OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CONVERGENT GROUP CORPORATION
AT
$8.00 NET PER SHARE
BY
CONVERGENT ACQUISITION SUB, INC.,
A WHOLLY OWNED SUBSIDIARY OF
CONVERGENT HOLDING CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCHLUMBERGER TECHNOLOGY CORPORATION
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OUR OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON MONDAY, NOVEMBER 27, 2000 UNLESS OUR OFFER IS EXTENDED.
--------------------------------------------------------------------------------
We are making our offer pursuant to the terms of an Agreement and Plan of
Merger, dated as of October 13, 2000, by and among Convergent Acquisition
Sub, Inc., Convergent Holding Corporation, Schlumberger Technology Corporation
and Convergent Group Corporation.
CONVERGENT'S BOARD OF DIRECTORS, BASED IN PART UPON THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF THE CONVERGENT
BOARD, (1) UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, OUR OFFER,
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT IS
FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF CONVERGENT'S STOCKHOLDERS,
(2) UNANIMOUSLY APPROVED THE MERGER AGREEMENT, OUR OFFER, THE MERGER AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND (3) UNANIMOUSLY
RECOMMENDS THAT CONVERGENT'S STOCKHOLDERS ACCEPT OUR OFFER AND TENDER THEIR
SHARES PURSUANT TO OUR OFFER AND ADOPT THE MERGER AGREEMENT.
Our offer is not conditioned upon our obtaining financing.
IMPORTANT
If you desire to tender all or any portion of your shares of Convergent
common stock, you should either:
- complete and sign the enclosed Letter of Transmittal (or a facsimile copy)
in accordance with the instructions in the Letter of Transmittal, have
your signature guaranteed (if required by Instruction 1 to the Letter of
Transmittal), mail or deliver the Letter of Transmittal (or a facsimile
copy) and any other required documents to Citibank, N.A., our Depositary,
and either deliver the certificates for your shares along with the Letter
of Transmittal to the Depositary or tender your shares pursuant to the
procedures for book-entry transfer set forth in "The Tender
Offer--Procedures for Accepting Our Offer and Tendering Shares" or
- request your broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for you. If your shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee you must contact your broker, dealer, commercial bank, trust
company or other nominee to tender your shares.
If you desire to tender shares and certificates evidencing your shares, and
your shares are not immediately available, or if you cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, or if you cannot deliver all required documents to our Depositary
prior to the expiration of our offer, you may tender your shares by following
the procedures for guaranteed delivery set forth in "The Tender Offer--
Procedures for Accepting Our Offer and Tendering Shares."
Questions and requests for assistance may be directed to X.X. Xxxx &
Co., Inc., our Information Agent, or Xxxxxxx Xxxxx Xxxxxx Inc., our Dealer
Manager, at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of the Offer to
Purchase, the Letter of Transmittal and other related documents may be obtained
from the Information Agent or from brokers, dealers, commercial banks, trust
companies or other nominees.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTIONS, PASSED UPON THE
MERITS OR FAIRNESS OF THE TRANSACTIONS, OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE DISCLOSURES IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
----------------
THE DEALER MANAGER FOR OUR OFFER IS:
XXXXXXX XXXXX XXXXXX
October 27, 2000
SUMMARY OF OUR OFFER
THIS SUMMARY OF OUR OFFER HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT
AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER
UNDERSTAND OUR OFFER AND FOR A COMPLETE DESCRIPTION OF THE TERMS OF OUR OFFER,
YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING LETTER OF
TRANSMITTAL. QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO OUR
INFORMATION AGENT OR OUR DEALER MANAGER AT THE ADDRESSES AND TELEPHONE NUMBERS
LISTED ON THE BACK COVER OF THIS DOCUMENT. WHEN WE USE THE TERMS "PURCHASER,"
"WE," "US" OR "OUR," WE ARE REFERRING TO CONVERGENT ACQUISITION SUB, INC.
WHO IS OFFERING TO BUY MY SECURITIES?
- We are Convergent Acquisition Sub, Inc., a wholly owned subsidiary of
Convergent Holding Corporation (our Parent), which is currently wholly
owned by Schlumberger Technology Corporation (STC). We and our Parent were
organized in connection with this offer and have not carried on any
activities other than in connection with this offer.
- STC is a Texas corporation that is a United States wholly-owned subsidiary
of Schlumberger Limited, a worldwide leader in technical services. STC
operates in the United States and is engaged either directly or
indirectly, through wholly-owned subsidiaries, in three primary business
segments:
- oilfield services, which is organized into three product groups:
reservoir evaluation, reservoir development, and reservoir management,
that provide exploration and production services required during the
life of an oil and gas reservoir to the petroleum industry;
- resource management services, a solutions provider to electricity, gas
and water resource industry clients, to design, install, operate and
maintain resource measurement networks and services; and
- test and transaction services, which provides smart card-based
solutions, semiconductor test, metrology and handling systems and
services, and corporate internet protocol and network solutions to
customers.
- Please see "The Tender Offer--Information Concerning Us, Our Parent and
STC."
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THIS OFFER?
- We are offering to purchase all the issued and outstanding common stock of
Convergent. Please see the "Introduction" and "The Tender Offer--Terms of
Our Offer; Expiration Date."
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
- We are offering to pay $8.00 for each share, net to you in cash, less any
required withholding taxes and without interest. You will not have to pay
brokerage fees or commissions in connection with our offer. Please see
"Introduction" and "The Tender Offer--Terms of Our Offer; Expiration
Date."
WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF YOUR OFFER?
- We are not obligated to purchase any tendered shares unless, after the
purchase of all of the tendered shares, we would beneficially own at least
a majority of the outstanding shares (after giving effect to the
conversion or exercise of all of the then outstanding options and other
rights and securities exercisable or convertible into shares, whether or
not exercised or converted at the time of determination). In calculating
the number of shares we beneficially own, we are required to count shares
owned by our Parent and STC and shares that are contributed to our Parent
by Cinergy Ventures, LLC, a stockholder of Convergent and a subsidiary of
one of
1
Convergent's largest customers, and members of Convergent's senior
management team. Please see the "Introduction" "The Tender Offer--Terms of
Our Offer; Expiration Date," "The Tender Offer--Merger Agreement;
Subscription and Contribution Agreement; Tender and Voting Agreement;
Voting Agreement; Exclusivity Agreement; Nondisclosure Agreement;
Employment Agreements" and "The Tender Offer--Conditions of Our Offer."
- We are not obligated to purchase any shares unless and until all material
governmental or regulatory notices, approvals or other requirements
necessary to consummate the merger have been given, obtained or complied
with, including the applicable waiting period under the U.S. antitrust
laws have expired or been terminated. Please see "The Tender
Offer--Conditions of Our Offer" and "The Tender Offer--Legal Matters and
Regulatory Approvals."
- Please read "The Tender Offer--Conditions of Our Offer," which sets forth
in full the conditions to our offer.
WHAT AGREEMENTS DO YOU HAVE WITH CONVERGENT OR ANY OF ITS STOCKHOLDERS RELATING
TO YOUR OFFER?
- Prior to our entering into the merger agreement with Convergent, we
entered into a separate agreement with members of Convergent's senior
management, whom we refer to as the management investors, and Cinergy, in
which these parties agreed to contribute shares of Convergent common stock
to our Parent for shares of our Parent's common stock and to tender in our
offer all the shares that they do not contribute to our Parent. Generally,
each of these parties agreed to contribute approximately 80% of their
holdings in Convergent, except for Cinergy which agreed to contribute 50%
of its holdings in Convergent. As a result, these stockholders will become
stockholders of our Parent and will not receive any cash for the shares
they contribute to our Parent. They will, however, have the opportunity to
share in any future growth of Convergent, which will be a wholly owned
subsidiary of our Parent. The shares to be contributed represent
approximately 28.3% of the Convergent stock on a fully diluted basis.
- Simultaneously with our entering into the merger agreement, we also
entered into a voting agreement with the management investors and Cinergy
in which these parties agreed to vote all of their shares in favor of the
merger and the merger agreement and against any takeover proposal.
- Simultaneously with entering into the merger agreement, we also entered
into a tender and voting agreement with InSight Capital Partners III,
L.P., InSight Capital Partners III (Cayman), L.P., InSight Capital
Partners III (Co-Investors), L.P., GS Private Equity Partners II, L.P., GS
Private Equity Partners II Offshore, L.P., GS Private Equity
Partners III, L.P., GS Private Equity Partners III Offshore, L.P., NBK/GS
Private Equity Partners, L.P. and Cinergy Ventures, LLC, whom we refer to
as the major stockholders. The major stockholders agreed to tender all, or
in the case of Cinergy, half, of their shares in the tender offer and
agreed to vote all of their shares in favor of the merger and the merger
agreement and against any takeover proposal. Cinergy has agreed to
contribute the other half of its shares to our Parent pursuant to the
subscription and contribution agreement.
- Please see "The Tender Offer--Merger Agreement; Subscription and
Contribution Agreement; Tender and Voting Agreement; Voting Agreement;
Exclusivity Agreement; Nondisclosure Agreement; Employment Agreements."
DO YOU HAVE ENOUGH FINANCIAL RESOURCES TO MAKE PAYMENT?
- We will obtain all necessary funds to purchase the shares from our Parent,
which will obtain these funds from STC. STC will provide the necessary
funds to us as set forth in "The Tender Offer--Financing of Our Offer and
the Merger."
2
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN YOUR OFFER?
- We do not think our financial condition is relevant to your decision to
tender in our offer because our offer does not contain a financing
condition, we are offering only cash, and all of the funding that will be
needed will be provided from STC's existing financial resources, as well
as the lack of any relevant historical information concerning us.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN YOUR OFFER?
- You will have until at least 12:00 Midnight, New York City time, on
Monday, November 27, 2000, to tender your shares. If you cannot deliver
everything that is required in order to make a valid tender by that time,
you may be able to use the guaranteed delivery procedure that is described
in "The Tender Offer--Procedures for Accepting Our Offer and Tendering
Shares."
CAN YOUR OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
- We have the right, in our sole discretion, but subject to the terms of the
merger agreement and applicable law, to extend the period of time during
which our offer remains open. If on November 27, 2000 all conditions to
our offer are not then satisfied or waived, we have agreed that we will
extend our offer from time to time until March 31, 2001. Please see "The
Tender Offer--Terms of Our Offer; Expiration Date" and "The Tender
Offer--Merger Agreement; Subscription and Contribution Agreement; Tender
and Voting Agreement; Voting Agreement; Exclusivity Agreement;
Nondisclosure Agreement; Employment Agreements."
HOW WILL I BE NOTIFIED IF YOUR OFFER IS EXTENDED?
- If we decide to extend our offer, we will inform Citibank, N.A., our
Depositary, of that fact, and will issue a press release giving the new
expiration date no later than 9:00 a.m., New York City time, on the
business day after the day on which our offer was previously scheduled to
expire. Please see "The Tender Offer--Terms of Our Offer; Expiration
Date."
HOW DO I TENDER MY SHARES?
To tender your shares in our offer, you must:
- complete and sign the accompanying Letter of Transmittal (or a manually
signed facsimile of the Letter of Transmittal) in accordance with the
instructions in the Letter of Transmittal and mail or deliver it together
with your stock certificates and any other required documents, to our
Depositary or tender your shares by book-entry transfer as described in
"The Tender Offer--Procedures for Accepting Our Offer and Tendering
Shares;" or
- if your stock certificates are not immediately available or if you cannot
deliver your stock certificates and any other required documents to our
Depositary prior to the expiration of our offer, or you cannot complete
the procedure for delivery by book-entry transfer on a timely basis, you
may still tender your shares if you comply with the guaranteed delivery
procedures described in "The Tender Offer--Procedures for Accepting Our
Offer and Tendering Shares."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
- Except in the case of a subsequent offering period, you may withdraw any
previously tendered shares at any time prior to the expiration of our
offer. Please see "The Tender Offer--Withdrawal Rights."
3
HOW DO I WITHDRAW MY PREVIOUSLY TENDERED SHARES?
- In order to withdraw your tender of shares, you must deliver a written or
facsimile notice of withdrawal with the required information to our
Depositary while you still have the right to withdraw. If you tendered
shares by giving instructions to a broker or bank, you must instruct the
broker or bank to arrange for the withdrawal of your shares. Please see
"The Tender Offer--Withdrawal Rights."
WHAT DOES CONVERGENT'S BOARD OF DIRECTORS THINK OF OUR OFFER?
- Convergent's board of directors, based in part upon the unanimous
recommendation of a special committee of independent directors of the
board, (1) unanimously determined that each of the merger agreement, our
offer, the merger and the other transactions contemplated by the merger
agreement is fair to, advisable and in the best interests of Convergent's
stockholders, (2) unanimously approved the merger agreement, our offer,
the merger and the transactions contemplated by the merger agreement and
(3) unanimously recommends that Convergent's stockholders accept our offer
and tender their shares pursuant to our offer and adopt the merger
agreement.
- Please see "Special Factors--Reasons and Recommendations of the Special
Committee and the Board of Directors of Convergent; Fairness of the
Transaction."
WHAT WILL HAPPEN IF ALL THE SHARES ARE NOT TENDERED?
- If we are able to acquire beneficial ownership of at least a majority of
the outstanding shares on a fully diluted basis, then, in accordance with
Delaware General Corporation Law, we will merge with and into Convergent,
and Convergent will become a wholly owned subsidiary of our Parent. In
calculating the number of shares we beneficially own, we are required to
count shares owned by our Parent and STC and shares that are contributed
to our Parent, by Cinergy and by members of Convergent's senior management
team. Each share of Convergent that is outstanding at the time of the
merger (other than any shares held in the treasury of Convergent, or owned
by us, and any shares held by stockholders seeking appraisal rights for
their shares) will be canceled and converted automatically into the right
to receive the same consideration as stockholders who tendered their
shares in our offer received.
- If we are not able to acquire beneficial ownership of at least a majority
of the outstanding shares on a fully diluted basis, we will either
purchase those shares which have been tendered, extend our offer or
terminate our offer in the manner specified in the merger agreement.
- Because the management investors and Cinergy are contributing
approximately 28.3% of the outstanding Convergent common stock to our
Parent and the management investors have agreed to tender approximately
3.5% of the outstanding Convergent common stock, and because several
venture capital investors, including Cinergy, have agreed to tender
approximately 23.7% of the outstanding Convergent common stock, on a fully
diluted basis, we anticipate that we will acquire at least a majority of
Convergent's outstanding shares. See "The Tender Offer--Merger Agreement;
Subscription and Contribution Agreement; Tender and Voting Agreement;
Voting Agreement; Exclusivity Agreement; Nondisclosure Agreement;
Employment Agreements."
- If all of the conditions to our offer have been satisfied or waived, we
may commence a subsequent offering period of up to 20 business days for
the purpose of securing tenders of enough shares so that after we buy
shares in the subsequent offering period, we will own at least 90% of the
outstanding shares of Convergent common stock. We will pay the same price
per share in the subsequent offering period as we pay in our offer. Our
ownership of 90% or more of the shares of Convergent may allow us to
complete a "short form" merger. This type of
4
merger will not require Convergent to hold a stockholders' meeting to
approve the merger. See "Introduction," "Special Factors--Purposes,
Alternatives, Effects and Plans" and "The Tender Offer--Legal Matters and
Regulatory Approvals."
WILL CONVERGENT CONTINUE AS A PUBLIC COMPANY?
- If the merger occurs, Convergent will no longer be publicly owned. Even if
the merger does not occur, if we purchase all the tendered shares,
(1) there may be so few remaining stockholders and publicly held shares
that the Convergent common stock may no longer be eligible to trade on the
Nasdaq National Market, (2) there may not be a public trading market for
the Convergent common stock, and (3) Convergent may cease making filings
with the SEC or otherwise cease being required to comply with SEC rules
relating to publicly held companies. Please see "Special
Factors--Purposes, Alternatives, Effects and Plans" and "The Tender
Offer--Possible Effects of Our Offer on the Market for the Shares; Nasdaq
Listing; Margin Regulations and Exchange Act Registration."
IF I DECIDE NOT TO TENDER, HOW WILL YOUR OFFER AFFECT MY SHARES?
- If you decide not to tender your shares in our offer and the merger
occurs, you will receive in the merger the same amount of cash per share
as you would have received if you tendered your shares in our offer.
- If you decide not to tender your shares in our offer and the merger does
not occur, if we purchase all the tendered shares, (1) there may be so few
remaining stockholders and publicly held shares that the Convergent common
stock will no longer be eligible to trade on the Nasdaq National Market,
(2) there may not be a public trading market for the Convergent common
stock, or (3) Convergent may cease making filings with the SEC or
otherwise cease being required to comply with SEC rules relating to
publicly held companies. Please see "The Tender Offer--Possible Effects of
Our Offer on the Market for the Shares; Nasdaq Listing; Margin Regulations
and Exchange Act Registration."
WILL I HAVE APPRAISAL RIGHTS?
- We do not believe that appraisal rights are available in connection with
our offer; however, appraisal rights may be available in connection with
the merger. If the merger is consummated, stockholders who have not
tendered their shares may have the right under Delaware law to dissent
from the merger and demand appraisal of, and to receive payment in cash of
the fair value of, their shares. See "The Tender Offer--State Take-Over
Laws" and "The Tender Offer--Rights of Dissenting Stockholders."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
- On October 13, 2000, the last full trading day before we announced our
offer, the closing price per share on the Nasdaq National Market was $4.72
per share. On October 25, 2000, the last full day of trading before the
printing of this Offer to Purchase, the closing price per share on the
Nasdaq National Market was $7.84. See "The Tender Offer--Price Range of
Convergent's Common Stock."
WITH WHOM MAY I TALK IF I HAVE QUESTIONS ABOUT YOUR OFFER?
- You can call (toll free) X.X. Xxxx & Co., Inc., our Information Agent, at
(000) 000-0000, or Xxxxxxx Xxxxx Xxxxxx Inc., our Dealer Manager at
(000) 000-0000. See the back cover of this document.
5
TO THE HOLDERS OF SHARES OF CONVERGENT'S COMMON STOCK:
INTRODUCTION
We hereby offer to purchase all of the outstanding shares of common stock of
Convergent for $8.00 per share, net to the seller in cash, less any required
withholding taxes without interest, upon the terms and subject to the conditions
set forth in this document and in the related Letter of Transmittal. Please read
"The Tender Offer--Information Concerning Us, Our Parent and STC" for additional
information concerning us, our Parent and STC. You will not be obligated to pay
brokerage fees or commissions in connection with our offer. We will pay all
charges and expenses of Citibank, N.A., our Depositary, X.X. Xxxx & Co., Inc.,
our Information Agent, and Xxxxxxx Xxxxx Xxxxxx Inc., our Dealer Manager.
CONVERGENT'S BOARD OF DIRECTORS, BASED IN PART UPON THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF THE CONVERGENT
BOARD, (1) UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, OUR OFFER,
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT IS
FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF CONVERGENT'S STOCKHOLDERS,
(2) UNANIMOUSLY APPROVED THE MERGER AGREEMENT, OUR OFFER, THE MERGER AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND (3) UNANIMOUSLY
RECOMMENDS THAT CONVERGENT'S STOCKHOLDERS ACCEPT OUR OFFER AND TENDER THEIR
SHARES PURSUANT TO OUR OFFER AND ADOPT THE MERGER AGREEMENT.
Xxxxxx Xxxxxxx & Co. Incorporated, financial advisor to the special
committee of the board of directors of Convergent which was formed to negotiate
the transactions with us, our Parent and STC, has delivered to the special
committee a written opinion, dated October 13, 2000, to the effect that, as of
that date and based on and subject to the matters described in the opinion, the
$8.00 per share cash consideration to be received in our offer and the merger,
by the holders of Convergent shares was fair, from a financial point of view, to
the holders of Convergent common stock. A copy of Xxxxxx Xxxxxxx'x written
opinion, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken, is attached as Annex A to
this Offer to Purchase. YOU ARE URGED TO READ THE OPINION CAREFULLY AND IN ITS
ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN BY XXXXXX XXXXXXX.
OUR OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE SHALL HAVE BEEN
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF OUR
OFFER, NOT LESS THAN THAT NUMBER OF SHARES OF CONVERGENT COMMON STOCK WHICH,
WHEN ADDED WITH THE SHARES OF CONVERGENT COMMON STOCK BENEFICIALLY OWNED BY STC,
OUR PARENT AND US AND WHEN ADDED TO THE SHARES OF CONVERGENT COMMON STOCK TO BE
CONTRIBUTED TO OUR PARENT PURSUANT TO THE SUBSCRIPTION AND CONTRIBUTION
AGREEMENT, CONSTITUTES AT LEAST A MAJORITY OF THE SHARES OF CONVERGENT COMMON
STOCK OUTSTANDING ON A FULLY DILUTED BASIS (AFTER GIVING EFFECT TO THE
CONVERSION OR EXERCISE OF ALL OUTSTANDING OPTIONS, WARRANTS AND OTHER RIGHTS AND
SECURITIES EXERCISABLE OR CONVERTIBLE INTO SHARES OF CONVERGENT COMMON STOCK,
WHETHER OR NOT EXERCISED OR CONVERTED AT THE TIME OF DETERMINATION), EXCLUDING
ANY SHARES OF CONVERGENT COMMON STOCK HELD BY CONVERGENT OR ANY OF ITS
SUBSIDIARIES, AND (2) ALL MATERIAL GOVERNMENTAL OR REGULATORY NOTICES, APPROVALS
OR OTHER REQUIREMENTS NECESSARY TO CONSUMMATE THE MERGER SHALL HAVE BEEN GIVEN,
OBTAINED OR COMPLIED WITH, INCLUDING THE EXPIRATION OR TERMINATION OF THE
APPLICABLE WAITING PERIOD UNDER U.S. ANTITRUST LAWS. WE REFER TO CONDITION (1)
ABOVE AS THE MINIMUM CONDITION. OUR OFFER IS ALSO SUBJECT TO OTHER CONDITIONS
CONTAINED IN THIS DOCUMENT. WE REFER YOU TO "THE TENDER OFFER--CONDITIONS OF OUR
OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO OUR OFFER.
We are making this offer pursuant to an Agreement and Plan of Merger, dated
as of October 13, 2000, by and among us, our Parent, STC and Convergent. The
merger agreement provides, among other things, that as promptly as practicable
after the purchase of shares pursuant to our offer and the satisfaction or, if
permissible, waiver of the other conditions set forth in the merger agreement
and in accordance with the relevant provisions of the Delaware General
Corporation Law, we will be merged
6
with and into Convergent. At the effective time of the merger, each share issued
and outstanding immediately prior to the effective time of the merger (other
than shares held in the treasury of Convergent and other than shares held by
stockholders who will have demanded and perfected appraisal rights under
applicable law) will be canceled and converted automatically into the right to
receive $8.00 in cash (or any higher price that may be paid per share in our
offer) without interest. The merger agreement is more fully described in "The
Tender Offer--Merger Agreement; Subscription and Contribution Agreement; Tender
and Voting Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements." The material federal income tax consequences
of the sale of shares pursuant to our offer and the merger are described in "The
Tender Offer--Material Federal Income Tax Consequences."
Prior to the execution of the merger agreement, Cinergy, six of Convergent's
most senior executive officers (including its chief executive officer and its
chief financial officer) and 27 other executives of Convergent have agreed to
contribute a portion of their shares to us prior to the merger and to tender the
remaining portion pursuant to a subscription and contribution agreement. There
are potential conflicts of interest that the Convergent board of directors had
to consider with respect to the transaction, which are described in more detail
in "Special Factors--Reasons and Recommendations of the Special Committee and
the Board of Directors of Convergent; Fairness of the Transaction."
Simultaneously with the execution of the merger agreement, we, our Parent
and STC entered into a voting agreement with the management investors and
Cinergy which obligates each of them to, among other things:
- vote (1) in favor of the merger and the merger agreement, (2) against any
Acquisition Proposal (as that term is defined in the merger agreement),
against any proposal for action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or
agreement of Convergent under the merger agreement, against any change in
the directors of Convergent, against any change in the present
capitalization of Convergent, against any amendment to Convergent's
certificate of incorporation or bylaws which in each case could reasonably
be expected to impede, interfere with, delay, postpone or materially
adversely affect the transactions contemplated by the merger agreement or
the likelihood of the transactions being consummated and (3) in favor of
any other matter necessary for consummation of the transactions
contemplated by the merger agreement;
- execute any documents which are necessary or appropriate in order to
effectuate the foregoing, including the ability for us or our nominees to
vote shares owned by the management investors;
- waive any rights of appraisal or rights to dissent from the merger; and
- (1) revoke all prior proxies or powers of attorney governing the shares
owned by them and (2) grant an irrevocable proxy to us and our Parent, or
any of its nominees to vote and act (by written consent or otherwise) with
respect to all of the shares owned by them at any meeting of Convergent's
stockholders or by written consent in lieu of any meetings with regard to
any matter covered in the paragraph above. See "The Tender Offer--Merger
Agreement; Subscription and Contribution Agreement; Tender and Voting
Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements."
