerald Klein General Counsel and Secretary.
Diane P. Baker Director
Constance F. Galley Director
Ernest E. Keet Director
Richard Little Director
James P. Schadt Vice Chairman, Director
Dennis G. Sisco Director
Mark C. Stevens Director
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OFFER TO EXCHANGE OPTIONS UNDER THE
MERCATOR 1997 EQUITY INCENTIVE PLAN
_________________
If you wish to tender your options for exchange, you must complete and sign the
letter of transmittal in accordance with its instructions, and mail, fax or hand
deliver it and any other required documents to us at Mercator Software, Inc., 45
Danbury Road, Wilton, Connecticut, 06897-0840, Attn: Linda Austin (facsimile:
(203) 761-8537).
Any questions, requests for assistance or additional copies of any documents
referred to in the offer to exchange may be directed to Linda Austin, Mercator
Software, Inc., 45 Danbury Road, Wilton, Connecticut, 06897-0840 (telephone:
(203) 563-1260, facsimile: (203) 761-8537).
_________________
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