Simultaneously with the execution of the merger agreement, we, our Parent
and STC entered into a tender and voting agreement with the major stockholders,
which obligates the major stockholders to, among other things:
- tender all of their shares of Convergent common stock to us in our offer,
with the exception of Cinergy who will tender 50% of its shares in our
offer and contribute 50% of its shares to our Parent pursuant to the
subscription and contribution agreement;
7
- vote (1) in favor of the merger and the merger agreement, (2) against any
Acquisition Proposal (as that term is defined in the merger agreement),
against any proposal for action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or
agreement of Convergent under the merger agreement, against any change in
the directors of Convergent, against any change in the present
capitalization of Convergent, against any amendment to Convergent's
certificate of incorporation or bylaws which in each case could reasonably
be expected to impede, interfere with, delay, postpone or materially
adversely affect the transactions contemplated by the merger agreement or
the likelihood of the transactions being consummated and (3) in favor of
any other matter necessary for consummation of the transactions
contemplated by the merger agreement;
- execute any documents which are necessary or appropriate in order to
effectuate the foregoing, including the ability for us or our nominees to
vote shares owned by the major stockholders;
- waive any rights of appraisal or rights to dissent from the merger; and
- (1) revoke all prior proxies or powers of attorney governing the shares
owned by them and (2) grant an irrevocable proxy to us and our Parent, or
any of our nominees to vote and act (by written consent or otherwise) with
respect to all of the shares owned by them at any meeting of Convergent's
stockholders or by written consent in lieu of any meetings with regard to
any matter covered in the paragraph above.
Pursuant to the tender and voting agreement, the major stockholders will
receive $8.00 per share of Convergent common stock tendered in our offer, the
same consideration to be received by the public stockholders.
See "The Tender Offer--Merger Agreement; Subscription and Contribution
Agreement; Tender and Voting Agreement; Voting Agreement; Exclusivity Agreement;
Nondisclosure Agreement; Employment Agreements."
The merger agreement provides that promptly after the later to occur of
(1) the purchase of and payment for any shares as a result of which Parent and
its subsidiaries own at least a majority of then outstanding shares (together
with the shares beneficially owned by us and STC, including, the shares to be
contributed to our Parent pursuant to the subscription and contribution
agreement) and (2) compliance with Section 14f-1 of the Exchange Act, and the
SEC's Rule 14f-1, our Parent will be entitled to designate the number of
directors on Convergent's board of directors as will give our Parent
representation proportionate to the percentage of the total outstanding number
of shares that our Parent or any of its subsidiaries beneficially owns.
Convergent will, upon request of our Parent, use its best efforts promptly
either to increase the size of its board of directors or to secure the
resignations of some of its incumbent directors, or both as is necessary to
enable our Parent's designees to be so elected or appointed to Convergent's
board of directors, and Convergent will take all actions available to Convergent
to cause our Parent's designees to be elected or appointed at that time.
We will complete the merger if conditions specified in the merger agreement
are satisfied, including the consummation of our offer, and, if required under
Delaware law, the adoption of the merger agreement at a meeting of Convergent's
stockholders. For a more detailed description of the conditions to the merger,
please see "The Tender Offer--Merger Agreement; Subscription and Contribution
Agreement; Tender and Voting Agreement; Voting Agreement; Exclusivity Agreement;
Nondisclosure Agreement; Employment Agreements" and "The Tender
Offer--Conditions of Our Offer." The affirmative vote of the holders of at least
a majority of the outstanding shares of Convergent common stock is required to
adopt the merger agreement. Consequently, if we acquire (pursuant to our offer
or otherwise) at least a majority of the outstanding shares, then we will be
able to adopt the merger agreement without the affirmative vote of any other
stockholder. See "The Tender Offer--Merger Agreement; Subscription and
Contribution Agreement; Tender and Voting Agreement;
8
Voting Agreement; Exclusivity Agreement; Nondisclosure Agreement; Employment
Agreements" and "The Tender Offer--Conditions of Our Offer."
Under Delaware law, if we, together with our Parent, acquire, pursuant to
our offer, the subscription and contribution agreement or otherwise, at least
90% of the then outstanding shares of Convergent capital stock, we will be able
effect the merger without holding a meeting of Convergent's stockholders to vote
on the merger and without requesting the affirmative vote of Convergent's other
stockholders. If that happens, we, our Parent and Convergent have agreed to take
all necessary and appropriate action to cause the merger to become effective in
accordance with Delaware law as soon as practicable after we acquire 90% of the
then outstanding shares without a meeting of Convergent's stockholders. If,
however, we do not acquire at least 90% of the then outstanding shares and a
meeting of Convergent's stockholders to approve the merger is required under
Delaware law, a significantly longer period of time will be required in order to
effect the merger. See "The Tender Offer--Legal Matters and Regulatory
Approvals."
Xxxxxxxxxx has advised us that as of October 13, 2000, 43,414,402 shares
were issued and outstanding, 4,484,786 shares were subject to outstanding and
exercisable stock options, and 5,000 shares were held in the treasury of
Convergent. As a result, as of October 13, 2000:
- our Minimum Condition would be satisfied if we had acquired 23,949,595
shares;
- we would have been able to approve the merger without the calling a
meeting of Convergent's stockholders or getting the consent or vote of any
other Convergent stockholder, if we had acquired 43,109,270 shares.
- Because the management investors and Cinergy are contributing
approximately 28.3% of the outstanding Convergent common stock to our
Parent, and the management investors have agreed to tender approximately
3.5% of the outstanding Convergent common stock, and because several
venture capital investors, including Cinergy, have agreed to tender
approximately 23.7% of the outstanding Convergent common stock, on a fully
diluted basis, we anticipate that the Minimum Condition will be satisfied.
See "The Tender Offer--Merger Agreement; Subscription and Contribution
Agreement; Tender and Voting Agreement; Voting Agreement; Exclusivity
Agreement; Nondisclosure Agreement; Employment Agreements."
We do not believe that appraisal rights are available in connection with our
offer; however, appraisal rights may be available in connection with the merger.
If the merger is consummated, stockholders who have not tendered their shares
may have the right under Delaware law to dissent from the merger and demand
appraisal of, and to receive payment in cash of the fair value of, their shares.
See "The Tender Offer--State Take-Over Laws" and "The Tender Offer--Rights of
Dissenting Stockholders."
SPECIAL FACTORS
1. BACKGROUND OF OUR OFFER; CONTACTS WITH CONVERGENT, NEGOTIATIONS AND
AGREEMENTS.
The following information (other than information concerning us, our Parent
or STC (or its affiliates) has been provided to us by Convergent:
During 1999 and the first three quarters of 2000, Convergent's management
pursued several growth strategies in the market for eBusiness solutions for
utility and local government clients, including an initial public offering of
its common stock and possible strategic relationships with a number of
companies, including STC. Convergent's management believed that a strategic
relationship with STC could complement Convergent's growth strategy by offering
synergies with STC's businesses and expertise in providing solutions and
technologies, particularly to the utility industry. In addition, Convergent's
Digital Utility solution could provide STC with direct, real-time access to
services and
9
information and reduce utility transaction and operational costs by enabling
end-to-end automation of customers' business processes. Digital Utility offers
eBusiness solutions for front-office applications, including call center and
customer relationship management; back-office applications such as finance,
accounting and human resources; and energy delivery applications such as mobile
work force and outage management. Convergent also believed that a strategic
relationship with STC could allow it to expand the scope of its Digital Utility
to include revenue management, load data management and fixed network
optimization, areas in which STC could provide significant expertise.
As a result, in the spring and early summer of 2000, representatives of
Convergent and STC held several meetings to discuss a possible business
relationship. During these meetings, representatives of Convergent informed STC
that Convergent was preparing for an initial public offering. The discussions
focused exclusively on the feasibility of establishing a cooperative business
relationship. During this period, consistent with its normal and customary
practice, Convergent was also holding similar discussions with other companies.
As a result of those discussions, Convergent and STC entered into a
nondisclosure agreement on July 6, 2000, whereby Convergent agreed to provide
information to STC to enable STC to evaluate a possible business relationship
with Convergent. On August 4, 2000, the nondisclosure agreement was amended to
make the exchange of information between Convergent and STC reciprocal in order
to prepare a joint business plan with the aim to identify and quantify the
opportunities resulting from a possible business relationship. During this
period, the discussions between the parties continued and Convergent and STC
explored numerous areas of possible cooperation and STC undertook a limited due
diligence investigation.
On August 4, 2000, Convergent completed its initial public offering at a
price of $7.00 per share of its common stock. From the time of its initial
public offering, the per share price of Convergent's common stock has declined.
Following the initial public offering, representatives of STC and Convergent
continued their ongoing discussion of synergies and areas of possible joint
cooperation between the two firms. Thereafter, in early-September 2000, for the
first time, representatives of STC approached representatives of InSight Capital
Partners, one of the venture capital investors in Convergent, to discuss the
possibility of STC's acquisition of all of the various venture capital
investors' shares of Convergent's common stock. Representatives of InSight
declined to discuss any possible transaction with STC unless STC offered all
holders of Convergent's common stock the possibility to participate on the same
terms. STC also concluded that the risks associated with individually negotiated
purchases from the venture capital firms outweighed the speed of acquiring
control of Convergent through a series of private placements.
Thereafter, representatives of STC had meetings and telephone calls with
representatives of Convergent to discuss the timing and structure of a proposal,
and expanded the scope of their due diligence. On September 13, 2000, STC
delivered to Convergent a non-binding expression of interest and a term sheet in
connection with a proposed acquisition of Convergent through a tender offer for
all of the shares of Convergent common stock held by the public and a subsequent
merger. STC's proposal was conditioned on management's contribution of all, or a
substantial part, of management's shares of Convergent in exchange for shares of
a newly formed holding company for Convergent and the execution of new
employment agreements with a significant number of members of management. The
proposal also contemplated the contribution by Cinergy of all of its shares of
Convergent to the newly formed holding company in exchange for shares of the
newly formed holding company. Convergent's management would continue to be
employed by the surviving corporation. STC requested a 21-day exclusivity period
to complete its due diligence and to prepare definitive documentation.
On September 14, 2000, Xxxxxxxxxx informed STC that a 21 day exclusivity
period was too long and indicated that it would be willing to enter into an
exclusivity period until September 20, 2000. After
10
negotiations, the parties entered into an exclusivity agreement on
September 20, 2000, whereby Convergent granted STC an exclusivity period until
September 29, 2000.
The board of directors of Convergent held a special meeting on September 18,
2000 to consider the STC proposal. The board determined that it would be willing
to consider a proposal if STC indicated a serious interest in acquiring
Convergent at a price that provided Convergent's stockholders with a substantial
premium over the then-current market price of Convergent's common stock.
Subsequent discussions with STC resulted in a preliminary proposal by STC
suggesting a cash price of $10.00 per share of Convergent common stock.
Convergent's board of directors noted that the $10.00 price represented a
substantial premium over Convergent's market price at the time. As of the close
of the Nasdaq National Market on the previous trading day, the price per share
of Convergent common stock was $4.50.
At the September 18 board meeting Xxxxxxxxxx's board of directors considered
the qualifications of each of its members to serve on a special committee of the
board of directors that would be formed to review, evaluate and negotiate the
terms and conditions of the STC proposal and to report final recommendations
regarding the proposed merger to the board. Because two of Convergent's
executive officers, Xxxxx X. Xxxxxxxxxx, Xx. and Xxxxx X. Xxxxxx, also serve on
Convergent's board of directors, and based on STC's proposal, were expected to
remain employed by Convergent following the closing of the offer and the merger
and to contribute a substantial portion of their Convergent common stock to the
newly formed holding company, the board determined that a special committee
comprised solely of the board's three remaining directors be formed to review,
evaluate and negotiate the merger agreement and the terms of our offer.
Convergent's board established a special committee consisting of Xxxxx Xxxxxxx,
Xxxx X. Xxxxx, III and Xxxxxx Xxxxxx, constituting all of the non-employee
directors of Convergent.
At that time, Xxxxxxxxxx's board of directors also authorized the engagement
of Xxxxxx Xxxxxxx to serve as the special committee's financial advisor for the
purpose of (1) assisting in the negotiations with STC, (2) advising the special
committee with respect to the fairness of the transaction from a financial point
of view and (3) delivering a fairness opinion to the special committee in
connection with the proposed transaction.
During various periods throughout September 2000, representatives of STC
conducted further due diligence of Convergent at Convergent's offices in
Greenwood Village, Colorado.
On September 21, 2000, STC's outside counsel, Xxxxxxx Xxxxxxx & Xxxxxxxx
LLP, delivered a draft merger agreement and other ancillary agreements. Although
the draft merger agreement did not contain pricing terms, the special committee
evaluated the agreement based on the special committee's expectation that STC
would make an offer at a price reflecting a premium to the then-current market
price. The draft merger agreement provided extensive representations and
warranties to be made by Convergent; numerous conditions to STC's offer; an
agreement by Convergent restricting it from pursuing a superior proposal; a 4%
termination fee; and the granting to STC of an option to purchase 19.9% of the
shares of Convergent common stock. The draft tender and voting agreement also
granted STC an option to acquire the shares of the significant venture capital
investors in Convergent.
On September 21, 2000, Xxxxxxx also delivered drafts of the subscription and
contribution agreement and voting agreement to Xxxxxxx & Xxxx LLP, counsel to
certain of the management investors. The documents reflected that Cinergy had
agreed to contribute only 50% of its Convergent common stock to Parent. Over the
next two weeks, the terms of these agreements were negotiated by STC, management
and their respective counsel. In addition, during this period representatives of
STC and Xx. Xxxxxxxxxx negotiated with representatives of Cinergy regarding the
terms of Cinergy's participation in the transaction.
11
During the period from September 24 through September 28, 2000, the special
committee adopted organizational resolutions and elected Xx. Xxxxxx as its
chairman. The committee also reviewed the progress of the negotiations with its
legal and financial advisors, X'Xxxxxxxx Xxxxx & Karabell LLP and Xxxxxx
Xxxxxxx, respectively, and X'Xxxxxxxx Xxxxx & Xxxxxxxx reviewed in detail with
the special committee the terms of the merger agreement. At the direction of the
special committee, X'Xxxxxxxx Xxxxx & Xxxxxxxx and Xxxxxx Xxxxxxx were directed
to proceed with the negotiation of the merger agreement and the other ancillary
documents in accordance with the instructions of the special committee.
On September 25, 2000 X'Xxxxxxxx Xxxxx & Xxxxxxxx delivered detailed
comments to the draft merger agreement and advised STC that the special
committee had rejected various terms of the initial merger proposal including,
among other things, the granting to us of an option to purchase 19.9% of the
outstanding shares of Convergent's common stock, the amount of the termination
fee and the expense reimbursement provisions. On September 26, X'Xxxxxxxx
Xxxxx & Xxxxxxxx negotiated a number of the terms of the merger agreement with
Xxxxxxx, making progress on the scope of Convergent's representations and
warranties and conditions to STC's offer and the timing and trigger of the
termination fee. At that time, STC dropped its requirements for an option to
purchase 19.9% of the outstanding shares of Convergent's common stock. The
parties, however, did not make progress on the amount of the termination fee.
On September 28, 2000, X'Xxxxxxxx Xxxxx & Xxxxxxxx and Xxxxxxx continued to
negotiate the terms of the merger agreement. During this meeting, STC agreed to
a reduced termination fee of $10 million, and an expense reimbursement provision
capped at a $2.5 million, which together represented approximately 3% of the
proposed transaction value.
On September 29, 2000, Holland & Xxxx, LLP, counsel to certain of the
management investors provided its initial draft of employment agreements to
Xxxxxxx.
In the evening of September 29, 2000, the exclusivity agreement was extended
until October 6, 2000.
From September 29 through October 6, 2000, Holland & Xxxx negotiated the
terms of employment agreements for Xx. Xxxxxxxxxx, the executive vice presidents
and the vice presidents of Convergent.
Thereafter, during the first week of October negotiations between
representatives of STC and the special committee centered on, among other
issues, (1) the participation of venture funds managed by affiliates of Xxxxxxx,
Xxxxx & Co. in the transaction, (2) the circumstances surrounding the payment of
the termination fee, (3) Cinergy's participation in the transaction and
Convergent's future business relationship with Cinergy and (4) the possibility
of a reduction to the purchase price as a result of due diligence findings by
STC.
During the course of those several weeks, X'Xxxxxxxx Xxxxx & Xxxxxxxx,
Xxxxxxx & Xxxx and Xxxxxx Xxxxxxx provided updates and advice at several
meetings of management and the special committee, at the conclusion of which,
Xxxxxxx & Xxxx and X'Xxxxxxxx Xxxxx & Xxxxxxxx were directed to proceed with the
negotiations in accordance with the instructions of management and the special
committee, respectively. In addition, during this period X'Xxxxxxxx Xxxxx &
Xxxxxxxx had numerous conversations with the chairman of the special committee
regarding various issues.
On October 5, 2000, X'Xxxxxxxx Xxxxx & Xxxxxxxx informed the special
committee that STC had indicated that, based on due diligence findings that,
among other things, Convergent was exceeding its estimated burden rate for 2000
and that unbilled revenue had increased since 1999, STC would be prepared to
move forward with the proposal only if the purchase price per share were reduced
to $9.90 per share. At the direction of the special committee, representatives
of Xxxxxx Xxxxxxx advised representatives of STC that the special committee was
not prepared to accept STC's initial price
12
reduction proposal. The parties to the negotiation ultimately settled on a
reduced price of $9.93 per share and Convergent agreed to present this reduced
price to its board of directors. Xxxxxx Xxxxxxx evaluated the transaction in
light of the proposed reduction to the consideration to be paid to Convergent's
stockholders and discussed with the special committee the terms of the proposed
transaction. At that stage, the special committee and management directed their
respective advisors to proceed with the negotiations and work towards finalizing
the documents. At this point in the negotiations, the extent of management's and
Cinergy's participation in the proposed transactions and numerous issues
concerning the employment agreements remained open.
Late on October 5, 2000, Cinergy's management informed STC's management of
their unwillingness to contribute any of their Convergent shares to the newly
formed holding company but that they would tender all of their shares in the
tender offer.
On October 9, 2000, STC indicated to Convergent's board of directors that it
would move forward with the proposed transaction only if the following revised
terms were satisfied: (1) the price per share was further reduced, (2) Cinergy
agreed to maintain 50% of its current investment in Convergent and (3) the
documents evidencing the new terms of the transaction were executed on or prior
to October 13, 2000. Based upon these new facts, Xx. Xxxxxxxxxx was authorized
to inform STC that unless STC provided a more definitive revised proposal,
including the price at which STC would be prepared to go forward with the
transaction, Xxxxxxxxxx's negotiations would cease with STC.
The revised terms resulted primarily from STC's growing concern over the
weakness of the e-consulting market and the market generally, as well as its
uncertainty regarding the future of the customer relationship between Cinergy
and Convergent.
Subsequently, during a special meeting of Xxxxxxxxxx's board of directors on
October 10, 2000, the board was informed that STC had presented a revised
proposal which included a new price per share of $8.00. The revised proposal
also included STC's previously stated conditions regarding Cinergy's continued
investment and the timely execution of all transaction documents. Convergent's
board of directors unanimously agreed that before taking any action with respect
to the new proposal, the venture capital investors in Convergent should evaluate
the revised proposal and if desired, pursue negotiations directly with STC.
Following that meeting, from October 10, 2000 until the morning of October 13,
2000, representatives of InSight had discussions with STC regarding the price,
the involvement of each of the venture capital investors in Convergent in the
proposed transactions, the timing of the execution of the documents and the
consummation of the related transactions and the other matters discussed during
the course of the October 10, 2000 meeting of Convergent's board of directors.
The special committee directed X'Xxxxxxxx Xxxxx & Xxxxxxxx to inform Xxxxxxx
that Convergent would not proceed with the revised STC proposal unless STC
agreed to (1) the elimination of any restrictions on the right of the major
stockholders to solicit superior proposals; (2) a reduction to (A) the
transaction's termination fee and (B) the expense reimbursement obligations of
Convergent and (3) the elimination of STC's option to purchase the shares held
by the major stockholders.
During that same time period, X'Xxxxxxxx Xxxxx & Xxxxxxxx negotiated with
Xxxxxxx other aspects of the proposed transaction. As a result, at a special
meeting of Convergent's board of directors in the morning of October 13, 2000,
the board and X'Xxxxxxxx Xxxxx & Xxxxxxxx were informed that STC was prepared to
proceed with a revised proposal on the following terms: (1) a purchase price of
$8.00 per share; (2) the elimination of any restrictions on the right of the
major stockholders to solicit superior proposals; (3) a reduction to (A) the
transaction's break-up fee from $10 million to $8.0 million and (B) the expense
reimbursement obligations of Convergent from $2.5 million to $2.0 million;
(4) STC would not have an option to purchase the shares held by any of the major
stockholders; (5) Cinergy would tender half of its shares of Convergent in the
offer and contribute the other half to Parent, in accordance with the terms of a
subscription and contribution agreement; and (6) changes would be
13
required in the employment agreements for Convergent's executive officers. The
board was further advised that Cinergy was prepared to commit to the revised
proposal.
Based upon the revised proposal, during the morning meeting on October 13,
2000, Xxxxxx Xxxxxxx reviewed in detail with the board its updated fairness
opinion and advised the board that it was prepared to deliver its fairness
opinion that, as of October 13, 2000, and subject to and based upon the various
considerations set forth in its opinion, the cash consideration to be received
by holders of Convergent common stock was fair, from a financial point of view,
to the holders of Convergent common stock. In the course of the meeting, InSight
informed the Board that (1) it was willing to commit to the proposal at the
price of $8.00 per share, (2) the venture funds managed by Xxxxxxx Xxxxx had
indicated to InSight that they would similarly be willing to commit to the
proposal, and (3) certain other significant venture capital investors were not
willing to commit to the proposal.
The special committee met separately later on the same day, after the market
had closed and was updated on the status of the final negotiations and the
resolution of open issues. At that time, Xxxxxx Xxxxxxx again reviewed its
updated fairness analysis and reaffirmed its opinion to the special committee
and orally delivered its opinion that the cash consideration to be received in
our offer and the merger were fair to Convergent's stockholders from a financial
point of view. Thereafter, following further discussion, the special committee
determined that the proposed merger agreement, tender offer and merger were fair
to, advisable and in the best interests of, Convergent and its stockholders. The
special committee recommended that Convergent's board of directors approve the
transactions contemplated by the merger agreement and the voting agreement, and
recommend to the stockholders that they accept the tender offer, tender their
shares to us and adopt the merger agreement. At such time, the special committee
also directed the advisors to finalize the documents. Shortly thereafter, Xxxxxx
Xxxxxxx delivered its written fairness opinion to the special committee.
Convergent's board of directors reconvened immediately following the meeting
of the special committee. After considerable discussion, and after having
received the recommendation of the special committee, the board determined that
the proposed merger agreement, tender offer, merger and related transactions
were fair to, advisable and in the best interests of, Convergent and its
stockholders.
During the night of October 13, 2000,
- we, our Parent, STC and Convergent executed the merger agreement;
- we, the management investors and Cinergy executed the voting agreement;
and
- we, the major stockholders and Cinergy executed the tender and voting
agreement.
On October 27, 2000, we commenced our offer.
2. PURPOSES, ALTERNATIVES, EFFECTS AND PLANS.
PURPOSES OF OUR OFFER. The purpose of our offer and the merger is for our
Parent to acquire control of, and the entire equity interest in, Convergent. Our
offer, as the first step in the acquisition of Convergent, is intended to
facilitate the acquisition of all outstanding shares of Convergent. The purpose
of the merger is to acquire all of the outstanding common stock not purchased
pursuant to our offer or otherwise. If, after consummation of our offer, we own
at least 90% of the shares then outstanding, we will be able to cause the merger
to occur without holding a meeting of Convergent's stockholders to adopt the
merger agreement and without the affirmative vote of Convergent's other
stockholders. If, however, after consummation of our offer, we own less than 90%
of the then-outstanding shares but our Minimum Condition has been satisfied, we
will have sufficient voting power to cause the approval and adoption of the
merger without the affirmative vote of any other stockholder.
14
ALTERNATIVES. Convergent believes that the proposed transaction represents
the best available means to acquire adequate working capital. Management
considers the prospects for raising capital in a secondary public offering less
attractive because the decline in the price for Convergent's stock following its
initial public offering and the general decline in the systems integration and
Internet consulting industries would adversely affect Convergent's ability to
obtain the best possible price from the public. Additionally, although
management continues to explore joint ventures and other business relationships
with strategic partners, including Cinergy, such alternatives do not offer the
potential for access to the same amount of capital that a merger with our Parent
would provide.
EFFECTS OF OUR OFFER. As a result of our offer and the merger, the entire
equity interest in Convergent will be beneficially owned by STC, Cinergy and the
management investors through their ownership of our Parent. The stockholders of
Convergent will no longer have any interest in, and will not be stockholders of,
Convergent. The public stockholders of Convergent will have the right to receive
$8.00 in cash, without interest, for each share of Convergent common stock held
(other than shares of Convergent common stock for which appraisal rights have
been perfected).
To the extent that the management investors and Cinergy receive shares of
our Parent's common stock for their shares of Convergent common stock, they will
have the ability to benefit from any corporate opportunities that may be pursued
by Convergent in the future. However, to the extent that the management
investors receive shares of our Parent for their shares of Convergent common
stock, they will also bear the risk of any decreases in the value of Convergent.
See "The Tender Offer--Merger Agreement; Subscription and Contribution
Agreement; Tender and Voting Agreement; Voting Agreement; Exclusivity Agreement;
Nondisclosure Agreement; Employment Agreements."
In addition, after the merger, Convergent will no longer be subject to the
reporting requirements of the Exchange Act, which will allow Convergent to
eliminate the time devoted by its management and other employees to matters
which relate exclusively to Convergent being a publicly held company.
Convergent's officers, directors and the owners of more than 10% of the shares
of Convergent will no longer be subject to reporting and the short-swing profit
provisions of Section 16 of the Exchange Act.
An equity investment in our Parent following the merger will involve
substantial risk resulting from the limited liquidity of the investment and the
leverage resulting from Convergent's existing leverage and any other
indebtedness required to fund the capital expenditures and acquisitions
necessary to execute Convergent's business strategy. Nonetheless, if Convergent
successfully executes its business strategy, the value of an equity investment
in our Parent could be considerably greater than the original cost of the
investment.
Depending upon the number of shares purchased pursuant to our offer, the
Convergent common stock may no longer meet the standards for continued listing
on the Nasdaq National Market. According to Nasdaq's published guidelines, the
shares would not be eligible to be included for listing if, among other things,
the number of shares that are not held directly or indirectly by any officer or
director of Convergent and by any other person who is the beneficial owner of
more than 10% of the total shares outstanding is less than 750,000, or the
number of holders of shares falls below 400. If, as a result of the purchase of
shares pursuant to our offer, the merger, the merger agreement or otherwise, the
Convergent common stock no longer meet the requirements of the Nasdaq National
Market for continued listing, the listing of the shares will be discontinued. If
that happens, the market for the shares would be adversely affected. If the
shares were no longer eligible for listing on the Nasdaq National Market,
quotations might still be available from other sources. The extent of the public
market for the shares and the availability of quotations would, however, depend
upon the number of stockholders remaining at the time, the interest in
maintaining a market in the shares on the part of securities firms, the possible
termination of registration of the shares under the Exchange Act as described
below and other factors. Assuming we acquire the requisite number of shares to
effect a
15
delisting of the shares, we intend to cause the delisting of the shares from
Nasdaq following consummation of our offer.
PLANS FOR CONVERGENT. Upon completion of our offer, we intend to effect the
merger in accordance with the terms and conditions of the merger agreement.
The merger agreement provides that, effective upon the consummation of our
offer, Convergent will take such action required to cause persons nominated by
us to constitute the number of directors of Convergent equal to our pro rata
ownership of Convergent.
Except as otherwise described in this document and except for the
transactions contemplated by the merger agreement, we have no current plans or
proposals which relate to or would result in: (1) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving
Convergent; (2) a sale or transfer of a material amount of assets of Convergent;
(3) any change in the management or any change in any material term of the
employment contract of any executive officer; or (4) any other material change
in Convergent's corporate structure or business.
Nevertheless, we may initiate a review of Convergent and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be desirable
following the merger in order best to organize and coordinate the activities of
Convergent and our Parent and its stockholders. Furthermore, in connection with
our ongoing review of Convergent's long term strategy, we may, in the future,
consider the disposition or acquisition of material assets, alliances, joint
ventures, other forms of cooperation with third parties or other extraordinary
transactions affecting Convergent or its operations.
3. REASONS AND RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD OF
DIRECTORS OF CONVERGENT; FAIRNESS OF THE TRANSACTION.
The following information (other than information concerning us, our Parent
and STC has been provided to us by Convergent):
REASONS OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF
CONVERGENT. The board of directors formed a special committee to review,
negotiate and evaluate the proposed transactions because it appeared that the
management directors would have a significant interest in the proposed
transaction to the extent that they held Convergent stock and their retention as
officers of Convergent would be part of the negotiations. The special committee
(comprised of the three non-employee directors) met and had discussions on
several occasions between September 24, 2000 and October 13, 2000 to consider
developments relating to the proposed transaction. The special committee was
advised during its deliberations by its financial advisor, Xxxxxx Xxxxxxx, and
was advised by its legal counsel, X'Xxxxxxxx Xxxxx & Xxxxxxxx. After
considerable discussion and deliberation, at a meeting held on October 13, 2000,
the special committee determined that the merger agreement, our offer, the
merger and the other transactions contemplated by the merger agreement were fair
to, and in the best interests of, the stockholders of Convergent and recommended
that Convergent's board of directors approve the merger agreement.
Following the unanimous recommendation of the special committee, the board
unanimously approved the merger agreement, our offer, the merger and the
transactions contemplated by the merger agreement, and recommended that
Convergent's stockholders tender their shares pursuant to the offer and adopt
the merger agreement. In connection with each of their unanimous
recommendations, the special committee and the board each reviewed and adopted
the analyses, findings and opinion of the special committee's financial advisor,
Xxxxxx Xxxxxxx. Xxxxxx Xxxxxxx delivered its opinion that, as of October 13,
2000, and subject to and based on the various considerations set forth in its
opinion the cash consideration to be paid pursuant to the merger agreement was
fair from a financial point of view to the holders of Convergent common stock.
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The special committee is unaware of any developments since its meeting on
October 13, 2000, that would affect its determination that the merger agreement,
our offer, the merger and the transactions contemplated by the merger agreement
are fair to, advisable and in the best interests of, Convergent's stockholders.
Based on the foregoing, the board also determined that the merger agreement, our
offer, the merger and the transactions contemplated thereby are fair to, and in
the best interests of, Convergent's stockholders.
The material factors that the special committee evaluated in connection with
our offer and the merger are described below. Except as noted below, the special
committee considered each of the following factors to be positive factors
supporting its determination that the merger agreement, our offer, the merger
and the transactions contemplated thereby are fair to, and in the best interests
of, Convergent's stockholders.
- Xxxxxx Xxxxxxx'x oral opinion was delivered to the special committee on
October 13, 2000, that, subject to and based upon the various
considerations set forth in its opinion, the cash consideration of $8.00
per share of Convergent common stock to be received by the Convergent
stockholders in our offer and the merger pursuant to the merger agreement
was fair to such holders from a financial point of view. The full text of
Xxxxxx Xxxxxxx'x written opinion sets forth the assumptions made, the
matters considered and the limitations on the review undertaken in
connection with the opinion, and is attached to this document as Annex A
and is incorporated herein by reference. Convergent's stockholders are
urged to and should read the Xxxxxx Xxxxxxx opinion in its entirety, a
copy of which is attached to this document as Annex A. See "Special
Factors--Reports, Opinions, Appraisals and Negotiations."
- The special committee considered the possibility that we would withdraw
our bid if our proposal was used to attempt to generate higher bids from
third parties and, based on advice from Xxxxxx Xxxxxxx, the special
committee determined that, despite the fact that no auction had been
concluded, the $8.00 price per share to be paid by us in our offer and the
merger likely exceeds the consideration that holders of Convergent's
common stock could reasonably expect to receive in a transaction with
another party.
- In addition, through the negotiation of the merger agreement the special
committee was able to reduce significantly the amount of the break-up fee
and the expenses associated with certain terminations of the merger
agreement, as well as eliminate the restrictions on solicitation of
competing bids, which the special committee believes would facilitate the
creation of competing bids. The special committee noted that members of
Convergent's management believed that Convergent's August 2000 initial
public offering had not been as successful as originally hoped, and that
the recent decline of stock values in the technology, consulting and
systems integration industries, and the decline in Convergent's stock
price in particular, made access to the public markets as a source of
capital less attractive to Convergent and that Convergent would likely
have better access to the capital necessary to fund its growth as a
private company if it were controlled by a party such as STC, with better
access to public and private capital.
- Specifically, the special committee believes that the termination fee and
expense reimbursement obligations would not have the effect of
unreasonably discouraging competing bids and, subject to the satisfaction
of specified conditions set forth in the merger agreement, the board is
permitted to withdraw or modify its recommendation to the stockholders
regarding the merger and enter into an agreement with respect to a more
favorable transaction with a third party, should such a "Superior
Proposal" become available prior to the consummation of the offer. In
addition, Convergent indicated in its press release announcing the merger
agreement's execution that Convergent may respond to unsolicited proposals
from alternative bidders. See "The Tender Offer--Merger Agreement;
Subscription and Contribution Agreement; Tender and Voting
17
Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements."
- Based in part on the declining price of Convergent's common stock, the
negative change on the systems integration and internet consulting
industries in general, and advice from Xxxxxx Xxxxxxx that, despite the
fact that no auction had been conducted and based upon Xxxxxx Xxxxxxx'x
experience, the group of potential bidders for Convergent was relatively
small, the special committee believed that it was unlikely that another
bidder would make a definitive proposal that would result in a transaction
which would provide greater value to Convergent's stockholders. This
belief has now been reinforced by the fact that no other party has come
forward to express interest in an acquisition of Convergent since the
execution of the merger agreement and the issuance of Convergent's press
release announcing the transaction.
- The merger agreement requires that there have been tendered and not
withdrawn that number of shares which, when taken together with the shares
beneficially owned by STC, our Parent and us (including the shares to be
contributed to our Parent pursuant to the subscription and contribution
agreement), constitute at least a majority of the shares of common stock
outstanding on a fully diluted basis. The special committee also
considered the support of affiliates of InSight Capital Partners of the
tender offer at the board meeting of October 13, 2000, as well as the fact
that the Xxxxxxx Xxxxx affiliated venture funds and Cinergy had agreed to
tender their shares in the offer pursuant to the tender and voting
agreement and, therefore, were supportive of the offer.
- On October 13, 2000, prior to the announcement of the merger agreement,
Convergent's common stock on the Nasdaq National Market closed at $4.72
per share and, therefore, the $8.00 per share price to be paid pursuant to
our offer represented approximately a 69% premium. Xxxxxx Xxxxxxx also
informed the board that the $8.00 per share to be received by the
stockholders in our offer and the merger represented premiums ranging from
approximately 14% to 69% when compared to Convergent's stock price over
specified pre-announcement trading periods.
- The merger agreement does not condition our obligations to consummate the
merger on our or our Parent's ability to obtain financing for the merger.
Each of STC, our Parent and us has represented in the merger agreement
that one of such entities will have available funds sufficient to purchase
all of the outstanding shares of Convergent on a fully diluted basis at
our offer price and to pay all fees and expenses of our Parent and us in
connection with the transactions contemplated by the merger agreement.
- If the merger is consummated, stockholders who have not tendered their
shares may have the right under Delaware law to dissent from the merger
and demand appraisal of, and to receive payment in cash equal to the fair
value of, their shares. Stockholders who perfect appraisal rights by
complying with the procedures set forth in Section 262 of the Delaware
General Corporation Law will be entitled to an appraisal by the Delaware
Court of Chancery of the fair value of the shares. The fair value of the
shares will be determined as exclusive of any element of value arising
from the accomplishment or expectation of the merger. In addition,
dissenting stockholders may be entitled to receive payment of a fair rate
of interest on the amount determined to be the fair value of their shares,
interest will be computed from the date Convergent is obligated to pay the
award to the dissenting stockholders through the date of payment.
Potentially negative factors considered by the special committee were as
follows:
- The special committee considered that our Parent has given members of
Convergent's management an opportunity to contribute their equity
investments in Convergent for an
18
investment in our Parent. As a result, the members of Convergent's
management will own shares of our Parent. The special committee considered
that the contribution of a substantial portion of current equity
investment in Convergent would indicate a level of confidence in
Convergent's prospects that might be inconsistent with the special
committee's assessment of the risks associated with Convergent's future.
- The special committee considered that, under the merger agreement, members
of Convergent's management would continue as officers of the surviving
corporation and that their existing options of Convergent would be
converted on a one-for-one basis for options of our Parent. In the board's
first meeting on October 13, 2000, it was reported that management would
enter into amended employment agreements with Convergent. Those employment
agreements contain new benefits to management, including stock repurchase
agreements, options to purchase shares in our Parent at a per share price
of $8.00, severance benefits, and, in Xx. Xxxxxxxxxx'x case, a $500,000
payment for termination of his prior employment agreement and the
discretion to allocate no less than 25% of any over-allotment options in
connection with any future underwritten public offering of shares of our
Parent's common stock.
In view of the variety of factors considered in connection with its
evaluation of the merger agreement, the special committee found it impracticable
to, and did not, quantify, rank or otherwise assign relative weights to the
factors considered or determine that any factor was of particular importance in
reaching its determination that the merger is fair to, advisable and in the best
interests of, the public stockholders of Convergent. Rather, the special
committee viewed its recommendations as being based upon its judgment, in light
of the totality of the information presented and considered, of the overall
effect of the merger and the transactions contemplated by the merger agreement
on the stockholders compared to any alternative transaction and the likely
effect of rejecting the merger proposal. In arriving at its determination that
our offer, the merger, the merger agreement and the transactions contemplated
thereby were fair to, advisable and in the best interests of, Convergent and all
of its stockholders, the special committee did not consider the net book value,
the liquidation value or the going concern value of Convergent, as the special
committee did not deem these factors relevant to its determination.
FAIRNESS OF THE TRANSACTION AND RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND
THE BOARD OF DIRECTORS OF CONVERGENT. The special committee believes that the
procedure that was followed in determining the purchase price to be paid to the
stockholders of Convergent was fair to, and in the best interests of, all
stockholders of Convergent. Convergent's five-person board (of which two
individuals are members of management), appointed as members of the special
committee the three non-employee directors and granted the special committee
exclusive authority on behalf of the board to review, evaluate and negotiate the
proposed transactions. The merger agreement negotiated by the special committee
and its financial and legal advisors contains provisions which enable
Convergent's board of directors to withdraw or modify its recommendation to
Convergent's stockholders regarding our offer and the merger and to enter into
an agreement with respect to a more favorable transaction with a third party.
The merger agreement also contains provisions (without which the special
committee believes we would not have entered into the merger agreement) imposing
upon Convergent termination fee and expense reimbursement obligations that, in
the view of the special committee, are reasonable and would not have the effect
of unreasonably discouraging competing bids.
Although the merger agreement requires Convergent to notify our Parent of
the existence of any proposal, discussion, negotiation or inquiry which could
reasonably be expected to lead to a superior proposal, Convergent is not
prohibited from entering into negotiations with other perspective buyers. In
addition, Convergent's stockholders may decide not to tender their shares in our
offer and dissent from the merger and be paid cash for the fair value of their
shares under Delaware law. The merger is structured to require the tender of
that number of shares which, when taken together with the shares, if any,
beneficially owned by our Parent, represent more than a majority of the
outstanding shares of
19
Convergent's common stock on a fully diluted basis. The special committee
believes, as of the date of this offer and for this and the reasons set forth
below, that the merger is procedurally fair to the Convergent's stockholders.
The special committee believes that the merger is procedurally and
substantively fair to all of Convergent's stockholders because (1) the special
committee (comprised of directors who are not members of management) was
authorized to review, evaluate and negotiate the proposed merger; (2) Xxxxxx
Xxxxxxx, a financial advisor unaffiliated to STC, Parent or Purchaser, was
retained to advise the special committee and render an opinion as to the
fairness to the holders of Convergent common stock of the cash consideration to
be received in our offer and the merger from a financial point of view; (3) the
merger agreement allows the board to withdraw its recommendation to the holders
of Convergent common stock and does not prohibit Convergent from entering into
an alternative transaction; (4) the merger requires the tender by holders of
Convergent common stock, which when taken together with the shares of
Convergent's common stock, if any beneficially owned by us, our Parent and STC,
represent more than a majority of the outstanding shares on a fully diluted
basis; and (5) all of the non-employee directors approved the merger.
The special committee unanimously determined that our offer, the merger, the
merger agreement and the transactions contemplated thereby were fair to,
advisable and in the best interests of, Convergent and all of its stockholders
and recommended that Convergent's board of directors approve the merger
agreement, our offer, the merger and the transactions contemplated by the merger
agreement and that Convergent's board of directors recommend to the stockholders
of Convergent to accept our offer, to tender their shares pursuant to our offer
and to adopt the merger agreement. The board approved the merger agreement, our
offer, the merger and the other transactions contemplated hereby late in the day
on October 13, 2000, after the market had closed, and has confirmed, as of the
date of this offer, that the merger is fair to, advisable and in the best
interests of, all of the stockholders of Convergent.
All of the directors of Convergent, other than the members of the special
committee, may be considered to have an interest in our offer and the merger.
Accordingly, the board based its determination that the terms of our offer are
fair to the stockholders upon the conclusions of the special committee described
above, the Xxxxxx Xxxxxxx opinion and the other factors described above in the
discussion of the reasons of the special committee.
4. THE POSITION OF CONVERGENT, US, OUR PARENT, STC AND THE SENIOR MANAGEMENT AS
TO THE FAIRNESS OF OUR OFFER AND THE MERGER TO THE PUBLIC STOCKHOLDERS.
Rule 13e-3 of the Exchange Act governs "going-private" transactions by
issuers and their affiliates. Accordingly, in compliance with Rule 13e-3, we,
our Parent, STC, Convergent and the management investors who are filing persons
hereto, whom we refer to as the senior management, may be required to consider
the fairness of our offer and the merger to the public stockholders.
We, our Parent, STC, Convergent and the senior management believe our offer
and the merger to be substantively and procedurally fair to the public
stockholders who are not affiliates of Convergent. We, our Parent, STC,
Convergent and the senior management have considered the following factors:
- The fact that the board of directors and the special committee of the
board concluded that our offer and the merger are fair to, advisable and
in the best interests of, Convergent.
- The historical and projected financial performance of Convergent and its
financial results.
- The per share amount represents approximately a 69% premium over the
closing price for the shares on October 13, 2000, the last full trading
day prior to announcement of the $8.00 offer.
20
- Our offer is an all cash offer for all of the outstanding shares and the
unaffiliated public stockholders can accept or reject our offer.
- The ability of unaffiliated public stockholders who do not tender their
shares and object to the merger to obtain "fair value" for their shares if
they exercise and perfect their appraisal rights under the Delaware
General Corporation Law.
- Our offer is not subject to a financing condition.
- Our offer provides the unaffiliated public stockholders who are
considering selling their shares with the opportunity to sell their shares
at the per share amount without incurring the transaction costs typically
associated with market sales.
- The terms of the merger agreement were determined through arm's-length
negotiations between the special committee and its legal and financial
advisors, on the one hand, and representatives of us, our Parent and STC,
on the other hand, and provide for our offer to allow unaffiliated public
stockholders to receive payment for their shares on an accelerated basis.
These terms were negotiated before we, our Parent or STC beneficially
owned any shares.
We, our Parent, STC, Convergent and the senior management have reviewed the
factors considered by the special committee and Convergent's board of directors
in support of its decision as described above, and had no basis to question
their consideration of or reliance on these factors. In view of the variety of
factors considered with their evaluation of our offer and the merger, we, our
Parent, STC, Convergent and the senior management found it impracticable to, and
did not, quantify, rank or otherwise assign relative weights to the factors
considered or determine that any factor was of particular importance in reaching
their determination that our offer and the merger are fair to, advisable and in
the best interests of the unaffiliated public stockholders of Convergent.
Rather, we, our Parent, STC, Convergent and the senior management viewed their
position as being based upon their judgement, in light of the totality of the
information presented and considered, of the overall effect of the merger and
the transactions contemplated by the merger agreement on the unaffiliated public
stockholders compared to any alternative transaction and the likely effect of
rejecting the merger proposal.
5. INTERESTS OF CERTAIN PERSONS IN OUR OFFER AND THE MERGER.
In considering the recommendations of the board of directors of Convergent
and the special committee with respect to the merger, you should be aware that
Convergent's officers, directors and the management investors have interests in
connection with our offer and the Merger which may present them with actual or
potential conflicts of interest as described below. The special committee was
aware of these interests and considered them among the other matters described
below and in "Special Factors--Reasons and Recommendations of the Special
Committee and the Board of Directors of Convergent; Fairness of the
Transaction."
The management investors together own approximately 29.7% of Convergent's
shares and Cinergy owns approximately 4.5% of Convergent's shares on a fully
diluted basis. The management investors and Cinergy entered into the
subscription and contribution agreement pursuant to which they agreed to
contribute to our Parent a number of their shares of Convergent common stock and
options for shares of our Parent's common stock and to tender all remaining
shares of Convergent common stock in our offer. The management investors and
Cinergy also entered into a voting agreement with us, our Parent and STC
pursuant to which they agreed to support our offer and the merger. See "The
Tender Offer--Merger Agreement; Subscription and Contribution Agreement; Tender
and Voting Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements." Upon execution of the merger agreement,
several of the management investors entered into new employment agreements with
Convergent which will replace their existing employment agreements with
Convergent
21
upon consummation of the merger. Our Parent and STC (with respect to portions of
Convergent's obligations) are also parties to the new employment agreements.
Xxxxx X. Xxxxxxxxxx, Xx. is Chairman, Chief Executive Officer and President
of Convergent and owns 3,275,093 shares of Convergent common stock, representing
approximately 7.5% of the issued and outstanding shares of Convergent's common
stock. Xx. Xxxxxxxxxx entered into the subscription and contribution agreement
pursuant to which he will contribute to our Parent 2,610,074 of such shares for
an equal amount of our Parent's common stock. Xx. Xxxxxxxxxx also agreed to
tender in our offer 655,019 shares of Convergent common stock owned by him.
Xx. Xxxxxxxxxx also entered into the voting agreement pursuant to which, as a
stockholder, he agreed to support our offer and the merger. Xx. Xxxxxxxxxx will
continue as a director and as a member of management in the surviving
corporation pursuant to a new employment agreement which will take effect upon
consummation of the merger and provide for severance payments, stock repurchase
rights and non-compete periods. See "The Tender Offer--Merger Agreement;
Subscription and Contribution Agreement; Tender and Voting Agreement; Voting
Agreement; Exclusivity Agreement; Nondisclosure Agreement; Employment
Agreements."
Xxxxx X. Xxxxxxxx is the Executive Vice President of Strategic Accounts and
Secretary of Convergent and beneficially owns 2,776,078 shares of Convergent
common stock, representing approximately 6.4% of the issued and outstanding
shares of Convergent's common stock. Xx. Xxxxxxxx entered into the subscription
and contribution agreement pursuant to which he will contribute to our Parent
all but 10,000 of such shares for an equal amount of our Parent's common stock.
Xx. Xxxxxxxx agreed to tender the remaining 10,000 shares in our offer.
Xx. Xxxxxxxx also entered into the voting agreement pursuant to which, as a
stockholder, he agreed to support our offer and the merger. Xx. Xxxxxxxx will
continue as a member of management in the surviving corporation pursuant to a
new employment agreement which will take effect upon consummation of the merger
and provide for severance payments, stock repurchase rights and non-compete
periods. See "The Tender Offer--Merger Agreement; Subscription and Contribution
Agreement; Tender and Voting Agreement; Voting Agreement; Exclusivity Agreement;
Nondisclosure Agreement; Employment Agreements."
Xxxxx X. Xxxxxx is the Executive Vice President of Finance and a director of
Convergent and owns 847,427 shares of Convergent common stock, representing
approximately 2.0% of the issued and outstanding shares of Convergent's common
stock. Xx. Xxxxxx entered into the subscription and contribution agreement
pursuant to which he will contribute to our Parent 787,427 of such shares for an
equal amount of our Parent's common stock. Xx. Xxxxxx agreed to tender 60,000
shares of Convergent common stock owned by him in our offer. Xx. Xxxxxx also
entered into the voting agreement pursuant to which, as a stockholder, he agreed
to support our offer and the merger. Xx. Xxxxxx will continue as a member of
management in the surviving corporation pursuant to a new employment agreement
which will take effect upon consummation of the merger and provide for severance
payments, stock repurchase rights and non-compete periods. See "The Tender
Offer--Merger Agreement; Subscription and Contribution Agreement; Tender and
Voting Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements."
Xxxxxx X. Xxxxxx is the Executive Vice President of Resource Management of
Convergent and owns, or has options to acquire, an aggregate of 250,000 shares
of Convergent common stock, representing less than 1% of the issued and
outstanding shares of Convergent's common stock. This does not include 125,874
options that will expire upon consummation of the tender offer and merger.
Xx. Xxxxxx entered into the subscription and contribution agreement pursuant to
which she will contribute to our Parent all of such options or shares for an
equal amount of our Parent's options and common stock. Xx. Xxxxxx also entered
into the voting agreement pursuant to which she agreed to support our offer and
the merger. Xx. Xxxxxx will continue as a member of management in the surviving
corporation pursuant to a new employment agreement which will take effect upon
consummation of the merger and provide for severance payments, stock repurchase
rights and
22
non-compete periods. See "The Tender Offer--Merger Agreement; Subscription and
Contribution Agreement; Tender and Voting Agreement; Voting Agreement;
Exclusivity Agreement; Nondisclosure Agreement; Employment Agreements."
Xxxxx X. Xxxxxxx is the Chief Financial Officer, Treasurer and Assistant
Secretary of Convergent and owns, or has options to acquire, an aggregate of
250,001 shares of Convergent common stock, representing less than 1% of the
issued and outstanding shares of Convergent's common stock. Xx. Xxxxxxx entered
into the subscription and contribution agreement pursuant to which he will
contribute to our Parent all of such options or shares for an equal amount of
our Parent's options and common stock. Xx. Xxxxxxx also entered into the voting
agreement pursuant to which he agreed to support our offer and the merger.
Xx. Xxxxxxx will continue as a member of management in the surviving corporation
pursuant to a new employment agreement which will take effect upon consummation
of the merger and provide for severance payments, stock repurchase rights and
non-compete periods. See "The Tender Offer--Merger Agreement; Subscription and
Contribution Agreement; Tender and Voting Agreement; Voting Agreement;
Exclusivity Agreement; Nondisclosure Agreement; Employment Agreements."
Xxxxx X. Xxxxxxxxxx is the Executive Vice President of Global Delivery of
Convergent and owns, or has options to acquire, an aggregate of 249,950 shares
of Convergent common stock, representing less than 1% of the issued and
outstanding shares of Convergent's common stock. This does not include 125,874
options that will expire upon consummation of the tender offer and merger.
Xx. Xxxxxxxxxx entered into the subscription and contribution agreement pursuant
to which he will contribute to our Parent 204,950 options or shares for an equal
amount of our Parent's options and common stock. Xx. Xxxxxxxxxx agreed to tender
45,000 shares of Convergent common stock owned by him in our offer.
Xx. Xxxxxxxxxx also entered into the voting agreement pursuant to which he
agreed to support our offer and the merger. Xx. Xxxxxxxxxx will continue as a
member of management in the surviving corporation pursuant to a new employment
agreement which will take effect upon consummation of the merger and provide for
severance payments, stock repurchase rights and non-compete periods. See "The
Tender Offer--Merger Agreement; Subscription and Contribution Agreement; Tender
and Voting Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements."
OPTIONS. Following the merger, our Parent intends to grant to some of the
management investors options to purchase approximately 2,525,000 shares of our
Parent's common stock. The shares issuable on exercise of the new options will
represent less than one percent of the shares of our Parent's common stock on a
fully diluted basis immediately after the merger. The exercise price of the new
options will be $8.00 per share.
The merger agreement requires Convergent, and after the merger, the
surviving corporation, to provide indemnification, to the fullest extent
permitted by applicable law, to the current and former officers, directors,
fiduciaries, and agents of Convergent and its subsidiaries against liabilities
(including reasonable attorneys' fees) arising out of actions or omissions
occurring at or arising prior to the Effective Time of the merger. The surviving
corporation is required to provide officers' and directors' liability insurance
covering Convergent's officers and directors who are currently covered by
Convergent's officers' and directors' insurance for a period of six years,
provided it is not required to expend annually more than 200% of the current
cost of such coverage. For a more detailed discussion of the indemnification and
insurance provisions of the merger agreement, see "The Tender Offer--Merger
Agreement; Subscription and Contribution Agreement; Tender and Voting Agreement;
Voting Agreement; Exclusivity Agreement; Nondisclosure Agreement; Employment
Agreements."
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TRANSACTIONS WITH XXXXX XXXXXXXXXX. On August 13, 1999, Convergent extended
a $2,000,000 loan to Xxxxx X. Xxxxxxxxxx, Xx., evidenced by a promissory note.
The interest rate on the loan is 5.9% per annum, and Xx. Xxxxxxxxxx is required
to make payments of principal and interest to Convergent in four equal
installments of $652,685.27 on or before each of July 1, 2003, January 1, 2004,
July 1, 2004 and August 13, 2004. Xx. Xxxxxxxxxx may prepay the outstanding
principal and accrued interest on the loan at any time without penalty.
Xx. Xxxxxxxxxx will repay this loan pursuant to the terms of his new employment
agreement upon the consummation of the merger.
The loan to Xx. Xxxxxxxxxx is non-recourse. To secure the loan,
Xx. Xxxxxxxxxx executed a stock pledge agreement whereby he pledged to
Convergent all shares of the common stock of Convergent then owned by him. In
addition, Xx. Xxxxxxxxxx'x obligations under the promissory note were initially
guaranteed on a non-recourse basis by GMJM Stock Partnership, Ltd. ("GMJM").
GMJM's obligations under the guaranty are secured by a pledge to Convergent of
all shares of the common stock owned by GMJM. The GMJM guaranty and pledge were
released in January 2000 in connection with the sale of the shares owned by
GMJM. In connection with the release of the GMJM guaranty and pledge,
Xx. Xxxxxxxxxx pledged additional shares of Convergent's common stock that he
acquired subsequent to the date of his original pledge.
Between January 15, 2000 and February 14, 2000, Xx. Xxxxxxxxxx sold 755,420
shares of preferred and common stock in private transactions to three separate
investor groups. Total aggregate consideration for the transactions amounted to
approximately $6.0 million, or approximately $8.00 per share.
1999/2000 ISSUANCE OF RESTRICTED STOCK TO CERTAIN DIRECTORS. On
October 29, 1999 Convergent issued 377,710 shares of common stock each to Xxxxxx
Xxxxxx and Xxxx X. Xxxxx XXX, members of its board of directors. The shares were
subject to vesting at the rate of 47,213.5 shares per calendar quarter,
effective on the last day of such quarter, commencing September 30, 1999, as
well as forfeiture in the event that Xx. Xxxxxx or Mr. Xxxxx's service as a
director terminated. In connection with the tender offer, the board resolved on
October 13, 2000 to accelerate the vesting of these shares and waive
restrictions on transfer contained in the restricted stock agreements whereby
the shares were issued to Xx. Xxxxxx and Mr. Xxxxx.
THE 1999 RECAPITALIZATION. The following information was provided to us by
Convergent.
On August 13, 1999, Convergent consummated a recapitalization pursuant to an
agreement among Convergent, a number of its then existing stockholders and
investors led by InSight, including UBS Capital II LLC and the Xxxxxxx Xxxxx
managed venture funds. In connection with the recapitalization, these investors
acquired approximately a 63% controlling interest in Convergent through the
purchase of shares of a new series of Convergent's voting convertible
participating preferred stock for a total purchase price of approximately
$45.5 million. As a part of the recapitalization:
- Convergent entered into a $25.0 million revolving line of credit with
Fleet National Bank, of which $22.0 million was borrowed in order to
finance the recapitalization;
- all shares of Convergent's then outstanding preferred stock and all shares
of common stock owned by Convergent's two largest non-employee
stockholders were purchased for a total purchase price of approximately
$44.3 million;
- Convergent's employee stockholders, including several management
investors, received cash payments totaling $11.8 million for the sale of a
portion of their equity interest in Convergent;
- Convergent made cash payments totaling approximately $5.4 million to
members of Convergent's senior mangement in connection with the
termination of their then effective employment agreements, as finance fees
in connection with the recapitalization and to satisfy deferred
compensation obligations to those members of senior management;
24
- Convergent issued 10,516,424 shares of common stock and options to
purchase 694,506 shares of its common stock at an exercise price of $0.092
per share, to employees, including several management investors, in
consideration for their continued employment with Convergent; and
- Convergent loaned $2.0 million to Xxxxx Xxxxxxxxxx.
Under the recapitalization agreement, Convergent agreed to indemnify the
investors, in the form of cash, additional shares of its stock, or a combination
of both, for breaches of representations, warranties and covenants Convergent
made to them in connection with their purchase of its capital stock (including
representations and warranties regarding Convergent's financial condition, its
liabilites and its client contracts), up to a maximum of $1.5 million in cash
and $3.0 million in preferred stock, valued at $1.08 per share. The majority of
the representations and warranties under the recapitalization agreement survive
for one year. The obligation to indemnify the investors against environmental
claims remains in effect until the seventh anniversary of the closing of the
recapitalization. The obligations to indemnify the investors against tax-related
and ERISA claims remain in effect until the expiration of all applicable
statutes of limitation. The obligation to indemnify the investors against claims
made in connection with certain representations and warranties relating to
certain fundamental corporate matters, such as Convergent's organization, its
subsidiaries, its outstanding stock and corporate approvals, remains in effect
indefinitely. Also in connection with the recapitalization, Xxxxxxxxxx's
continuing stockholders agreed to elect two designees of the investors (Xxxx X.
Xxxxx XXX and Xxxxx Xxxxxxx) to serve on the board of directors. This obligation
to elect the designees of the investors terminated upon Convergent's initial
public offering.
POST-MERGER OWNERSHIP OF PARENT. It is anticipated that immediately
following the merger the following individuals and entities will beneficially
own the number of shares of our Parent's common stock shown in the following
table, which shares will represent all of the outstanding shares of Parent
stock.(1)
NUMBER OF PARENT SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED
------------------------ ------------------------
Schlumberger Technology Corp.(2)(3)......................... 33,879,012
Xxxxx X. Xxxxxxxx(4)........................................ 2,766,078
Xxxxx X. Xxxxxxxxxx, Xx..................................... 2,610,074
Cinergy Ventures, LLC....................................... 1,083,280
Xxxxx X. Xxxxxx............................................. 787,427
Xxxxx X. Xxxxxxx............................................ 250,001
Xxxxxx X. Xxxxxx............................................ 250,000
Xxxxx X. Xxxxxxxxxx......................................... 204,950
Other management investors.................................. 6,679,507
Total..................................................... 48,510,329
==========
------------------------
1 Excludes options to purchase our Parent's common stock to be granted under
the stock option plan to be adopted by our Parent.
2 STC currently owns the sole share of our Parent's common stock issued and
outstanding.
3 Assumes that all outstanding options of Convergent are exercised prior to
the completion of our offer.
4 Includes 1,004,915 shares held by Xx. Xxxxxxxx; 1,108,993 shares held by his
wife, Xxxxx X. Xxxxx-Xxxxxxxx; 108,695 shares held by each of the Xxxxx
Xxxxxxxxx Xxxxxxxx 1999 Trust, the Xxxxxx Xxxxxx Xxxxxxxx 1999 Trust, the
Xxxxxx Xxxx Xxxxxxxx 1999 Trust, the Xxxxxx Xxxxx Xxxxxxxx 1999 Trust, the
Xxxxxxx Xxxx Xxxxx 1999 Trust and the Xxxx Xxx Xxxxx 1999 Trust.
25
6. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.
The following information (other than the information concerning us, our
Parent and STC) has been provided to us by Convergent:
PURSUANT TO AN ENGAGEMENT LETTER DATED SEPTEMBER 15, 2000, CONVERGENT
RETAINED XXXXXX XXXXXXX TO PROVIDE IT WITH FINANCIAL ADVISORY SERVICES IN
CONNECTION WITH A POSSIBLE STRATEGIC BUSINESS COMBINATION WITH STC. XXXXXX
XXXXXXX WAS SELECTED TO ACT AS THE SPECIAL COMMITTEE'S FINANCIAL ADVISOR BASED
ON XXXXXX XXXXXXX'X QUALIFICATIONS, EXPERTISE AND REPUTATION, AND ITS KNOWLEDGE
OF THE BUSINESS AND AFFAIRS OF CONVERGENT. AT THE MEETING OF THE SPECIAL
COMMITTEE ON OCTOBER 13, 2000, XXXXXX XXXXXXX DELIVERED AN ORAL OPINION,
SUBSEQUENTLY CONFIRMED IN WRITING, TO THE EFFECT THAT, AS OF OCTOBER 13, 2000,
AND SUBJECT TO AND BASED UPON THE VARIOUS CONSIDERATIONS SET FORTH IN ITS
OPINION, THE CASH CONSIDERATION TO BE RECEIVED BY CONVERGENT STOCKHOLDERS IN OUR
OFFER AND THE MERGER PURSUANT TO THE MERGER AGREEMENT WAS FAIR, FROM A FINANCIAL
POINT OF VIEW, TO THOSE HOLDERS.
PLEASE NOTE THAT THE XXXXXX XXXXXXX OPINION SPEAKS AS OF THE DATE IT WAS
ISSUED AND THE OCTOBER 13, 2000 OPINION WILL NOT BE UPDATED.
THE FULL TEXT OF THE WRITTEN OPINION OF XXXXXX XXXXXXX, DATED OCTOBER 13,
2000, IS ATTACHED AS ANNEX A TO THIS DOCUMENT AND SETS FORTH THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF
THE REVIEW UNDERTAKEN BY XXXXXX XXXXXXX IN RENDERING ITS OPINION. CONVERGENT'S
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION CAREFULLY AND IN ITS
ENTIRETY. XXXXXX XXXXXXX'X OPINION, DATED OCTOBER 13, 2000, WAS DIRECTED TO THE
SPECIAL COMMITTEE AND ADDRESSED ONLY THE FAIRNESS OF THE CASH CONSIDERATION TO
BE RECEIVED BY CONVERGENT STOCKHOLDERS PURSUANT TO THE MERGER AGREEMENT FROM A
FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION. IT DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
CONVERGENT STOCKHOLDER TO TAKE ANY SPECIFIC ACTION WITH RESPECT TO THE TENDER
OFFER. THE SUMMARY OF THE OPINION OF XXXXXX XXXXXXX SET FORTH IN THIS DOCUMENT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS OPINION.
In connection with rendering its opinion, Xxxxxx Xxxxxxx, among other
things:
- Reviewed certain publicly available financial statements and other
information concerning Convergent;
- Reviewed certain financial statements and other information concerning
STC;
- Reviewed certain internal financial statements and other financial and
operating data concerning Convergent prepared by the management of
Convergent;
- Reviewed certain financial projections prepared by the management of
Convergent, and certain publicly available financial projections of
Convergent prepared by certain equity securities research analysts;
- Discussed with senior executives of Convergent the past and current
operations and financial condition and the prospects of Convergent;
- Reviewed the reported prices and trading activity for certain Convergent's
common stock;
- Compared the financial performance of Convergent and the prices and
trading activity of the Convergent's common stock with that of certain
other publicly traded companies comparable with Convergent and its
securities;
- Reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions;
- Participated in certain discussions and negotiations among representatives
of Convergent, STC and Parent;
- Reviewed the merger agreement, the subscription and contribution agreement
and related documents; and
26
- Performed such other analyses and considered certain other factors as it
deemed appropriate.
Xxxxxx Xxxxxxx assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by Xxxxxx Xxxxxxx for the
purposes of its opinion. With respect to the financial projections, Xxxxxx
Xxxxxxx assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Convergent. Xxxxxx Xxxxxxx did not make any independent valuation or
appraisal of the assets or liabilities of Convergent, nor has it been furnished
with any such appraisals.
Xxxxxx Xxxxxxx assumed that our offer and the merger will be consummated in
accordance with the terms set forth in the merger agreement, and that the
contribution will be consummated in accordance with the terms set forth in the
subscription and contribution agreement. Xxxxxx Xxxxxxx'x opinion was
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to Xxxxxx Xxxxxxx as of, the date
of its opinion.
The following is a brief summary of the analyses Xxxxxx Xxxxxxx performed in
connection with delivering its opinion as of October 13, 2000 and subsequently
reviewed with the special committee on October 13, 2000. Some of these summaries
of financial analyses include information presented in tabular format. In order
to understand fully the financial analyses used by Xxxxxx Xxxxxxx, the tables
must be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
INDEXED STOCK PRICE ANALYSIS. Xxxxxx Xxxxxxx reviewed the recent
performance of the Convergent common stock and compared such performance with
that of the following indices:
- NASDAQ Composite
- Comparable Companies Index
The Comparable Companies Index included publicly traded technology service
companies that Xxxxxx Xxxxxxx selected based upon its views as to the
comparability of the financial and operating characteristics of these companies
to Convergent. The companies included in the Comparable Companies Index were:
- Cambridge Technology Partners, Inc.
- Diamond Technology Partners, Inc.
- iXL Enterprises, Inc.
- Proxicom, Inc.
- Razorfish, Inc.
- Sapient Corporation
- Scient Corporation, and
- Viant Corporation
The following table presents the change in value for the above indices, as
compared to the change in the stock prices of Convergent common stock over the
periods from August 1, 2000 to October 11, 2000 and September 13, 2000 to
October 11, 2000.
PERCENTAGE CHANGE FOR THE PERIOD
------------------------------------------
AUGUST 1, 2000 SEPTEMBER 13, 2000
TO OCTOBER 11, 2000 TO OCTOBER 11, 2000
-------------------- -------------------
NASDAQ Composite............................... (14.03)% (18.63)%
Comparable Companies Index..................... (60.52)% (43.53)%
Convergent Common Stock........................ (30.81)% 7.64%
27
MERGER CONSIDERATION ANALYSIS. Xxxxxx Xxxxxxx reviewed the cash
consideration to be received by Convergent stockholders in connection with our
offer and the merger. As part of this analysis, Xxxxxx Xxxxxxx also calculated
the premium the consideration implied to the closing price per share of the
Convergent's common stock over various time periods ending on October 11, 2000.
Based on the all-cash offer of $8 per share of Convergent's common stock, Xxxxxx
Xxxxxxx calculated the premium to be 65% relative to the price of shares of
Convergent's common stock as of October 11, 2000. Additionally, relative to the
average closing price of shares of Convergent's common stock for the 5-trading
day, 10-trading day and 30-trading day periods ending on October 11, 2000,
respectively, Xxxxxx Xxxxxxx calculated the premium to be 65%, 69% and 69%,
respectively. Finally, relative to the average price from the August 1, 2000
initial public offering to October 11, 2000 and the price of the August 1, 2000
initial public offering, Xxxxxx Xxxxxxx calculated the premium to be 42% and
14%, respectively.
PERIOD ENDING OCTOBER 11, 2000 PRICE(1) IMPLIED PREMIUM TO OFFER PRICE
----------------------------------------------------------- -------- ------------------------------
October 11, 2000........................................... $4.84 65.16%
Prior 5 Days............................................... $4.86 64.74%
Prior 10 Days.............................................. $4.73 69.31%
Prior 30 Days.............................................. $4.74 68.77%
Since IPO (August 1, 2000)................................. $5.63 42.06%
IPO Price (August 1, 2000)................................. $7.00 14.29%
------------------------
(1) Averages except for October 11, 2000 Price and IPO Price
COMPARABLE PUBLIC COMPANIES ANALYSIS Xxxxxx Xxxxxxx reviewed and compared
financial information, ratios and public market multiples relating to Convergent
to corresponding financial data for comparable publicly traded technology
services companies. Xxxxxx Xxxxxxx selected these companies based upon Xxxxxx
Xxxxxxx'x views as to the comparability of the financial and operating
characteristics of these companies to Convergent.
The companies included in the Convergent comparable public companies
analysis were:
- Cambridge Technology
Partners, Inc. - Razorfish, Inc.
- Diamond Technology Partners, Inc. - Sapient Corporation
- iXL Enterprises, Inc. - Scient Corporation, and
- Proxicom, Inc. - Viant Corporation
Xxxxxx Xxxxxxx then reviewed publicly available information to compare
financial information and public market multiples of these comparable public
companies to Convergent's public market multiples. The comparison included:
- aggregate value to last twelve months' revenue;
- aggregate value to 2000 estimated revenue;
- aggregate value to 2001 estimated revenue;
- stock price to 2001 estimated net income per share; and
- stock price to the ratio of 2001 estimated net income per share to the
estimated long term growth rate of earnings.
28
The following table reflects the results of the analysis, as compared to the
multiples for Convergent:
PRICE TO EPS AGGREGATE VALUE TO REVENUE
------------------- ---------------------------------------------------------
LAST
TWELVE 2001E P/E
2001E MONTHS 2000 2001 TO GROWTH
------------------- ----------------- ----------------- ----------------- -----------------
Range Derived from
Comparable Companies...... 22.5x-30.0x 2.3x-3.2x 1.6x-2.1x 1.1x-1.6x 0.5x-0.8x
Convergent.................. 36.6x 2.8x 2.6x 1.9x 1.0x
Applying a range of multiples derived from the comparable public companies
analysis, Xxxxxx Xxxxxxx calculated a range of implied equity values per share
of Convergent with respect to Convergent's:
- aggregate value to last twelve months revenue;
- aggregate value to 2000 estimated revenue;
- aggregate value to 2001 estimated revenue;
- stock price to 2001 estimated net income per share; and
- stock price to 2001 estimated net income per share to the estimated long
term growth rate of earnings.
Based on this analysis, Xxxxxx Xxxxxxx derived a range of implied equity
values per share of Convergent of $3.00 to $5.00.
No company utilized in the comparable public companies analysis is identical
to Convergent. Accordingly, an analysis of the results necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of Convergent and other factors that could affect the
public trading value of the companies to which Convergent is being compared. In
evaluating the comparable companies, Xxxxxx Xxxxxxx made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Convergent, like the impact of competition on Convergent and the
industry generally, industry growth and the absence of any adverse material
change in the financial conditions and prospects of Convergent or the industry
or in the financial markets in general. Mathematical analysis, such as
determining the mean, median or average, is not in itself a meaningful method of
using comparable company data.
PRECEDENT TRANSACTIONS ANALYSIS. Using publicly available information,
Xxxxxx Xxxxxxx considered 18 announced or completed transactions in the
technology services industry comparable in respects to the tender offer and the
merger which we refer to collectively as the precedent transactions. These
precedent transactions included:
- Diamond Technology Partners' acquisition of Cluster Consulting;
- General Electric's acquisition of Smallworldwide;
- CommerceOne's acquisition of AppNet;
- Eltrax Systems' acquisition of Cereus Technology Partners;
- Computer Sciences Corporation's acquisition of Policy Management Systems;
- PSINet's acquisition of Metamor Worldwide;
- Xxxxxxxx-Xxxx'x acquisition of USWeb/CKS;
- iXL Enterprises' acquisition of Tessera Enterprise Systems;
- Lucent Technologies' acquisition of International Network Services;
29
- Razorfish's acquisition of I-Cube;
- USWeb/CKS' acquisition of Xxxxxxxx Xxxxxxx Group;
- I-Cube's acquisition of Conduit;
- AnswerThink Consulting Group's acquisition of Think New Ideas;
- Welsh Xxxxxx Xxxxxxxx & Xxxxx'x acquisition of Banctec;
- Iron Mountain, Inc.'s acquisition of Data Base, Inc.;
- Computer Associates International Inc.'s acquisition of Computer
Management Systems, Inc.;
- Affiliated Computer Services' acquisition of BRC Holdings, Inc.; and
- IAT Multimedia, Inc.'s acquisition of ATEC Group.
Xxxxxx Xxxxxxx then reviewed publicly available information to compare
financial information and market statistics of the precedent transactions to the
merger. The comparison included:
- percentage premium to unaffected market price; and
- aggregate value to last twelve month revenue
The following table reflects the results of the analysis, as compared to the
multiples for Convergent:
% PREMIUM TO AGGREGATE VALUE TO
UNAFFECTED LAST TWELVE
MARKET PRICE MONTH REVENUE
------------------- ------------------
Precedent Transactions.................. 42-60 3.2x-5.1x
Based on an analysis of the corresponding premium to unaffected market price
and aggregate value to last twelve month revenue, Xxxxxx Xxxxxxx calculated per
share transaction values for Convergent ranging from $7.00 to $9.00.
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the tender offer or the merger, and, accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Convergent and other factors that would affect the
acquisition value of the companies to which it is being compared. In evaluating
the precedent transactions, Xxxxxx Xxxxxxx made judgments and assumptions with
regard to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of
Convergent, such as the impact of competition on Convergent and the industry
generally, industry growth and the absence of any adverse material change in the
financial conditions and prospects of Convergent or the industry or in the
financial markets in general. Mathematical analysis, such as determining the
mean or median, is not, in itself, a meaningful method of using precedent
transactions data.
In connection with the review of our offer and the merger by the special
committee, Xxxxxx Xxxxxxx performed a variety of financial and comparative
analyses for purposes of delivering its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, Xxxxxx Xxxxxxx
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor it considered. Furthermore,
Xxxxxx Xxxxxxx believes that selecting any portion of its analyses, without
considering all analyses would create an incomplete view of the process
underlying its analyses and opinion. In addition, Xxxxxx Xxxxxxx may have given
various analyses and factors more or less weight than other analyses and
factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Xxxxxx Xxxxxxx'x
view of the actual value of Convergent.
30
In performing its analyses, Xxxxxx Xxxxxxx made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Convergent, us, our
Parent and STC. Any estimates contained in Xxxxxx Xxxxxxx'x analysis are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by the estimates. The
analyses performed were prepared solely as part of Xxxxxx Xxxxxxx'x analysis of
the fairness from a financial point of view of the cash consideration to be
received by the Convergent stockholders pursuant to our offer and the merger
agreement and were conducted in connection with the delivery of Xxxxxx Xxxxxxx'x
opinion, dated October 13, 2000, to the special committee. The analyses do not
purport to be appraisals or to reflect the prices at which the Convergent common
stock might actually trade. The cash consideration pursuant to the merger
agreement and other terms of the merger agreement were determined through arm's
length negotiations between Convergent, us, our Parent and STC and were approved
by the special committee. Xxxxxx Xxxxxxx provided advice to Convergent during
such negotiations; however, Xxxxxx Xxxxxxx did not recommend any specific
consideration to Convergent or that any specific consideration constituted the
only appropriate consideration for the tender offer or the merger. In arriving
at its opinion, Xxxxxx Xxxxxxx was not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction involving Convergent. Xxxxxx
Xxxxxxx'x opinion was one of many factors taken into consideration by the
special committee in making its decision to recommend the merger agreement and
the transactions contemplated thereby to Convergent's board of directors.
Consequently, the Xxxxxx Xxxxxxx analyses as described above should not be
viewed as determinative of the opinion of the special committee with respect to
value of Convergent or whether the special committee would have been willing to
agree to different consideration.
Xxxxxx Xxxxxxx was retained as financial advisor to the special committee
based upon Xxxxxx Xxxxxxx'x qualifications, experience and expertise. Xxxxxx
Xxxxxxx is an internationally recognized investment banking and advisory firm.
Xxxxxx Xxxxxxx, as part of its investment banking and financial advisory
business, is continuously involved in the valuation of business and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of Xxxxxx Xxxxxxx'x business, Xxxxxx Xxxxxxx or its affiliates
may from time to time hold or trade in the securities or indebtedness of
Convergent or STC and its affiliates for its own account, the accounts of
investment funds and other clients under the management of Xxxxxx Xxxxxxx or its
affiliates and for the account of its customers, and, accordingly, may at any
time hold long or short positions in these securities or indebtedness.
Pursuant to the terms of the engagement letter, Xxxxxx Xxxxxxx has provided
advisory services in connection with the tender offer and the merger and
Convergent has agreed to pay a customary fee in connection therewith. In
addition, Xxxxxxxxxx has also agreed to reimburse Xxxxxx Xxxxxxx for its
reasonable expenses incurred in performing its services and to indemnify Xxxxxx
Xxxxxxx and its affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Xxxxxx Xxxxxxx or any of its
affiliates against certain liabilities and expenses, including the fees of its
legal counsel and certain liabilities under the federal securities laws, related
to or arising out of Xxxxxx Xxxxxxx'x engagement and any related transactions.
The full text of Xxxxxx Xxxxxxx'x written presentation to the special
committee on October 13, 2000 has been attached as an exhibit to the Schedule TO
we filed with the Securities and Exchange Commission and we incorporated it by
reference. In addition to Annex A to this document, Convergent will make Xxxxxx
Xxxxxxx'x opinion letter available to any interested Convergent stockholder or a
stockholder's representative who has been designated as an authorized
representative in writing for inspection and copying at Convergent's principal
executive offices.
31
THE TENDER OFFER
1. TERMS OF OUR OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of our offer (including any
terms and conditions of any extension or amendment), we will accept for payment
and pay for all shares validly tendered (and not withdrawn in accordance with
the procedures set forth in "The Tender Offer--Withdrawal Rights") on or prior
to the "Expiration Date." The "Expiration Date" means 12:00 Midnight, New York
City time, on Monday, November 27, 2000, unless and until we (subject to the
terms and conditions of the merger agreement) extend the period during which our
offer is open, in which case "Expiration Date" will mean the latest time and
date at which our offer, as we have extended it, will expire.
Our offer is subject to the conditions set forth in "The Tender
Offer--Conditions of Our Offer," including the satisfaction of the Minimum
Condition and the acquiring of material governmental approvals. Subject to the
terms of the merger agreement, we expressly reserve the right to waive any
condition to our offer in whole or in part, in our sole discretion, and also
expressly reserve the right to increase the price per share payable in our offer
and to make any other changes in the terms and conditions of our offer; but,
without the written consent of Convergent, we will not amend or waive the
Minimum Condition. We cannot legally waive material governmental approvals. We
have also agreed that we will not decrease the number of shares sought in our
offer, change the form of or decrease the amount of consideration to be paid,
impose conditions to our offer in addition to those set forth in "The Tender
Offer--Conditions of Our Offer," make any other change in our offer which is
materially adverse to you or extend our offer (except as provided in the merger
agreement).
The merger agreement provides that we may, without the consent of
Convergent, extend our offer beyond 12:00 Midnight, New York City time, on
Monday November 27, 2000, if, on that date, any of the conditions to our offer,
are not satisfied or waived, until that condition is satisfied or waived (except
that the Minimum Condition may not be waived). We have agreed to extend our
offer from time to time until March 31, 2001 if, and to the extent that, at the
Expiration Date, the conditions to our offer have not been satisfied or waived.
We may extend our offer after the acceptance of shares for a further period of
time by means of a subsequent offering period under Rule 14d-11 under the
Exchange Act, of not more than twenty business days to meet the objective that
there be validly tendered and not withdrawn prior to the Expiration Date (as so
extended) a number of shares which, together with shares then owned by us and
our Parent, represents at least 90% of the outstanding shares. If, during an
extension for this purpose, you have previously tendered your shares, you will
not be able to withdraw your shares. Under no circumstances will interest be
paid on the purchase price for tendered shares, whether or not our offer is
extended.
We will pay for all shares validly tendered and not withdrawn promptly
following the acceptance of shares for payment pursuant to our offer. Subject to
the rules of the Securities and Exchange Commission and the terms and conditions
of our offer, we also expressly reserve the right to delay payment for shares in
order to comply in whole or in part with applicable laws (any delay will be
effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires
us to pay the consideration offered or to return shares deposited by or on
behalf of stockholders promptly after the termination or withdrawal of our
offer).
We will, as promptly as practicable, make a public announcement of any
extension, delay, termination, waiver or amendment. If we extend our offer, we
will make the announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to you in a
manner reasonably designed to inform you of changes) and without limiting the
manner in which we may choose to make any public announcement, we will have no
obligation to publish, advertise or otherwise communicate any public
announcement other than by issuing a press release to Business Wire.
32
If we make a material change in the terms of our offer or the information
concerning our offer, or if we waive a material condition of our offer, we will
extend our offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. If, before the Expiration Date, we decide to increase
the consideration being offered our offer, the increase in the offered
consideration will be applicable to all stockholders whose shares are accepted
for payment pursuant to our offer. If at the time notice of any increase in the
offered consideration being is first published, sent or given, our offer is
scheduled to expire at any time earlier than the period ending on the tenth
business day from and including the date that the notice is first so published,
sent or given, our offer will be extended at least ten business days after that
notice.
For purposes of our offer, a "business day" means any day other than a
Saturday, a Sunday or a day on which commercial banks in New York City are
permitted by law, rule or regulation to be closed.
Convergent has provided us mailing labels, security position listings and
any available listing or computer file containing the names and addresses of all
recordholders of the shares. This document and the related Letter of Transmittal
will be mailed to the recordholders whose names appeared on Convergent's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of our offer (including, if our
offer is extended or amended, the terms and conditions of any extension or
amendment), we will accept for payment all shares validly tendered (and not
properly withdrawn in accordance with "The Tender Offer--Withdrawal Rights")
prior to the Expiration Date promptly after the occurrence of the Expiration
Date. Additionally, we will pay for all shares validly tendered and not
withdrawn promptly following the acceptance of shares pursuant to our offer.
In all cases, we will pay for shares tendered and accepted for payment
pursuant to our offer only after timely receipt by our Depositary of (1) the
stock certificates evidencing tendered shares or timely confirmation of a
book-entry transfer of shares into our Depositary's account at The Depository
Trust Company, or DTC, pursuant to the procedures set forth in "The Tender
Offer--Procedures for Accepting Our Offer and Tendering Shares," (2) the Letter
of Transmittal (or a manually signed facsimile of the Letter of Transmittal),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message, in connection with the book-entry transfer and (3) any other
documents required by the Letter of Transmittal. An "Agent's Message" is a
message, transmitted by DTC to, and received by, our Depositary and forming a
part of the book-entry confirmation which states that DTC has received an
express acknowledgment from the participant in DTC tendering the shares that are
the subject of the book-entry confirmation, that the participant has received
and agrees to be bound by the Letter of Transmittal and that we may enforce the
agreement against that participant.
For purposes of our offer, we will be deemed to have purchased shares which
have been validly tendered and not properly withdrawn if and when we give oral
or written notice to our Depositary of our acceptance for payment of shares
pursuant to our offer. Upon the terms and subject to the conditions of our
offer, payment for the shares will be made by depositing the aggregate purchase
price with our Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE
PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING PAYMENT.
If we do not accept tendered shares for payment for any reason pursuant to
the terms and conditions of our offer, or if stock certificates are submitted
evidencing more shares than are tendered, the stock certificates evidencing
unpurchased shares will be returned, without expense to the tendering
33
stockholder (or, in the case of shares tendered by book-entry transfer into our
Depositary's account at DTC pursuant to the procedure set forth in "The Tender
Offer--Procedures for Accepting Our Offer and Tendering Shares," the shares will
be credited to an account maintained at DTC), as promptly as practicable
following the expiration or termination of our offer.
We reserve the right to assign, in our sole discretion, any or all of our
rights, interests and obligations contained in the merger agreement to STC or to
any direct or indirect wholly owned subsidiary of STC, but any assignment will
not relieve us of our obligations under our offer and will in no way prejudice
your rights to receive payment for shares validly tendered and accepted for
payment pursuant to our offer.
If you are a record owner of shares and tender directly to our Depositary,
you will not be obligated to pay brokerage fees or commissions or, except as
provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes
with respect to our purchase of shares pursuant to our offer. Nonetheless, if
you fail to complete and sign the Substitute Form W-9, which is included in the
Letter of Transmittal, you may be subject to a required back-up U.S. federal
income tax withholding of 31% of the gross proceeds payable to you. See "The
Tender Offer--Material Federal Income Tax Consequences."
3. PROCEDURES FOR ACCEPTING OUR OFFER AND TENDERING SHARES.
In order for you to validly tender shares pursuant to our offer, the Letter
of Transmittal (or a manually signed facsimile of the Letter of Transmittal),
properly completed and duly executed, together with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message, and any
other documents required by the Letter of Transmittal, must be received by our
Depositary at one of its addresses set forth on the back cover of this document
and either (1) the stock certificates evidencing tendered shares must be
received by our Depositary at its address or the shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
book-entry confirmation must be received by our Depositary (including an Agent's
Message if you did not deliver a Letter of Transmittal), in each case prior to
the Expiration Date, or (2) you must comply with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF STOCK CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY OUR DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERTY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. Our Depositary will establish an account with respect
to the shares at DTC for purposes of our offer within two business days after
the date of this document. Any financial institution that is a participant in
the system of DTC may make a book-entry delivery of shares by causing DTC to
transfer shares into our Depositary's account at DTC in accordance with DTC's
procedures. However, although delivery of shares may be effected through
book-entry transfer at DTC, the Letter of Transmittal (or a manually signed
facsimile of the Letter of Transmittal), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message, and any
other required documents, must, in any case, be received by our Depositary at
one of its addresses set forth on the back cover of this document prior to the
Expiration Date, or you must comply with the guaranteed delivery procedure
described below. Delivery of documents to DTC does not constitute delivery to
our Depositary.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Security Transfer Agent Medallion
Signature Program, or by any other "eligible guarantor institution," as the term
is defined in Rule 17Ad-15 under the Exchange Act, except in cases where shares
are tendered (1) by a registered holder of shares who has not completed either
the box
34
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (2) for the account of an eligible
guarantor institution. If a stock certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a stock certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the stock
certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the stock certificate, with the signature(s) on the stock certificate or stock
powers guaranteed by an eligible guarantor institution. See Instructions 1 and 5
of the Letter of Transmittal.
GUARANTEED DELIVERY. If you desire to tender shares pursuant to our offer
and the stock certificate(s) evidencing your shares are not immediately
available or you cannot deliver your stock certificate(s) and all other required
documents to our Depositary prior to the Expiration Date, or you cannot complete
the procedure for delivery by book-entry transfer on a timely basis, your shares
may still be tendered, provided that all the following conditions are satisfied:
- the tender is made by or through an eligible guarantor institution;
- a properly completed and duly executed Notice of Guaranteed Delivery is
received prior to the Expiration Date by our Depositary; and
- the stock certificate(s) (or a book-entry confirmation) evidencing all
tendered shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by the Letter of Transmittal are
received by our Depositary within three trading days after the date of
execution of the Notice of Guaranteed Delivery.
You may deliver your Notice of Guaranteed Delivery by hand or mail or by
facsimile transmission to our Depositary. Your Notice of Guaranteed Delivery
must include a guarantee by an eligible guarantor institution in the form set
forth in the Notice of Guaranteed Delivery.
In all cases, we will pay for shares tendered and accepted pursuant to our
offer only after timely receipt by our Depositary of the stock certificate(s)
evidencing shares, or a book-entry confirmation of the delivery of shares, and
the Letter of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), properly completed and duly executed, with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message, and any
other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. We will determine, in our sole discretion, all
questions as to the form of documents and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of shares.
Our determination will be final and binding on all parties. We reserve the
absolute right to reject any and all tenders determined by us not to be in
proper form or the acceptance for payment of which may be unlawful. We also
reserve the absolute right to waive any condition of our offer to the extent
permitted by applicable law and the merger agreement or any defect or
irregularity in the tender of any shares of any particular stockholder, whether
or not similar defects or irregularities are waived in the case of other
stockholders. A TENDER OF SHARES WILL NOT HAVE BEEN VALIDLY MADE UNTIL ALL
DEFECTS AND IRREGULARITIES HAVE BEEN CURED OR WAIVED. NEITHER WE, OUR PARENT,
STC NOR ANY OF STC'S, OUR PARENT'S OR OUR RESPECTIVE AFFILIATES OR ASSIGNS, OUR
DEALER MANAGER, OUR DEPOSITARY, OUR INFORMATION AGENT, OR ANY OTHER PERSON WILL
BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN
TENDERS OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY NOTIFICATION. Our
interpretation of the terms and conditions of our offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding
If you tender your shares pursuant to any of the procedures described above,
it will constitute your acceptance of the terms and conditions of our offer, as
well as your representation and warranty to us
35
that (1) you have the full power and authority to tender, sell, assign and
transfer the tendered shares (and any and all other shares or other securities
issued or issuable in respect of your shares), and (2) when we accept your
shares for payment, we will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims.
OUR ACCEPTANCE OF YOUR SHARES PURSUANT TO ANY OF THE PROCEDURES DESCRIBED
ABOVE WILL CONSTITUTE A BINDING AGREEMENT BETWEEN YOU AND US UPON THE TERMS AND
SUBJECT TO THE CONDITIONS OF OUR OFFER.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, you
irrevocably appoint our designees as your agents, attorneys-in-fact and proxies,
each with full power of substitution, in the manner set forth in the Letter of
Transmittal, to the full extent of your rights with respect to the shares you
tender and we accept for payment (and with respect to any and all other shares
or other securities issued or issuable on or after October 27, 2000). These
powers of attorney and proxies will be considered irrevocable and coupled with
an interest in the tendered shares. The appointment will be effective when, and
only to the extent that, we accept your shares for payment. Upon our acceptance
for payment, all prior powers of attorney and proxies given by you with respect
to your shares (and your other shares and securities) will be revoked, without
further action, and no subsequent powers of attorney or proxies may be given nor
any subsequent written consent executed by you (and, if given or executed, will
not be deemed to be effective). Our designees will, with respect to the shares
for which the appointment is effective, be empowered to exercise all of your
voting and other rights as they in their sole discretion may deem proper at any
annual or special meeting of Convergent's stockholders or any adjournment or
postponement of that meeting, by written consent in lieu of any meeting or
otherwise. We reserve the right to require that, in order for shares to be
deemed validly tendered, immediately upon our payment for the shares, we must be
able to exercise full voting rights with respect to the shares (and the other
shares and securities).
4. WITHDRAWAL RIGHTS.
Tenders of shares made pursuant to our offer are irrevocable except that
tendered shares may be withdrawn at any time prior to the Expiration Date. If we
extend our offer, are delayed in our acceptance for payment of shares or are
unable to accept shares for payment pursuant to our offer for any reason, then,
without prejudice to our rights under our offer, our Depositary may,
nevertheless, on our behalf, retain tendered shares, and those shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described in this Section 4. Any delay will be by an
extension of our offer to the extent required by law.
We may, without the consent of Convergent, extend our offer beyond 12:00
Midnight, New York City time, if, on the 60th day from the date of this
document, any of the conditions to our offer, are not satisfied or waived, until
that condition is satisfied or waived (except that the Minimum Condition may not
be waived). We have agreed to extend our offer from time to time until
March 31, 2001 if, and to the extent that, at the Expiration Date, the
conditions to our offer have not been satisfied or waived.
We may extend our offer after the acceptance of shares for a further period
of time by means of a subsequent offering period under Rule 14d-11 under the
Exchange Act, of not more than twenty business days to meet the objective that
there be validly tendered and not withdrawn prior to the Expiration Date a
number of shares which, together with shares then owned by our Parent and us,
represents at least 90% of the outstanding shares. If, during an extension for
this purpose, you have previously tendered your shares, you will not be able to
withdraw your shares. Under no circumstances will interest be paid on the
purchase price for tendered shares, whether or not our offer is extended.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by our Depositary at one of its addresses
set forth on the back cover page of this document. Any notice of withdrawal must
specify the name of the person who tendered the shares to be withdrawn, the
number of shares to be withdrawn and the name of the registered holder of the
36
shares, if different from that of the person who tendered the shares. If stock
certificates evidencing shares to be withdrawn have been delivered or otherwise
identified to our Depositary, then, prior to the physical release of the stock
certificates, the serial numbers shown on the stock certificates must be
submitted to our Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an eligible guarantor institution, unless the shares have
been tendered for the account of an eligible guarantor institution. If shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in "The Tender Offer--Procedures for Accepting Our Offer and Tendering
Shares," any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn shares.
WE WILL DETERMINE, IN OUR SOLE DISCRETION, ALL QUESTIONS AS TO THE FORM AND
VALIDITY (INCLUDING TIME OF RECEIPT) OF ANY NOTICE OF WITHDRAWAL. OUR
DETERMINATION WILL BE FINAL AND BINDING. NEITHER WE, OUR PARENT, STC NOR ANY OF
STC'S, OUR PARENT'S OR OUR RESPECTIVE AFFILIATES OR ASSIGNS, OUR DEALER MANAGER,
OUR DEPOSITARY, OUR INFORMATION AGENT, OR ANY OTHER PERSON WILL BE UNDER ANY
DUTY TO GIVE ANY NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF
WITHDRAWAL OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY NOTIFICATION.
Withdrawals of shares may not be rescinded. If you have properly withdrawn
shares they will be deemed not to have been validly tendered for purposes of our
offer. However, withdrawn shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in "The Tender
Offer--Procedures for Accepting Our Offer and Tendering Shares."
5. MATERIAL FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal U.S. federal income tax
consequences of our offer and the merger to holders whose shares are purchased
pursuant to our offer or whose shares are converted into the right to receive
cash in the merger (whether upon receipt of the merger consideration or pursuant
to the proper exercise of dissenter's rights). The discussion applies only to
holders of shares in whose hands shares are capital assets, and may not apply to
shares received pursuant to the exercise of employee stock options or otherwise
as compensation, or to holders of shares who are not citizens or residents of
the United States of America, who hold their shares as part of an integrated
investment (including a "straddle"), who are subject to alternative minimum tax
or who are subject to special rules, like financial institutions or insurance
companies. The discussion also assumes that the "collapsible corporation" rules
of the Internal Revenue Code do not apply to convert any gain to ordinary
income.
This tax discussion is included for general information purposes only and is
based upon present law. Because individual circumstances may differ, you should
consult your own tax advisor to determine the applicability of the rules
discussed below to you and the particular tax effects of our offer and the
merger, including the application and effect of other federal, state, local and
other tax laws.
The receipt of payment for shares accepted in our offer and the receipt of
cash pursuant to the merger (whether as merger consideration or pursuant to the
proper exercise of dissenter's rights) will be a taxable transaction for federal
income tax purposes (and also may be a taxable transaction under applicable
state, local and other income tax laws). In general, for federal income tax
purposes, a holder of shares will recognize gain or loss equal to the difference
between the holder's adjusted tax basis in the shares sold pursuant to our offer
or converted to cash in the merger and the amount of cash received therefor.
Gain or loss must be determined separately for each block of shares (i.e.,
shares acquired at the same cost in a single transaction) sold pursuant to our
offer or converted to cash in the merger. The gain or loss will be capital gain
or loss. Individual holders generally will be subject to federal income tax on
the net amount of the gain at a maximum rate of 20% if the holder's holding
period for the shares exceeds 12 months. The deduction of capital losses is
subject to limitations.
Payments in connection with our offer or the merger may be subject to backup
withholding at a 31% rate. Backup withholding generally applies if you (1) fail
to properly furnish a social security
37
number or taxpayer identification number, or (2) furnish an incorrect social
security number or taxpayer identification number. Backup withholding is not an
additional tax but merely an advance payment of tax, which may be refunded to
the extent it results in an overpayment. Some persons, including corporations
and financial institutions generally, are exempt from backup withholding.
Penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. You should consult with your own tax
advisor as to your qualifications for exemption from withholding and the
procedure for obtaining such exemption.
6. PRICE RANGE OF CONVERGENT'S COMMON STOCK.
According to Convergent's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 and information supplied by Convergent, the Convergent
shares were approved for listing on the Nasdaq National Market under the symbol
"CVGP" on August 1, 2000. In August 2000, Convergent completed its initial
public offering of 5,000,000 shares of its common stock at a price of $7.00 per
share, for aggregate proceeds of approximately $34.7 million. The lead manager
of that offering was Xxxxxxxxx Xxxxxxxx Inc.
According to the Convergent 10-Q, Convergent has never paid cash dividends
on its common stock and intends to retain earnings for the growth and expansion
of its business and not to declare or pay any cash dividends. Convergent agreed
in the merger agreement that, without the prior written consent of us or our
Parent, it will not declare, set aside or pay any dividend or other distribution
on any shares of capital stock of Convergent.
The following table sets forth the high and low sales prices per Convergent
share on the Nasdaq National Market for the periods indicated, as reported in
published financial sources.
CALENDAR YEAR HIGH LOW
------------- -------- --------
2000:
Third Quarter (from August 1, 2000)................... $ 7.25 $ 4.19
Fourth Quarter (through October 25, 2000)............. $ 7.84 $ 4.34
On October 13, 2000, the last full day of trading prior to the public
announcement of the execution of the merger agreement, the closing sale price
per Convergent share on the Nasdaq National Market was $4.72. On October 25,
2000, the last full trading day before the printing of this Offer to Purchase,
the closing sale price per share on the Nasdaq National Market was $7.84. YOU
ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. POSSIBLE EFFECTS OF OUR OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING;
MARGIN REGULATIONS AND EXCHANGE ACT REGISTRATION.
POSSIBLE EFFECTS OF OUR OFFER ON THE MARKET FOR SHARES OF CONVERGENT. Our
purchase of shares pursuant to our offer will reduce the number of shares that
might otherwise trade publicly and will reduce the number of holders of shares,
which could adversely affect the liquidity and market value of the remaining
shares held by the public.
NASDAQ LISTING. Depending upon the number of shares purchased pursuant to
our offer, the Convergent common stock may no longer meet the standards for
continued listing on the Nasdaq National Market. According to Nasdaq's published
guidelines, the shares would not be eligible to be included for listing if,
among other things, the number of shares that are not held directly or
indirectly by any officer or director of Convergent and by any other person who
is the beneficial owner of more than 10% of the total shares outstanding is less
than 750,000, or the number of holders of shares falls below 400. If, as a
result of the purchase of shares pursuant to our offer, the merger, the merger
agreement or otherwise, the Convergent common stock no longer meet the
requirements of the Nasdaq National Market for continued listing, the listing of
the shares will be discontinued. If that happens, the
38
market for the shares would be adversely affected. If the shares were no longer
eligible for listing on the Nasdaq National Market, quotations might still be
available from other sources. The extent of the public market for the shares and
the availability of quotations would, however, depend upon the number of
stockholders remaining at the time, the interest in maintaining a market in the
shares on the part of securities firms, the possible termination of registration
of the shares under the Exchange Act as described below and other factors.
Assuming we acquire the requisite number of shares to effect a delisting of the
shares, we intend to cause the delisting of the shares from Nasdaq following
consummation of our offer.
EXCHANGE ACT REGISTRATION. Convergent's common stock is currently
registered under the Exchange Act. If Convergent has less than 300 record
holders, Convergent may, upon application to the SEC, terminate that
registration under the Exchange Act. The termination of the registration of
Convergent's common stock under the Exchange Act would substantially reduce the
information required to be furnished by Convergent to holders of shares and to
the SEC and would make provisions of the Exchange Act, like the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, the requirement
of furnishing a proxy statement in connection with stockholders' meetings
pursuant to Section 14(a) or 14(c) of the Exchange Act and the related
requirements of an annual report, and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions, no longer applicable
to Convergent's common stock. In addition, once Convergent ceases to make its
public filings, affiliates of Convergent and persons holding "restricted
securities" of Convergent may have difficulty selling their shares pursuant to
Rule 144 promulgated under the Securities Act. We currently intend to seek to
cause Convergent to terminate the registration of the Convergent common stock
under the Exchange Act as soon after consummation of our offer as the
requirements for termination of registration are met.
MARGIN REGULATIONS. Shares of Convergent's common stock are currently
"margin securities," as defined under the rules of the Board of Governors of the
Federal Reserve System, which has the effect, among other things, of allowing
brokers to extend credit on shares of Convergent common stock used as
collateral. Depending upon factors similar to those described above regarding
listing and market quotations, following our offer it is possible that the
shares might no longer constitute "margin securities" for purposes of the margin
regulations of the Board of Governors of the Federal Reserve Board, with the
effect that shares could no longer be used as collateral for loans made by
brokers. In addition, if we terminate registration of the shares under the
Exchange Act, the shares would no longer constitute "margin securities."
8. INFORMATION CONCERNING CONVERGENT.
Except as otherwise set forth in this document, all of the information
concerning Convergent contained in this document, including financial
information, has been furnished by Convergent or has been taken from or based
upon publicly available documents and records on file with the SEC and other
public sources. Neither we, our Parent nor STC assume any responsibility for the
accuracy or completeness of the information concerning Convergent furnished by
Convergent or contained in those documents and records or for any failure by
Convergent to disclose events which may have occurred or may affect the
significance or accuracy of any of that information but which are unknown to us,
our Parent or STC.
GENERAL. Utility Graphics Consulting Corporation ("UGCC"), the predecessor
to Convergent, was founded in 1985. In 1994, Convergent was incorporated and it
immediately acquired all of the outstanding preferred and common stock of UGCC
and of Graphic Data Systems Corporation, a global information systems software
company. Convergent is a leading end-to-end business transformation provider for
utilities and local government. Convergent engineers, builds and manages digital
business solutions that allow utilities and government to transform their
organizations into digital business
39
enterprises where utility employees, contractors and customers can transact
business on a real-time basis using the Internet. Convergent's unique offerings
provide utilities with both the digital infrastructure and business solutions
necessary to operate in the new digital economy, a market characterized by
heightened competition and unprecedented, rapid change. Convergent combines
existing and emerging digital technologies and proprietary solution models with
acute subject matter expertise, focusing on mission critical solutions that help
utilities and local government increase revenues, reduce costs, improve customer
service, enhance service reliability, improve resource management and leverage
information assets. Convergent has offices in Denver, Boston, London and
Brisbane.
Convergent's principal executive offices are located at 0000 Xxxxx Xxxxxxx'x
Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000, and its telephone
number is (000) 000-0000.
DIRECTORS AND EXECUTIVE OFFICERS OF CONVERGENT GROUP CORPORATION.
Set forth below are the name, business address and principal occupation or
employment at the present time and, for the last five years, and the name,
principal business and address of any corporation or other organization in which
such employment is or was conducted, of each director and executive officer of
Convergent Group Corporation.
Unless otherwise noted, with respect to each of the executive officers of
Convergent, the business address is 0000 Xxxxx Xxxxxxx'x Xxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000. The telephone number of Convergent is
(000) 000-0000.
DIRECTORS AND EXECUTIVE OFFICERS OF CONVERGENT
The executive officers and directors of Convergent as of October 13, 2000
are as follows:
NAME AGE POSITION(S)
---- -------- ------------------------------------------
Xxxxx X. Xxxxxxxxxx, Xx................... 49 Chairman, Chief Executive Officer and
President
Xxxxx X. Xxxxxx........................... 42 Executive Vice President, Finance and
Director
Xxxx X. Xxxxxxx*.......................... 60 Executive Vice President
Xxxxx X. Xxxxxxxx......................... 50 Executive Vice President, Strategic
Accounts and Secretary
Xxxxx X. Xxxxxxx.......................... 40 Chief Financial Officer, Treasurer and
Assistant Secretary
Xxxxxx X. Xxxxxx.......................... 39 Executive Vice President, Resource
Management
Xxxxx X. Xxxxxxxxxx....................... 40 Executive Vice President, Global Delivery
Xxxxxx Xxxxxx............................. 56 Director
Xxxxx Xxxxxxx............................. 41 Director
Xxxx X. Xxxxx XXX......................... 54 Director
------------------------
* Xx. Xxxxxxx is expected to retire from Convergent upon the consummation of
the merger.
XXXXX X. XXXXXXXXXX, XX., a founding partner of Convergent, has been the
Chairman of its Board of Directors and its President and Chief Executive Officer
since 1994. He had been President and Chief Executive Officer of Convergent's
predecessor, UGC Consulting, since 1985. Prior to joining UGC Consulting, he
served from 1982 to 1985 as an executive consultant with Xxxxxxx Corporation, an
40
engineering management consulting firm. From 1977 to 1982, Xx. Xxxxxxxxxx served
as a projects director with MSE Corporation, a consulting and engineering
company, providing consulting, project planning, and management expertise to GIS
and land-related information system projects. Xx. Xxxxxxxxxx holds both an
M.S.E.S. degree in technology assessment from the School of Environmental
Affairs and a B.A. in computer mapping and geography from Indiana University.
XXXXX X. XXXXXX has been Executive Vice President of Finance of Convergent
since February 2000 and a director since August 1999. From 1994 until August
2000 Xx. Xxxxxx served as Convergent's Treasurer, and from 1994 to February 2000
he served as Xxxxxxxxxx's Chief Financial Officer. Prior to joining Convergent,
he served as Chief Financial Officer and Executive Vice President of Operations
for the Xxxx Xxxxxx Company, a commercial real estate developer, which he joined
after spending five years with a national public accounting firm. He holds a
B.S. in business administration and accounting from Colorado State University.
XXXX X. XXXXXXX has been Executive Vice President of Convergent since 1998,
and is responsible for the development and implementation of corporate growth,
expansion and marketing strategies. Xx. Xxxxxxx joined Convergent in 1989 to
lead a long-term consulting assignment for IBM. He left in 1993 to become
President of Smallworld, North America, a software company, and after their
initial public offering in 1997 he returned to Convergent. He served as Chief
Marketing Officer of Synercom Technology, a software company, from 1983 until
their initial public offering in 1986. Prior to joining Synercom, Xx. Xxxxxxx
was President of Utility Data Corporation, a data services company.
XXXXX X. XXXXXXXX, a founding partner of Convergent, has been Executive Vice
President of Strategic Accounts since July 2000, and is responsible for the
development and maintenance of certain of Convergent's primary accounts. From
1997 to July 2000, Xx. Xxxxxxxx served as the Executive Vice President of Global
Sales, and was responsible for executive leadership of Convergent's sales,
account development and account management activities. Prior to founding
Convergent in 1985, Xx. Xxxxxxxx worked at two global engineering design and
construction services firms, as well as being a Director and Executive Vice
President of EGT, Inc., a data conversion services and GIS application software
company. He is past president of the Geospatial Information & Technology
Association (GITA). Xx. Xxxxxxxx holds a B.S. degree in electrical engineering
from Kansas State University.
XXXXX X. XXXXXXX joined Convergent in January 2000 and has been Chief
Financial Officer since February 2000. Prior to joining Convergent, he served as
Director of Corporate Acquisitions and Alliances with Electronic Data Systems
Corporation. Xx. Xxxxxxx has worked in various capacities with Electronic Data
Systems during the past fifteen years, including in its Treasury Department.
Xx. Xxxxxxx holds an M.B.A. from Baylor University and a B.B.A. in accounting
from Abilene Christian University.
XXXXXX X. XXXXXX joined Convergent in November 1999 as Executive Vice
President of Resource Management. Prior to joining Convergent, Xx. Xxxxxx held
several executive positions at Cambridge Technology Partners, including Director
of Human Resources for the Customer Relationship Management and Interactive
Solutions practices and National Director of North American Recruitment. Before
joining Cambridge Technology Partners in 1995, Xx. Xxxxxx served during 1994 as
Director of Human Resources for the northeast management consulting practice of
Ernst & Young. Prior to joining Ernst & Young, Xx. Xxxxxx served from 1989 to
1993 as Director of Human Resources for the metropolitan New York tax practice
of Xxxxxx Xxxxxxxx, LLP and from 1985 to 1989 as Director of Human Resources at
the financial services center of Deloitte & Touche. Xx. Xxxxxx holds a B.A. in
Psychology from Xxxxx University.
XXXXX X. XXXXXXXXXX joined Convergent in December 1999 as Executive Vice
President of Global Delivery. Prior to joining Convergent, Xx. Xxxxxxxxxx served
as the Vice President of Customer Management Systems at Cambridge Technology
Partners. Prior to joining Cambridge Technology
41
Partners in 1997, Xx. Xxxxxxxxxx was a Managing Director of BSG Alliance/IT, an
information technology consulting company. Xx. Xxxxxxxxxx was also a co-founder
of Innovative Systems, Inc., a client/server integration company.
Xx. Xxxxxxxxxx holds a B.S. in Management and Computer Science from Worcester
Polytechnic Institute.
XXXXXX XXXXXX has been a director of Convergent since May 1998. In 1999, he
retired from Electronic Data Systems Corporation, where he served in various
capacities from 1972 until his retirement, most recently as Corporate Vice
President responsible for EDS' corporate global pursuit team. Prior to his
position with the global pursuit team, Xx. Xxxxxx was in charge of North
American and international business development for EDS. Xx. Xxxxxx was named
Corporate Vice President in 1982, and during his tenure with EDS he also managed
the Industrial Division, Finance and Industrial Group, General Motors Operations
Group and Financial and Commercial Group. Xx. Xxxxxx has a B.S. in marketing and
management from the University of Illinois.
XXXXX XXXXXXX has been a director of Convergent since August, 1999. He
co-founded InSight Capital Partners in 1995 and is a general partner of the
firm. Xx. Xxxxxxx was formerly the managing general partner of the Aspen
Technology Group, a consulting firm which he founded in 1987. He was a
consultant to X.X. Xxxxxxx Xxxxxx from 1989 to 1995. Xx. Xxxxxxx is a director
of Quest Software, Click Commerce, Software Technology Corporation,
XxxxxxxxXxxxx.xxx, Ikano, Peace Computers and Planiesia. He graduated from San
Diego State University with a B.A. in political science.
XXXX X. XXXXX XXX has been a director of Convergent since August 1999. He
currently consults with InSight Capital Partners and serves on the boards of
directors of a number of utility related technology companies. From 1985 to
1997, Mr. Xxxxx served as President of Worldwide Sales and Marketing and
Director for Indus International, an enterprise asset management solutions
company. Mr. Xxxxx has a B.A. in social sciences from Muhlenberg College.
AVAILABLE INFORMATION. Convergent is subject to the information and
reporting requirements of the Exchange Act and in accordance therewith is
obligated to file reports and other information with the SEC relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Convergent's directors and officers, their remuneration, stock
options granted to them, the principal holders of Convergent's securities, any
material interests of such persons in transactions with Convergent and other
matters is required to be disclosed in proxy statements distributed to
Convergent's stockholders and filed with the SEC. Those reports, proxy
statements and other information should be available for inspection at the
public reference room at the SEC's office 000 Xxxxx Xxxxxx, X.X., Xxxx 0000,
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, X.X., and also should be available for inspection
and copying at the following regional offices of the SEC: 0 Xxxxx Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and Citicorp Center, 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000. Copies may be obtained by
mail, upon payment of the SEC's customary charges, by writing to its principal
office at 000 Xxxxx Xxxxxx, X.X., Xxxx 0000, Xxxxxxxxx Xxxxx, Xxxxxxxxxx, X.X.
00000. Further information on the operation of the SEC's Public Reference Room
in Washington, D.C. can be obtained by calling the SEC at 0-000-XXX-0000. The
SEC also maintains an Internet worldwide web site that contains reports, proxy
statements and other information about issuers, such as Convergent, who file
electronically with the SEC. The address of that site is xxxx://xxx.xxx.xxx.
9. CONVERGENT PROJECTIONS.
CERTAIN PROJECTIONS OF CONVERGENT. In the course of discussions giving rise
to the merger agreement, representatives of Convergent furnished our
representatives with certain business and financial information that was not
publicly available, including certain financial projections for fiscal years
2000, 2001 and 2002. The non-public information provided by Convergent included
projections developed over a period of time by Convergent of the future
operating performance of Convergent. Convergent does not as a matter of course
publicly disclose projections as to future revenues or
42
earnings. Convergent's projections were prepared by management solely for
Convergent's internal purposes and were not prepared for publication or with a
view to complying with the published guidelines of the SEC regarding projections
or with the American Institute of Certified Public Accountants guide for
Prospective Financial Statements, and such information is being included in our
Offer to Purchase solely because it was furnished to us in connection with the
discussions giving rise to the merger agreement. The independent accountants of
Convergent have neither examined nor compiled the financial information set
forth below and, accordingly, do not express an opinion or any other form of
assurance with respect thereto. The reports of such independent accountants
incorporated by reference in our Offer to Purchase relate to the historical
financial information of Convergent and do not extend to the following financial
information and should not be read to do so.
CONVERGENT GROUP CORPORATION
SUMMARY FINANCIAL PROJECTIONS
$000S 2000 2001 2002
----- -------- -------- --------
Revenues.......................................... 83,005 127,161 182,834
------ ------- -------
Gross Profit...................................... 34,105 55,261 81,597
------ ------- -------
Operating Income.................................. 1,346 11,555 24,069
------ ------- -------
Net Profit........................................ (4,058) 5,249 13,029
====== ======= =======
The major assumptions made by Convergent with respect to Convergent's
projections were as follows:
- revenues increased by 24.6% from 1999 to 2000, 53.2% from 2000 to 2001,
and 43.8% from 2001 to 2002;
- overall gross margin was 36.2% in 1999, gross margins are expected to
increase to 41.1% in 2000, 43.5% in 2001, and 44.6% in 2002;
- operating margin was 10.9% in 1999 (excluding nonrecurring charges and
stock compensation expense), operating margins are expected to drop to
1.6% in 2000, before increasing to 9.1% in 2001, and 13.2% in 2002;
- net profit margins were -22.9% in 1999, and are expected to be -2.7% in
2000, 4.1% in 2001, and 7.1% in 2002; and
- an effective tax rate of 39.0% was utilized.
These projections are forward-looking statements. These forward-looking
statements are based on Convergent's current expectations and are subject to a
number of risks, uncertainties and assumptions. Among the important factors that
could cause actual results to differ significantly from those expressed or
implied by the forward-looking statements are Convergent's dependence on a
limited number of significant clients and the loss of any major client or the
loss or reduction in scope of any significant project, unexpected project
delays, project cancellations or the failure to obtain new projects and
increased costs from any associated employee underutilization; the failure to
maintain costs under Convergent's fixed-price contracts at or below the
estimated levels; Convergent's reliance on a single subcontractor for its data
conversion services and the failure of that subcontractor to perform services on
a timely basis; the failure of Convergent's eBusiness transformation products
and services to be accepted in the marketplace; the intense competition in
Convergent's industry; technological change; damage to Convergent's reputation
which could result from unexpected network interruptions, undetected errors or
defects in Convergent's services, breaches of Convergent's network security or
computer viruses or government audits; the risk that Convergent's utility and
government clients will
43
postpone or cancel projects if there is an economic downturn or if they are
unable to comply with their regulatory requirements; demand for Convergent's
services could decrease if the rate of deregulation in the utility industry
slows; the imposition of new burdensome government regulations and legal
uncertainties regarding the Internet which could increase Convergent's costs or
limit its operations; the risk that Convergent's intellectual property and
proprietary rights may not be fully protected; Convergent's inability to
negotiate contracts which permit it to reuse its software codes and
methodologies; the risk that Convergent will fail to manage and maintain its
growth, including its international growth; Convergent's need to successfully
develop awareness of its brand names; the risk that Convergent may be subject to
employment-related claims relating to the hiring of new employees; the potential
need for additional financing; as well as the other risk factors affecting
Convergent detailed from time to time in the documents filed by Convergent with
the Securities and Exchange Commission. Accordingly, there can be no assurance
that Convergent's projections will be realized, and actual results may prove to
be materially higher or lower than those contained in the projections. The
inclusion of this information should not be regarded as an indication that we,
Convergent or anyone else who received this information considered it a reliable
predictor of future events, and this information should not be relied on as
such. None of us, Convergent or any of our respective representatives assumes
any responsibility for the validity, reasonableness, or completeness of the
projected financial information, and Convergent has made no representation to us
regarding such information.
10. INFORMATION CONCERNING US, OUR PARENT AND STC.
PURCHASER AND PARENT. We and our Parent are newly formed Delaware
corporations. To date, we have engaged in no activities other than those
incident to our formation and our offer and the merger. Our Parent is currently
a wholly owned subsidiary of STC. Until immediately prior to the time that we
will purchase shares pursuant to our offer, it is not anticipated that we will
have any significant assets or liabilities or engage in activities other than
those incident to our formation and capitalization and the transactions
contemplated by our offer and the merger. Because we are newly formed and have
minimal assets and capitalization, no meaningful financial information regarding
us is available.
STC. STC is a Texas corporation that is a United States wholly-owned
subsidiary of Schlumberger Limited a worldwide leader in technical services. STC
operates in the U.S. and is engaged either directly or indirectly, through
wholly-owned subsidiaries, in three primary business segments: (1) oilfield
services, which is organized into three product groups: reservoir evaluation,
reservoir development, and reservoir management, that provide exploration and
production services required during the life of an oil and gas reservoir to the
petroleum industry; (2) resource management services, a solutions provider to
electricity, gas and water resource industry clients, to design, install,
operate and maintain resource measurement networks and services and (3) test and
transactions services, which provides smart card-based solutions, semiconductor
test, metrology and handling systems and services, and corporate IP (internet
protocol) and network solutions to customers.
DIRECTORS AND EXECUTIVE OFFICERS OF STC. The following table sets forth the
name, and present principal occupation or employment, and material occupations,
positions, offices or employments and business addresses thereof for the past
five years of each director and executive officer of STC. With the exception of
Xxxxxx Xxxxxxx who is a citizen of France, each of these people is a citizen of
the United States of America. The current business address of each person is in
care of STC, 000 Xxxxxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx 00000.
44
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND AGE AND MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
------------ ------------------------------------------------------
Xxxxxx Xxxxxxxxxx, 63.......... Xx. Xxxxxxxxxx is the Chairman of STC and has served in such
capacity since January 1999. He has been the Executive Vice
President and Chief Financial Officer of Schlumberger
Limited from 1980 until 1998 and the Chief Accounting
Officer of Schlumberger from 1993 to 1998. From 1972 to 1980
he was an Audit Partner for Price Waterhouse and from 1974
to 1980 he was head of their Mergers & Acquisitions
Department.
Xxxxx X. Xxxxxxxx, 61.......... Xx. Xxxxxxxx is Vice President and Secretary of STC and has
served in such capacities since 1996 and 1985, respectively.
From 1975 to 1985 he served as Secretary and General Counsel
of Schlumberger Limited. Prior to 1975 he was Legal Counsel
of Schlumberger from 1970 to 1974. Prior to joining
Schlumberger, he was an attorney at the Texas law firm of
Fulbright & Xxxxxxxx from 1964 to 1970.
Xxxxxx Xxxxxxx, 48............. Xx. Xxxxxxx is Vice President of STC and has served in such
capacity since March 2000. He is currently Vice
President--Product Development for Reservoir Development.
From 1993 to 1999 he was Vice President and General Manager
of the Sugar Land Product Center and he has held several
international assignments (France, Japan and Venezuela) in
operations and product development. He joined Schlumberger
in 1978.
Xxxxx Xxxxxxxx, 41............. Xx. Xxxxxxxx is Vice President of STC and has served in such
capacity since 1998. He is currently Geomarket Manager for
U.S. Land. He has previously held various positions with
STC, including Division Manager of NAM Wireline & Testing,
Personnel Manager of NAM Wireline & Testing, and Marketing
Manager of NAM Wireline & Testing. He joined STC in 1981.
Xxxxxxx Xxxx, 48............... Xx. Xxxx is Vice President of STC and has served in such
capacity since May 1989. He is currently Deputy Director of
Taxes for Schlumberger Limited. He joined Schlumberger
Limited in 1981. Prior to 1981, he was Tax Manager with
Coopers & Xxxxxxx in New York from 1974 to 1981.
Xxx Xxxx, 44................... Xx. Xxxx is Treasurer of STC and has served in such capacity
since May 1999. He has been Assistant Treasurer for
Schlumberger Limited from 1995 to May 1999. From 1981 to
1995 he held several financial accounting positions in the
U.S. and internationally (France and the Netherlands). Prior
to joining Schlumberger, he worked for Dart & Kraft as an
internal auditor.
Xxxxx Xxxxxx, 53............... Xx. Xxxxxx is the Controller of STC and has served in such
capacity since 1995. He is currently Director of Financial
Reporting of Schlumberger Limited. From 1983 to 1993 he
served as Assistant Controller of Schlumberger Limited and
from 1982 to 1983 he served as Director of External
Reporting. Prior to joining Schlumberger, he was Senior
Audit Manager for Price Waterhouse from 1979-1982.
OUR AND OUR PARENT'S DIRECTORS AND EXECUTIVE OFFICERS. The following table
sets forth the name, current business address, and present principal occupation
or employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of our Parent and us, which are identical as of the date of
this offering.
45
Xx. Xxxxxxxxxx is a citizen of France. The current business address of each
person is in care of STC, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND AGE AND MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
------------ ------------------------------------------------------
Xxxx Xxxxxxxxxx, 53............ Xx. Xxxxxxxxxx is our sole director and officer and the sole
director and officer of our Parent. Xx. Xxxxxxxxxx has been
appointed as the President and Secretary of our Parent and
for us. Xx. Xxxxxxxxxx also serves as the Vice President of
Information Technology for Schlumberger Limited.
Xx. Xxxxxxxxxx has been with Schlumberger since 1971 in
various divisions both in the U.S. and internationally.
Except as described in this document, neither we, our Parent nor STC nor, to
the best of our, our Parent's and STC's knowledge, any of our, our Parent's or
STC's directors or executive officers has during the last five years (1) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (2) been a party to any judicial or administrative proceeding
(except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws or a finding of any violation of such laws.
CURRENT OWNERSHIP OF SHARES. We, our Parent and STC may be deemed to
beneficially own, by virtue of the subscription and contribution agreement,
voting agreement and the tender and voting agreement, 27,684,971 shares of
Convergent common stock. Except as described in this document, neither we, our
Parent nor STC nor, to the best of our, our Parent's and STC's knowledge, any of
the persons or entities referred to above nor any director, executive officer or
subsidiary of any of these listed persons has effected any transaction in the
Convergent's common stock during the past 60 days. Please see "The Tender
Offer--Merger Agreement; Subscription and Contribution Agreement; Tender and
Voting Agreement; Voting Agreement; Exclusivity Agreement; Nondisclosure
Agreement; Employment Agreements" for a description of the merger agreement, the
subscription and contribution agreement, the tender and voting agreement and the
voting agreement.
PAST CONTACTS. Except as provided in the merger agreement, the subscription
and contribution agreement, the tender and voting agreement and the voting
agreement and as otherwise described in this document, neither we, our Parent
nor STC nor, to the best of our, our Parent's and STC's knowledge, any of our,
our Parent's or STC's directors or executive officers, has any agreement,
arrangement, understanding, whether or not legally enforceable, with any other
person with respect to any securities of Convergent, including, but not limited
to, the transfer or voting of such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies, consents or authorizations.
Except as set forth in this document, neither we, our Parent nor STC nor, to
the best of our, our Parent's and STC's knowledge, any of our, our Parent's or
STC's directors or executive officers, has had any transaction with Convergent
or any of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the SEC.
Except as described in this document, there have been no other negotiations,
transactions or material contacts between us, our Parent, STC, or any of our,
our Parent's or STC's subsidiaries or, to the best of our, our Parent's and
STC's knowledge, any of our, our Parent's or STC's directors or executive
officers, on the one hand, and Convergent or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer for or other
acquisition of any class of Convergent's securities, an election of Convergent's
directors or a sale or other transfer of a material amount of assets of
Convergent.
46
11. FINANCING OF OUR OFFER AND THE MERGER.
We estimate the maximum total funds required to consummate our offer and the
merger is approximately $276 million. We estimate our related fees and expenses
to be approximately $4.0 million. See "Tender Offer--Fees and Expenses."
Our offer is not conditioned upon any financing arrangements. We will obtain
all necessary funds required to consummate the transaction through capital
contributions or advances made by STC. STC plans to make these contributions or
advances from funds on hand and through borrowings under the revolving credit
line under its existing credit agreement, dated as of August 31, 1998, with
Banque Nationale De Paris, The Chase Manhattan Bank and Citibank, N.A., as
agents, and Banque Nationale De Paris, Chase Securities Inc. and Citicorp
Securities, Inc., as lead arrangers, and ABN Amro Bank N.V., as arranger.
The credit agreement consists of a senior unsecured (1) $1.0 billion
revolving credit commitment and (2) $1.8 billion term commitment. The final
maturity date for the outstanding loans under the credit agreement is
August 31, 2003.
At STC's option, any advance under the credit agreement made to it will be
available at either the "base rate" or the "eurodollar rate." The "base rate" is
a fluctuating rate equal to the greater of (1) Citibank's rate of interest
publicly announced as its base rate and (2) 1/2 of one percent per annum above
the federal funds rate. The "eurodollar rate" is a periodic fixed rate equal to
the London interbank market, commonly referred to as LIBOR, plus the applicable
margin, which is an amount that will vary based on a pricing grid with
applicable spreads based on the ratio of STC's adjusted cash flow to its
interest expense.
In addition to the rates set forth above, STC may request competitive bids
from the participating lenders under the credit agreement for advances under its
revolving credit commitment. Each lender may bid at its discretion. STC may
accept one or more bids, provided that the aggregate outstanding advances of all
lenders on the date of, and giving effect to, any advance under a competitive
bid may not exceed $1.0 billion. STC does not intend to request a competitive
bid from the participating lenders for any loans made in connection with our
offer or the merger.
Advances (other than competitive bid advances) may be prepaid without
penalty, in minimum amounts of $10.0 million and increments of $1.0 million.
Competitive bid advances cannot be prepaid. STC has not made any formal plans
concerning the repayment or refinancing of the credit agreement.
The credit agreement contains representations and warranties, affirmative
covenants, financial covenants, negative covenants and events of default that
are usual and customary for facilities similar to the credit agreement. STC is
permitted to make borrowings under the credit agreement so long as its
representations and warranties contained in the credit agreement are correct in
all material respects and so long as no event of default has occurred and is
continuing.
No alternative financing plans or arrangements have been made in the event
STC is unable to borrow the funds under its credit agreement described above in
connection with our offer and the merger.
This summary is qualified in its entirety by reference to the credit
agreement, which we incorporate by reference, and which has been filed as an
exhibit to the Schedule TO in connection with our offer.
47
12.MERGER AGREEMENT; SUBSCRIPTION AND CONTRIBUTION AGREEMENT; TENDER AND VOTING
AGREEMENT; VOTING AGREEMENT; EXCLUSIVITY AGREEMENT; NONDISCLOSURE AGREEMENT;
EMPLOYMENT AGREEMENTS.
THE MERGER AGREEMENT.
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
WHICH WE INCORPORATE BY REFERENCE, AND HAS BEEN FILED AS AN EXHIBIT TO THE
TENDER OFFER STATEMENT ON SCHEDULE TO (THE "SCHEDULE TO") FILED WITH THE SEC BY
US AND OUR PARENT IN CONNECTION WITH OUR OFFER. THE MERGER AGREEMENT MAY BE
EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACES SET FORTH IN "THE TENDER
OFFER--INFORMATION CONCERNING CONVERGENT" OR DOWNLOADED AT XXXX://XXX.XXX.XXX.
DEFINED TERMS USED IN THIS DISCUSSION AND NOT DEFINED HAVE THE MEANINGS GIVEN TO
THOSE TERMS IN THE MERGER AGREEMENT.
OUR OFFER. The merger agreement provides for the commencement of our offer
within ten business days after the execution and delivery of the merger
agreement. Our obligation to accept for payment shares tendered pursuant to our
offer is subject to the satisfaction of the Minimum Condition and certain other
conditions that are described in "The Tender Offer--Conditions of Our Offer."
Subject to the applicable law and the terms and conditions of the merger
agreement, we expressly reserve the right to waive any such condition in whole
or in part, in our sole discretion, and also expressly reserve the right to
increase the price per share payable in our offer and to make any other changes
in the terms and conditions of our offer; except that, without the written
consent of the special committee, we will not amend or waive the Minimum
Condition, decrease the number of shares sought in our offer, change the form of
or decrease the amount of consideration to be paid, impose conditions to our
offer in addition to those set forth in "The Tender Offer--Conditions of Our
Offer" or amend any other term in our offer which is materially adverse to
Convergent's stockholders.
THE MERGER. The merger agreement provides that, upon the terms and subject
to the conditions in the merger agreement, and in accordance with Delaware law,
we will be merged with and into Convergent. As a result of the merger, our
separate corporate existence will cease and Convergent will continue as the
surviving corporation and will become a wholly owned subsidiary of our Parent.
Upon consummation of the merger, each issued and then outstanding share (other
than shares held in the treasury of Convergent and any shares that are held by
stockholders who have not voted in favor of the merger or consented thereto in
writing and who will have demanded and perfected their appraisal rights for such
shares in accordance with Delaware law) will be canceled and converted
automatically into the right to receive the merger consideration, which will be
equal to the consideration given pursuant to our offer.
The merger agreement provides that our directors and Convergent's officers
immediately prior to the effective time of the merger will be the directors and
officers of Convergent, as the surviving corporation. Subject to the merger
agreement, the certificate of incorporation of Convergent, as in effect
immediately prior to the effective time of the merger, will be the certificate
of incorporation of Convergent after the merger. Immediately following the
merger, the certificate of incorporation of Convergent will be amended and
restated to be substantially identical to ours immediately prior to the
effective time of the merger. Subject to the merger agreement, our bylaws, as in
effect immediately prior to the effective time of the merger, will be the bylaws
of Convergent after the merger.
STOCKHOLDERS' MEETING. If required by applicable law in order to consummate
the merger, Convergent, acting through its board of directors, will, in
accordance with applicable law, duly call, give notice of, convene and hold a
special meeting of its stockholders, as promptly as practicable following the
acceptance for payment and purchase of shares by us pursuant to our offer, for
the purpose of considering and taking action upon the adoption of the merger
agreement. If we acquire at least a majority of the outstanding shares in our
offer, we will have sufficient voting power to adopt the merger agreement
without requiring other stockholders to vote in favor of adoption of the merger
48
agreement. We have agreed to cause all shares then owned beneficially by us to
be voted in favor of the adoption of the merger agreement. The merger agreement
provides that, if we acquire at least 90% of the then outstanding shares, we,
our Parent, STC and Convergent will take all necessary and appropriate action to
cause the merger to become effective, in accordance with Delaware law, as soon
as practicable after that acquisition, without a meeting of Convergent's
stockholders.
PROXY STATEMENT. If required by applicable law in order to consummate the
merger, Convergent, acting through its board of directors, will, in accordance
with applicable law:
- prepare and file with the SEC a preliminary proxy or information statement
relating to the merger and the merger agreement;
- use its best efforts to obtain and furnish information required to be
included by the SEC in the proxy statement;
- after consultation with our Parent, respond promptly to any comments made
by the SEC or its staff with respect to the preliminary proxy or
information statement;
- cause the proxy statement to be mailed to its stockholders;
- use its commercially reasonable efforts to solicit proxies in favor of the
adoption of the merger agreement; and
- take all other action necessary or advisable to secure any vote or consent
of stockholders required by Delaware law to effect the merger.
Convergent has agreed to include in the proxy statement the recommendation
of the board of directors of Convergent that stockholders of Convergent vote in
favor of the adoption of the merger agreement.
CONDUCT OF BUSINESS BY CONVERGENT PENDING THE MERGER. In the merger
agreement, Convergent agreed that between October 13, 2000 and the date on which
our Parent appoints a majority of the members of the board of directors of
Convergent, except as expressly contemplated by the merger agreement or the
tender agreements or as agreed in writing by our Parent (which consent will not
be unreasonably withheld):
- the business of Convergent and each of the subsidiaries of Convergent will
be conducted only in the usual, regular and ordinary course and
substantially in the same manner as previously conducted, and Convergent
and each subsidiary of Convergent will use its commercially reasonable
efforts to preserve its business organization substantially intact, keep
available the services of its current officers and employees and maintain
its existing relations with franchisees, customers, suppliers, creditors,
business partners and others having significant business dealings with it,
so that the goodwill and ongoing business is materially unimpaired at the
effective time of the merger;
- neither Convergent nor any subsidiary of Convergent will: (1) amend its
amended and restated certificate of incorporation or amended by-laws or
similar organizational documents, (2) issue, sell, transfer, pledge,
dispose of or encumber any shares of any class or series of its capital
stock or voting debt, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of any class or series of its capital stock or any voting debt,
other than shares reserved for issuance on October 13, 2000 pursuant to
the exercise of options under Convergent's 1999 Stock Option Plan
outstanding on October 13, 2000, or the exercise of options issued in
compliance with the merger agreement, (3) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with
respect to any shares of any class or series of its capital stock,
(4) split, combine or reclassify any outstanding shares of any class or
series of its stock or (5) redeem, purchase or
49
otherwise acquire directly or indirectly any shares of any class or series
of its capital stock, or any instrument or security which consists of or
includes a right to acquire such shares;
- neither Convergent nor any subsidiary of Convergent will materially
modify, amend or terminate any of its material contracts or waive, release
or assign any material rights or claims, except in the ordinary course of
business and consistent with past practice;
- neither Convergent nor any subsidiary of Convergent will (1) incur or
assume any long-term debt, or except in the ordinary course of business,
incur or assume any short-term indebtedness in excess of $500,000,
(2) materially modify the terms of any indebtedness or other liability,
other than modifications of short term debt in the ordinary and usual
course of business and consistent with past practice, (3) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person in excess of $500,000, except in certain circumstances as being in
the ordinary course of business, (4) make any loan, advance or capital
contribution to, or investment in, any other person (other than to or in
wholly owned subsidiaries of Convergent) in excess of $500,000, or
(5) enter into any commitment or transaction (including any capital
expenditure or purchase, sale or lease of assets or real estate) requiring
payments in excess of $500,000;
- neither Convergent nor any subsidiary of Convergent will transfer, lease,
license, sell or dispose of any assets except for (1) sales of assets
pursuant to existing contracts or commitments in the ordinary and usual
course of business and (2) dispositions of useless or worthless assets;
- except as otherwise specifically provided in the merger agreement or in
the Schedule 14D-9, neither Convergent nor any subsidiary of Convergent
will make or offer to make any material change in the compensation payable
or to become payable to any of its officers, directors, employees, agents
or consultants (other than normal recurring increases in wages to
employees who are not officers or directors or affiliates in the ordinary
course of business and consistent with past practice) or to persons
providing management services, or enter into or amend any material
employment, severance, consulting, termination or other agreement or
employee benefit plan or make any loans to any of its officers, directors,
employees, affiliates, agents or consultants or make any material change
in its existing borrowing or lending arrangements for or on behalf of any
such persons pursuant to an employee benefit plan of Convergent or
otherwise;
- except as otherwise contemplated by the merger agreement, neither
Convergent nor any subsidiary of Convergent will (1) pay or make any
accrual or arrangement for payment of any pension, retirement allowance or
other employee benefit pursuant to any existing plan, agreement or
arrangement to any officer, director, employee or affiliate (except for
payments and accruals made in the ordinary course of business and
consistent with past practice), (2) pay, offer to pay or agree to pay or
make any accrual or arrangement for payment to any officers, directors,
employees or affiliates of Convergent or any subsidiary of Convergent of
any amount relating to unused vacation days in excess of $50,000 (except
payments and accruals made in the ordinary course of business consistent
with past practice), (3) adopt or pay, grant, issue, accelerate or accrue
salary or other payments or benefits in excess of $50,000 pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with
or for the benefit of any director, officer, employee, agent or
consultant, whether past or present, or amend in any material respect any
existing plan, agreement or arrangement in a manner inconsistent with the
foregoing;
- neither Convergent nor any subsidiary of Convergent will exercise its
discretion or otherwise voluntarily accelerate the vesting of any option
under Convergent's stock option plan as a result of the merger or any
other "change in control" of Convergent or otherwise;
50
- neither Convergent nor any subsidiary of Convergent will revalue in any
material respect any of its assets, including writing down the value of
inventory or writing-off notes or accounts receivable, other than in the
ordinary course of business consistent with past practice or as required
by generally accepted accounting principles;
- neither Convergent nor any subsidiary of Convergent will permit any
material insurance policy naming it as a beneficiary or a loss payable
payee to be cancelled or terminated without notice to and the prior
consent of our Parent, except policies providing coverage for losses not
in excess of $50,000;
- neither Convergent nor any subsidiary of Convergent will settle or
compromise any pending or threatened suit, action or claim that relates to
the transactions contemplated by the merger agreement, except to the
extent the amount of any such settlement or compromise has been reserved
for in Convergent's financial statements contained in filings by
Convergent with the SEC or could not reasonably be expected to have a
material adverse effect on Convergent and its subsidiaries taken as a
whole;
- neither Convergent nor any subsidiary of Convergent will pay, purchase,
discharge or satisfy any of its claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $250,000, other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice, of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, Convergent's financial statements included (or
incorporated by reference) in filings by Convergent with the SEC, or as
required by all applicable law;
- neither Convergent nor any subsidiary of Convergent will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Convergent or
any subsidiary of Convergent (other than the merger);
- neither Convergent nor any subsidiary of Convergent will (1) change any of
the accounting methods used by it unless required by generally accepted
accounting principles or (2) make any material election relating to taxes,
change any material election relating to taxes already made, adopt any
material accounting method relating to taxes, change any material
accounting method relating to taxes unless required by generally accepted
accounting principles or change in the U.S. tax laws, enter into any
closing agreement relating to taxes, settle any claim or assessment
relating to taxes or consent to any claim or assessment relating to taxes
or any waiver of the statute of limitations for any such claim or
assessment;
- neither Convergent nor any subsidiary of Convergent will take, or agree to
commit to take, any action that would be reasonably likely to result in
any of the conditions to our offer or any of the conditions to the merger
not being satisfied, or that would make any representation or warranty of
Convergent contained in the merger agreement inaccurate in any material
respect at, or as of any time prior to the effective time of the merger,
or that would materially impair the ability of Convergent, our Parent, us
or the holders of shares to consummate our offer or the merger in
accordance with its terms or materially delay consummation;
- Convergent will not permit its plan administrator or similar person or
body to cause any outstanding option under Convergent's stock option plan
to terminate in connection with the transactions contemplated by the
merger agreement and the tender agreements; and
- neither Convergent nor any subsidiary of Convergent will enter into an
agreement, contract, commitment, understanding or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
51
BOARD REPRESENTATION. The merger agreement provides that promptly after the
later to occur of (1) the purchase of and payment for any shares by our Parent
or any of its subsidiaries as a result of which our Parent and its subsidiaries
beneficially own at least a majority of then outstanding shares and
(2) compliance with Section 14(f) of the Exchange Act, and Rule 14f-1
thereunder, our Parent will be entitled to designate up to such number of
directors, rounded up to the next whole number, on Convergent's board of
directors as will give our Parent representation on the board equal to the
product of the total number of directors on the board (giving effect to the
directors elected pursuant to the merger agreement) multiplied by the percentage
of the total outstanding number of shares that we or any affiliate of ours
beneficially owns. Convergent will, upon request of our Parent, use its best
efforts promptly either to increase the size of its board of directors or to
secure the resignations of such number of its incumbent directors, or both as is
necessary to enable such designees of our Parent to be so elected or appointed
to Convergent's board of directors, and Convergent will take all actions
available to Convergent to cause such designees of our Parent to be so elected
or appointed at that time. At that time, Convergent will, if requested by our
Parent, also take all action necessary to cause persons designated by our Parent
to have the same percentage representation on each committee of Convergent's
board of directors, each board of directors (or similar body) of each subsidiary
of Convergent, and each committee (or similar body) of each board of directors.
The parties have agreed that, in the event that our Parent's designees are
elected or appointed to Convergent's board of directors, all members of the
special committee of the board will remain on Convergent's board of directors.
The affirmative vote of a majority of the special committee will be required
after the acceptance for payment of shares pursuant to our offer and prior to
the effective time of the merger, before Convergent (1) amends or terminates the
merger agreement, (2) exercises or waives any of its rights, benefits or
remedies under the merger agreement if such exercise or waiver adversely affects
holders of shares (other than ours or our Parent), (3) takes any other action
under or in connection with the merger agreement if such action adversely
affects holders of shares (other than ours or our Parent) or (4) take any other
action on behalf of Convergent in connection with the merger agreement required
to be taken by Convergent's board of directors.
ACCESS TO INFORMATION. Convergent has agreed to (and will cause each of its
subsidiaries to) give the officers, employees, accountants, counsel and other
representatives of our Parent, upon reasonable notice given by our Parent to
Convergent prior to the later of the termination date of the merger agreement or
the date our Parent appoints a majority of the board of directors, reasonable
access to all its properties, books, contracts, commitments and records, and,
during that period, Convergent will (and will cause each of its subsidiaries to)
furnish reasonably promptly to our Parent a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and all other
information concerning its business, properties and personnel as our Parent
reasonably requests. We have agreed to keep that information confidential,
except in limited circumstances.
NOTIFICATION OF COMPETING TRANSACTIONS. Convergent will promptly, and in
any event within twenty-four hours, notify our Parent of the existence of any
proposal, discussion, negotiation or inquiry received by Convergent, and
Convergent will promptly, and in any event within twenty-four hours, communicate
to our Parent the material terms of any proposal, discussion, negotiation or
inquiry, which could reasonably be expected to lead to an Acquisition Proposal,
which it may receive (and will promptly, and in any event within twenty-four
hours, provide to our Parent copies of any written materials received by
Convergent, any subsidiary of Convergent or their respective representatives in
connection with a proposal, discussion, negotiation or inquiry) and the identity
of the party making the proposal or inquiry or engaging in such discussion or
negotiation, and will immediately communicate to our Parent the status of the
proposal, discussion or inquiry. Convergent will promptly, but in any event
within 24 hours, provide to our Parent any non-public information concerning
Convergent provided to any other party which was not previously provided to our
Parent.
52
An "Acquisition Proposal" means any proposal or offer from any person (other
than our Parent, us or any of our or our Parent's affiliates) to acquire
(1) all or a substantial part of the business or properties of Convergent or any
significant subsidiary of Convergent or any capital stock of Convergent, whether
by merger, tender offer, exchange offer, sale of assets, consolidation, other
business combination, recapitalization, reorganization, liquidation, dissolution
or other transactions involving Convergent or any significant subsidiary of
Convergent or (2) 15% or more of the capital stock or other equity interests in
Convergent or 100% of the capital stock or other equity interests in any
significant subsidiary of Convergent.
As a general rule, neither Xxxxxxxxxx's board of directors nor any committee
thereof can:
- withdraw or modify, or propose to withdraw or modify in a manner adverse
to our Parent or us, the approval or recommendation by such board of
directors or any such committee of our offer, the merger agreement or the
merger;
- approve or recommend or propose to approve or recommend any Acquisition
Proposal; or
- enter into any agreement with respect to any Acquisition Proposal.
However, prior to the time of acceptance for payment of shares pursuant to
our offer, Convergent's board of directors may withdraw or modify its approval
or recommendation of our offer, the merger agreement or the merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the third business day
following our Parent's receipt of written notice from Convergent advising our
Parent that the board of directors of Convergent has received a Superior
Proposal which it intends to accept, specifying the material terms and
conditions of the Superior Proposal, identifying the person making the Superior
Proposal. Convergent will not be entitled to enter into any agreement with
respect to a Superior Proposal unless and until the merger agreement is
terminated and Convergent has paid the termination fee due to our Parent.
The merger agreement clearly does not prohibit Convergent or Convergent's
board of directors from (1) soliciting a Superior Proposal, (2) taking and
disclosing to Convergent's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 under the
Exchange Act, or (3) making disclosure to Convergent's stockholders if, as and
when the board of directors of Convergent determines in good faith, after
consultation with outside counsel, that disclosure is required in order to
comply with their fiduciary duties to Convergent's stockholders under applicable
law; PROVIDED, HOWEVER, that Convergent will not, except as permitted by the
merger agreement, withdraw or modify, or propose to withdraw or modify, its
position with respect to our offer or the merger or approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or enter
into any agreement with respect to any Acquisition Proposal.
A "Superior Proposal" means an unsolicited Acquisition Proposal (but
changing the 15% amount in clause (a)(ii) of the definition of Acquisition
Proposal to 50%) which is (a) (1) a bona fide written offer, (2) capable of
being, and likely to be, funded on the terms disclosed, and (3) likely to be
consummated in accordance with its terms, each as determined in good faith by
the board of directors and consistent with the advice of an independent
investment bank and (b) the board of directors determines in good faith (after
(1) receiving advice from the Convergent's independent investment banking firm
that the Acquisition Proposal is superior, from a financial point of view, to
our offer, the merger and merger agreement and (2) consultation with outside
legal counsel that failure to take that action would likely be contrary to its
fiduciary duties to Convergent's stockholders under applicable law.
Convergent agreed not to enter into any agreement with respect to a Superior
Proposal without giving us the opportunity to match the Superior Proposal and
unless and until the merger agreement is terminated and Convergent has paid the
termination fee.
53
TREATMENT OF STOCK OPTIONS. The merger agreement provides that, at the
effective time of the merger, each stock option of Convergent which is then
outstanding and unexercised will be converted into options to purchase common
stock of our Parent. Each option assumed by our Parent under the merger
agreement will continue to have, and be subject to, the same terms and
conditions set forth in Convergent's stock option plan and the applicable stock
option agreement then in effect, except that (1) the option will be exercisable
for that number of shares of our Parent's common stock equal to the number of
shares of Convergent's common stock subject to such option immediately prior to
the effective time of the merger, and (2) the exercise price per share will
remain as the exercise price per share in effect for that option immediately
prior to the effective time of the merger. Consistent with the terms of
Convergent's stock option plan and the documents governing the outstanding
options under the plan, the merger will not terminate any of the outstanding
options under Convergent's stock option plan. Within 20 business days after the
effective time of the merger, our Parent will issue to each person who,
immediately prior to the effective time of the merger, was a holder of an
outstanding option under the Convergent's stock option plan, a document in form
and substance satisfactory to Convergent evidencing the assumption of options by
our Parent. All outstanding rights of Convergent which it held immediately prior
to the effective time of the merger will, at the effective time of the merger,
be assigned to our Parent in the merger and will be exercisable by our Parent
upon the same terms and conditions in effect immediately prior to the effective
time of the merger.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. In the merger agreement, our
Parent agreed that, to the fullest extent permitted under applicable law after
the effective time of merger, our Parent will, and will cause Convergent to, as
the surviving corporation (or any successor), indemnify, defend and hold
harmless each present and former officer and director, fiduciary or agent of
Convergent or the subsidiaries of Convergent against all losses arising out of
actions or omissions occurring at or prior to the effective time of the merger
to the full extent permitted under applicable Delaware law, the terms of
Convergent's certificate of incorporation or by-laws, as in effect on
October 13, 2000.
Our Parent or Convergent, as the surviving corporation, will maintain
Convergent's existing officers' and directors' liability insurance for at least
six years following the effective date of the merger. Parent may substitute
policies with substantially equivalent coverage and amounts which contain terms
no less favorable to the former directors or officers. In no event will our
Parent or Convergent be required to pay aggregate annual directors and officers
insurance premiums in excess of 200% of the aggregate premiums paid by
Convergent in the twelve months prior to October 13, 2000, on an annualized
basis; but if our Parent or Convergent is unable to obtain the amount of
insurance required by the merger agreement for the aggregate premium, our Parent
or Convergent will obtain as much insurance as can be obtained for an annual
premium not in excess of 200% of the aggregate directors and officers insurance
premiums paid by Convergent in the twelve months prior to October 13, 2000, on
an annualized basis.
54
REPRESENTATIONS AND WARRANTIES. The merger agreement contains various
customary representations and warranties of the parties thereto including
representations by Convergent as to its organization and qualification, its
subsidiaries and affiliates, capitalization, authorization of the execution of
the merger agreement, receipt of board approval, the vote of stockholders
required for adoption of the merger agreement, the necessary consents and
approvals, reports Convergent filed with the SEC, its financial statements,
undisclosed liabilities, interim operations, absence of changes since
December 31, 1999, litigation, employee benefit plans, tax matters, leases,
environmental issues, intellectual property, employment matters, compliance with
laws, contracts, customers and suppliers, the information contained in its
Schedule 14D-9, opinion of Xxxxxx Xxxxxxx, absence of questionable payments,
insider interests, brokers or finders and insurance.
CONDITIONS TO THE MERGER. Under the merger agreement, the respective
obligation of each party to effect the merger is subject to the satisfaction, at
or prior to the effective time of the merger, of the following conditions:
- the merger agreement has been adopted by the requisite vote of the holders
of the shares, if required by applicable law, in order to consummate the
merger;
- no statute, rule or regulation has been enacted or promulgated by any
governmental entity which prohibits the consummation of the merger, and
there is no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the merger;
- we have purchased the shares pursuant to our offer; and
- any governmental or regulatory notices, approvals or other requirements
necessary to consummate the merger has been given, obtained or complied
with.
TERMINATION. The merger agreement may be terminated at any time prior to
the effective time of the merger, whether before or after stockholder approval
is obtained:
- by the mutual written consent of our Parent and Convergent;
- by either of Convergent or our Parent:
- if our offer expired and we did not accept any shares pursuant to our
offer prior to March 31, 2001 (or such later termination date, if
extended in accordance with the merger agreement), except that any party
whose failure to fulfill its obligations under the merger agreement is
the cause of the failure by us to accept for payment shares pursuant to
our offer may not be entitled to terminate the merger agreement; or
- if any governmental entity has issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the parties
hereto will use their reasonable efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the acceptance for payment of,
or payment for, shares pursuant to our offer or the merger and that
order, decree, ruling or other action has become final and
non-appealable.
- By Convergent:
- if our offer is not commenced within 15 business days following the date
of the initial public announcement of our offer (unless Convergent is
then in material breach of its obligations under the merger agreement);
- if Convergent's board of directors withdraws or modifies its approval or
recommendation of our offer, the merger agreement or the merger, approves
or recommends a Superior Proposal, or enters into an agreement with
respect to a Superior Proposal, in each case at any time after the third
business day following our Parent's receipt of written notice from
Convergent advising our Parent that the board of directors of Convergent
has received a Superior
54
Proposal which it intends to accept, specifying the terms and conditions
of the Superior Proposal, identifying the person making the Superior
Proposal, so long as Convergent makes simultaneous payment to our Parent
of the termination fee; or
- if we have breached in any material respect any of our representations,
warranties, covenants or other agreements contained in the merger
agreement and (1) that breach is not curable or (2) 20 days have elapsed
subsequent to notice by Convergent to us of that breach and that breach
has not been cured within the 20 day period.
- By our Parent (on behalf of itself, STC and us):
- if, due to an occurrence, involving a material breach by Convergent of
its obligations under the merger agreement, we failed to commence our
offer within 15 business days following the date of the initial public
announcement of our offer;
- if, prior to the purchase of shares by us pursuant to our offer,
Convergent's board of directors withdraws, modifies or changes in a
manner adverse to us its approval or recommendation of our offer, the
merger agreement or the merger or recommends the approval or acceptance
of an Acquisition Proposal or executes a letter of intent, agreement in
principle or definitive agreement relating to an Acquisition Proposal; or
- if, prior to the purchase of shares by us pursuant to our offer,
Convergent has breached any representation, warranty, covenant or other
agreement contained in the merger agreement which causes the failure of
conditions to our offer and that breach has not been cured within
20 days after the giving of written notice of that breach.
EFFECT OF TERMINATION. In the event of the termination of the merger
agreement or abandonment of the merger pursuant to the terms of the merger
agreement, written notice will be given to the other party or parties specifying
the provision of the merger agreement pursuant to which such termination or
abandonment is made, the merger agreement will become void and have no further
effect, without any liability or obligation on the part of STC, our Parent, us
or Convergent; except that (1) a number of administrative provisions survive
termination; (2) nothing in the merger agreement will relieve Convergent or any
of its affiliates from liability or damages resulting from any willful and
material breach of the merger agreement; and (3) nothing in the merger agreement
will relieve STC, our Parent or us or any of our affiliates from liability or
damages resulting from any breach of STC's, our Parent's or our the merger
agreement.
EXPENSES; TERMINATION FEES. Generally, each party will pay its own costs
incurred in connection with the merger agreement with the transactions
contemplated by the merger, our offer and the tender agreements; except the
merger agreement provides that Convergent must pay STC $8,000,000 in same day
funds:
- concurrently with the execution by Convergent of a definitive written
agreement which accepts or implements a Superior Proposal;
- concurrently with the consummation of the transaction contemplated by an
Acquisition Proposal where either Convergent or our Parent terminates the
merger agreement because our offer expired and we did not purchase any
shares or we did not accept any shares pursuant to our offer prior to
March 31, 2001 (or a later termination date, if extended in accordance
with the merger agreement) and, before that time, there was publicly
announced another Acquisition Proposal by a person other than our Parent,
us or any of our affiliates (and that Acquisition Proposal has not been
withdrawn prior to the time of termination), and at any time prior to, or
within twelve months after the termination of the merger agreement,
Convergent has consummated a transaction with respect to that Acquisition
Proposal;
55
- concurrently with Convergent's termination of the merger agreement
resulting from Convergent's board of directors (x) withdrawing or
modifying its approval or recommendation of our offer, the merger
agreement or the merger, (y) approving or recommending a Superior
Proposal, or (z) entering into an agreement with respect to a Superior
Proposal; or
- within two business days after our Parent's termination of the merger
agreement in the event that Convergent' board of directors has withdrawn,
modified or changed in a manner adverse to us its approval or
recommendation of our offer, the merger agreement or the merger or has
recommended the approval or acceptance of an Acquisition Proposal or has
executed a letter of intent, agreement in principle or definitive
agreement relating to an Acquisition Proposal with a third party.
SUBSCRIPTION AND CONTRIBUTION AGREEMENT
ON OCTOBER 13, 2000, OUR PARENT ENTERED INTO THE SUBSCRIPTION AND
CONTRIBUTION AGREEMENT WITH STC, CINERGY AND THE MANAGEMENT INVESTORS. WE
QUALIFY THE FOLLOWING SUMMARY OF THE SUBSCRIPTION AND CONTRIBUTION AGREEMENT IN
ITS ENTIRETY BY REFERENCE TO THE SUBSCRIPTION AND CONTRIBUTION AGREEMENT. WE
INCORPORATE BY REFERENCE THE SUBSCRIPTION AND CONTRIBUTION AGREEMENT WHICH IS
FILED WITH THE SEC AS AN EXHIBIT TO THE SCHEDULE TO WHICH WE FILED WITH THE SEC.
THE SUBSCRIPTION AND CONTRIBUTION AGREEMENT MAY BE EXAMINED AND COPIES MAY BE
OBTAINED IN THE MANNER SET FORTH IN "THE TENDER OFFER--INFORMATION CONCERNING
CONVERGENT."
Pursuant to the subscription and contribution agreement, STC has agreed to
purchase a number of our Parent's shares at $8.00 per share sufficient to enable
us to pay (1) for all Convergent shares accepted for payment in the tender
offer, (2) $8.00 per Convergent share converted into cash pursuant to the merger
and (3) for all Convergent shares which we may be required to purchase pursuant
to employment agreements with certain executive officers.
Pursuant to the subscription and contribution agreement, Cinergy has agreed
to contribute 1,083,280 Convergent shares for 1,083,280 of our Parent's shares
and the management investors have agreed to contribute approximately 12,465,000
shares of their Convergent common stock or options exercisable for Convergent
common stock (tendering to us their remaining shares) and receive an equal
number of shares of or options for our Parent's common stock. Based on the
anticipated number of our Parent's shares that will be outstanding following the
consummation of the tender offer, the merger and the transactions contemplated
by the subscription and contribution agreement, the shares of our Parent's
common stock received by all of the management investors and Cinergy will
represent approximately 28% of our Parent's outstanding stock (before giving
effect to any stock options or other issuances of our Parent's securities or
rights to acquire our Parent's securities).
Pursuant to the subscription and contribution agreement, the management
investors and Cinergy made representations and warranties to our Parent, STC and
us and also agreed to do the following:
- deliver, within 15 business days of the date of the subscription and
contribution agreement (by November 2, 2000), their certificates
representing their Convergent common stock;
- treat their acquisition of our Parent's common stock as a tax free
exchange in accordance with Section 351 of the Internal Revenue Code;
- not to transfer their Parent common stock received pursuant to the
subscription and contribution agreement except in compliance with the
Securities Act and the stockholders' agreement; and
- waive their rights to a jury trial and submit to the personal jurisdiction
of any Federal court in the State of Delaware or any Delaware state court.
Concurrently with the closing of the purchases and contributions pursuant to
the subscription and contribution agreement, our Parent, the management
investors and Cinergy will enter into a
56
stockholders agreement. The stockholders agreement will contain various rights
and restrictions, including redemption, tag-along and drag-along rights, certain
restrictions on transfer and indemnification provisions, in connection with such
parties' ownership of equity securities of our Parent following the merger. In
addition, the stockholders agreement will contain provisions regarding the
constitution of the our Parent's board of directors, including provisions
permitting STC to designate a specified number of directors and permitting
Cinergy to designate one director so long as Cinergy holds 500,000 shares of our
Parent's common stock. In the event that the purchases and contributions
contemplated by the subscription and contribution agreement are consummated
after termination of the merger agreement, Cinergy and the management investors
will have a put right. This means that our Parent or STC will be obligated, upon
notice from the stockholder exercising such right, to repurchase the shares of
our Parent's common stock owned by such stockholder. The stockholders agreement
will also give the parties certain rights to register their shares of our
Parent's common stock under the Securities Act. This brief description of the
form of stockholders' agreement, which will be executed upon the closing of the
purchases and contributions pursuant to the subscription and contribution
agreement, is qualified in its entirety by reference to the stockholders'
agreement, a copy of which is incorporated herein by reference and copies or
forms of which have been filed with the SEC as exhibits to the Schedule TO to
which our offer is an exhibit. The stockholders' agreement may be examined and
copies may be obtained in the manner set forth in "The Tender Offer--Information
Concerning Convergent."
Concurrently with the closing of the purchases and contributions pursuant to
the subscription and contribution agreement, our Parent and Cinergy will enter
into an investors rights agreement. The investors rights agreement gives Cinergy
additional redemption rights, additional rights in the event that our Parent
exercises its drag-along rights and an additional right in the event that
Cinergy exercises its put right pursuant to the stockholders' agreement. This
brief description of the form of investor rights agreement, which will be
executed upon the closing of the purchases and contributions pursuant to the
subscription and contribution agreement, is qualified in its entirety by
reference to the investor rights agreement, a copy of which is incorporated
herein by reference and copies or forms of which have been filed with the SEC as
exhibits to the Schedule TO to which our offer is an exhibit. The investor
rights agreement may be examined and copies may be obtained in the manner set
forth in "The Tender Offer--Information Concerning Convergent."
TENDER AND VOTING AGREEMENT
ON OCTOBER 13, 2000, WE ENTERED INTO THE TENDER AND VOTING AGREEMENT WITH
OUR PARENT, STC AND THE MAJOR STOCKHOLDERS OF CONVERGENT. THE FOLLOWING SUMMARY
OF THE TENDER AND VOTING AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE TENDER AND VOTING AGREEMENT, A COPY OF WHICH IS INCORPORATED HEREIN BY
REFERENCE AND COPIES OR FORMS OF WHICH HAVE BEEN FILED WITH THE SEC AS EXHIBITS
TO THE SCHEDULE TO TO WHICH OUR OFFER IS AN EXHIBIT. THE TENDER AND VOTING
AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED IN THE MANNER SET FORTH IN
"THE TENDER OFFER--INFORMATION CONCERNING CONVERGENT."
TENDER OF SHARES. On or before November 24, 2000, the major stockholders,
except Cinergy, have agreed to tender all of their shares to us pursuant to our
offer. Cinergy has agreed to tender 50% of its shares. So long as the tender and
voting agreement is not terminated, the major stockholders may not withdraw
their shares from our offer.
VOTING. Each of the major stockholders further agreed that from
October 13, 2000 until the earlier to occur of (a) the effective time of the
merger, (b) the termination of the merger agreement by its terms, (c) the time
the parties later agree to by mutual written consent, or (d) March 31, 2001, at
any meeting of Convergent's stockholders, however called, and in any action by
consent of Convergent's stockholders, they will vote their shares:
57
- in favor of the merger and the merger agreement,
- against any Acquisition Proposal (as that term is defined in the merger
agreement), against any proposal for action or agreement that would result
in a breach of any covenant, representation or warranty or any other
obligation or agreement of Convergent under the merger agreement, against
any change in the directors of Convergent, against any change in the
present capitalization of Convergent, and against any amendment to
Convergent's amended and restated certificate of incorporation or amended
bylaws which in each case could reasonably be expected to impede,
interfere with, delay, postpone or materially adversely affect the
transactions contemplated by the merger agreement or the likelihood of the
transactions being consummated and
- in favor of any other matter necessary for consummation of the
transactions contemplated by the merger agreement.
The major stockholders agreed that they will execute any documents which are
necessary in order to effectuate the foregoing, including the ability for us or
our nominees to vote directly such shares owned by the major stockholders.
Additionally, the major stockholders agreed to waive any rights of appraisal or
rights to dissent from the merger.
IRREVOCABLE PROXY. The major stockholders (1) revoked all prior proxies and
powers of attorney governing the shares owned by them and (2) granted an
irrevocable proxy to us and our Parent, or any of our nominees, to vote and act
(by written consent or otherwise) with respect to all of the shares owned by
them at any meeting of Convergent's stockholders or by written consent in lieu
of any meetings with regard to any matter covered in the paragraph above.
NO DISPOSITION OR ENCUMBRANCE OF SHARES. Except as contemplated by the
tender and voting agreement and the merger agreement, the major stockholders
agreed not to, directly or indirectly, during the term of this agreement:
- sell, assign, transfer, encumber or otherwise dispose of or enter into any
contract, option, or other arrangement or understanding with respect to
the sale, assignment, transfer, encumbrance or other disposition of their
shares or any interest in their shares,
- enter into any agreement or understanding with respect to any transfer of
any or all of their shares or any interest therein,
- grant any proxy with respect to their shares or
- deposit their shares into a voting trust or other agreement or arrangement
with respect to their shares.
NOTIFICATION. Each major stockholder agreed to notify our Parent promptly,
but no later than 24 hours, of the existence of, or which could reasonably be
expected to lead to, an Acquisition Proposal and indentify the person making
such proposal or inquiry.
TERMINATION. The tender and voting agreement and the related proxies will
automatically terminate and be of no further force and effect upon the earlier
to occur of (1) the effective time of the merger, (2) the termination of the
merger agreement by its terms (including termination for acceptance of a
Superior Proposal), (3) the time the parties later agree to by mutual written
consent, or (4) March 31, 2001.
VOTING AGREEMENT
ON OCTOBER 13, 2000, WE ENTERED INTO THE VOTING AGREEMENT WITH OUR PARENT,
STC, CINERGY AND THE MANAGEMENT INVESTORS OF CONVERGENT. THE FOLLOWING SUMMARY
OF THE VOTING AGREEMENT IS QUALIFIED IN
58
ITS ENTIRETY BY REFERENCE TO THE VOTING AGREEMENT, A COPY OF WHICH IS
INCORPORATED HEREIN BY REFERENCE AND COPIES OR FORMS OF WHICH HAVE BEEN FILED
WITH THE SEC AS EXHIBITS TO THE SCHEDULE TO TO WHICH OUR OFFER IS AN EXHIBIT.
THE VOTING AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED IN THE MANNER
SET FORTH IN "THE TENDER OFFER--INFORMATION CONCERNING CONVERGENT."
VOTING. Each of the management investors and Cinergy agreed that from
October 13, 2000 until the earlier to occur of (a) the effective time of the
merger, (b) the termination of the merger agreement by its terms, (c) the time
the parties later agree to by mutual written consent, or (d) March 31, 2001, at
any meeting of Convergent's stockholders, however called, and in any action by
consent of Convergent's stockholders, they will vote their shares:
- in favor of the merger and the merger agreement,
- against any Acquisition Proposal (as that term is defined in the merger
agreement), and against any proposal for action or agreement that would
result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Convergent under the merger agreement,
any change in the directors of Convergent, any change in the present
capitalization of Convergent, and any amendment to Convergent's amended
and restated certificate of incorporation or amended bylaws which in each
case could reasonably be expected to impede, interfere with, delay,
postpone or materially adversely affect the transactions contemplated by
the merger agreement or the likelihood of the transactions being
consummated and
- in favor of any other matter necessary for consummation of the
transactions contemplated by the merger agreement.
The management investors and Cinergy agreed that they will execute any
documents which are necessary or appropriate in order to effectuate the
foregoing, including the ability for us or our nominees to vote directly such
shares owned by the major stockholders. Additionally, the management investors
and Cinergy agreed to waive any rights of appraisal or rights to dissent from
the merger.
IRREVOCABLE PROXY. The management investors and Cinergy (1) revoked all
prior proxies or powers of attorney governing the shares owned by them and
(2) granted an irrevocable proxy to us and our Parent, or any nominee to vote
and act (by written consent or otherwise) with respect to all of the shares
owned by them at any meeting of Convergent's stockholders or by written consent
in lieu of any meetings with regard to any matter covered in the paragraph
above.
NO DISPOSITION OR ENCUMBRANCE OF SHARES. Except as contemplated by the
voting agreement and the merger agreement, the management investors and Cinergy
agreed not to, directly or indirectly, during the term of this agreement:
- sell, assign, transfer, encumber or otherwise dispose of or enter into any
contract, option, or other arrangement or understanding with respect to
the direct or indirect sale, assignment, transfer, encumbrance or other
disposition of their shares,
- enter into any agreement or understanding with respect to any transfer of
any or all of their shares or any interest therein,
- grant any proxy with respect to their shares or
- deposit their shares into a voting trust or other agreement or arrangement
with respect to their shares.
TERMINATION. The voting agreement and related proxies will terminate and be
of no further force and effect upon the earlier to occur of (1) the effective
time of the merger, (2) the termination of the
59
merger agreement by its terms (including termination for acceptance of a
Superior Proposal), (3) the time the parties later agree to by mutual written
consent, or (4) March 31, 2001.
NOTIFICATION. Each management investor agreed to notify our Parent
promptly, but no later than 24 hours, of the existence of, or which could
reasonably be expected to lead to, an Acquisition Proposal and indentify the
person making such proposal or inquiry.
EXCLUSIVITY AGREEMENT
THE FOLLOWING IS A SUMMARY OF PROVISIONS OF THE EXCLUSIVITY AGREEMENT, DATED
SEPTEMBER 19, 2000, BETWEEN CONVERGENT AND SCHLUMBERGER LIMITED, OR ITS
DESIGNATED SUBSIDIARY OR AFFILIATE. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE EXCLUSIVITY AGREEMENT, WHICH WE INCORPORATE BY REFERENCE, AND A
COPY OF WHICH HAS BEEN FILED WITH THE SEC AS AN EXHIBIT TO THE SCHEDULE TO. THE
EXCLUSIVITY AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACES
SET FORTH IN "THE TENDER OFFER--INFORMATION CONCERNING CONVERGENT."
In the exclusivity agreement, Xxxxxxxxxx agreed that between September 19,
2000 and 5:00 p.m. on September 29, 2000, Convergent would not, directly or
indirectly, take any action to encourage, solicit or initiate any sale,
recapitalization or other disposition of the business of Convergent or any
material portion of the capital stock or assets of Convergent to anyone other
than Schlumberger. Convergent also agreed to discontinue any current discussions
it was having about such a transaction and agreed not to furnish any non-public
information about itself or its business to any third party other than
Schlumberger. Nothing in the exclusivity letter, however, prevented Convergent
or its board from complying with Rules 14d-9 and 14e-2 promulgated under the
Securities Exchange Act of 1934, as amended.
In the exclusivity agreement, Xxxxxxxxxx and Schlumberger agreed that,
unless disclosure was required by law, they would not publicly announce their
discussions. On September 29, the parties extend the exclusivity agreement to
5:00 p.m. October 6. The exclusivity agreement expired in accordance with its
terms on October 6, 2000.
NONDISCLOSURE AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE NONDISCLOSURE
AGREEMENT, DATED JULY 6, 2000, AS AMENDED ON AUGUST 4, 2000, BETWEEN CONVERGENT
AND SCHLUMBERGER, INDUSTRIES S.A. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE NONDISCLOSURE AGREEMENT, WHICH IS INCORPORATED HEREIN BY
REFERENCE, AND A COPY OF WHICH HAS BEEN FILED WITH THE SEC AS AN EXHIBIT TO THE
SCHEDULE TO. THE NONDISCLOSURE AGREEMENT MAY BE EXAMINED AND COPIES MAY BE
OBTAINED AT THE PLACES SET FORTH IN "THE TENDER OFFER--INFORMATION CONCERNING
CONVERGENT."
Pursuant to the terms of the nondisclosure agreement, Convergent and
Schlumberger S.A. agreed to provide one another some of its non-public
confidential and proprietary information, and each agreed, on behalf of itself
and any of its representatives that received any of the confidential
information, among other things: (1) to keep the disclosed information
confidential, except in specific situations and (2) not to use the confidential
information for any purpose other than to evaluate a possible transaction
between the parties. The nondisclosure agreement is effective until
December 31, 2002.
EMPLOYMENT AGREEMENTS
ON OCTOBER 13, 2000, CONVERGENT ENTERED INTO EMPLOYMENT AGREEMENTS (THE "NEW
AGREEMENTS") WITH XXXXX X. XXXXXXXXXX, XX. (THE "CEO") AND XXXXX X. XXXXXXXX,
XXXXX X. XXXXXX, XXXXXX X. XXXXXX, XXXXX X. XXXXXXX AND XXXXX X. XXXXXXXXXX,
KNOWN AS THE SENIOR EXECUTIVES, WHICH AS OF THE EFFECTIVE TIME OF THE MERGER
WILL SUPERSEDE AND REPLACE IN ALL RESPECTS THE SENIOR EXECUTIVES' CURRENT
60
EMPLOYMENT AGREEMENTS. IN THE EVENT THE MERGER AGREEMENT IS TERMINATED, EACH OF
THE NEW AGREEMENTS WOULD BE VOID AND THE SENIOR EXECUTIVES' CURRENT EMPLOYMENT
AGREEMENTS WOULD REMAIN IN FULL FORCE AND EFFECT. THE FOLLOWING SUMMARY OF THE
NEW AGREEMENTS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE NEW AGREEMENTS,
COPIES OF WHICH ARE INCORPORATED HEREIN BY REFERENCE AND COPIES OR FORMS OF
WHICH HAVE BEEN FILED WITH THE SEC AS EXHIBITS TO THE SCHEDULE TO TO WHICH OUR
OFFER IS AN EXHIBIT. THE NEW AGREEMENTS MAY BE EXAMINED AND COPIES MAY BE
OBTAINED IN THE MANNER SET FORTH IN "THE TENDER OFFER--INFORMATION CONCERNING
CONVERGENT."
THE CEO. Xx. Xxxxxxxxxx'x New Agreement provides that, as of the effective
time of the merger, he will serve as Chief Executive Officer and President of
Convergent. The initial term of employment is for a period of three years.
Thereafter, the New Agreement will automatically renew for one year periods,
provided neither we nor Xx. Xxxxxxxxxx give written notice of an intent not to
renew the New Agreement.
- Xx. Xxxxxxxxxx'x present annual salary of $225,000 will continue up to the
effective time of the merger; thereafter Xx. Xxxxxxxxxx'x initial annual
salary will be determined by the compensation committee of the board of
directors of our Parent, which will include one disinterested director
nominated by Xx. Xxxxxxxxxx. Subsequent annual adjustments to
Xx. Xxxxxxxxxx'x annual salary will be made by the compensation committee
then in effect, with no requirement that Xx. Xxxxxxxxxx nominate a member
of that committee.
- Xx. Xxxxxxxxxx'x bonus for calendar year 2000 is $50,000. The target
annual bonus after calendar year 2000 will be set using the same procedure
set for determining Xx. Xxxxxxxxxx'x annual salary.
- Xx. Xxxxxxxxxx'x New Agreement provides for the sale of shares of
Convergent to us, and also grants Xx. Xxxxxxxxxx an option to purchase
certain shares in our Parent.
- Xx. Xxxxxxxxxx will be entitled to participate in all employee benefit
plans generally made available to other employees, as well as to
"grossed-up" reimbursements for the costs of a $4,000,000 life insurance
policy and to certain other fringe benefits.
- Convergent may terminate Xx. Xxxxxxxxxx'x employment at any time for
"Cause" (as defined in the New Agreement) and upon thirty days' written
notice without "Cause." Xx. Xxxxxxxxxx may terminate his employment with
"Good Reason" (as defined in the New Agreement) upon written notice and
failure by Convergent to cure within 20 days. Xx. Xxxxxxxxxx may terminate
his employment agreement without "Good Reason" upon 30 days' notice. The
New Agreement may be terminated at any time upon the mutual agreement of
the parties. If Xx. Xxxxxxxxxx'x employment were to terminate without
"Cause," or if Xx. Xxxxxxxxxx were to terminate his employment for "Good
Reason," or if the New Agreement were to terminate because of
Xx. Xxxxxxxxxx'x disability (as defined in the New Agreement), then
Xx. Xxxxxxxxxx would be entitled to continuation of his employee benefits
and salary for a period of six months and, in the case of termination
without "Cause" or by Xx. Xxxxxxxxxx for "Good Reason" only, to exercise
his option to require our Parent to purchase his remaining shares of our
Parent. If Xx. Xxxxxxxxxx'x employment were to terminate for "Cause" and
such "Cause" was a failure to adequately perform material responsibilities
and duties in a professionally reasonable manner or in accordance with
Convergent's work standards, then Xx. Xxxxxxxxxx would be entitled to a
continuation of his employee benefits and salary for a period of one
month.
- If Xx. Xxxxxxxxxx'x employment were to terminate because of
Xx. Xxxxxxxxxx'x death, then his dependents would be entitled to a six
month continuation of his employee benefits and to payment of one month of
Xx. Xxxxxxxxxx'x salary.
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- Xx. Xxxxxxxxxx'x New Agreement contains a one year post-termination
non-competition provision, as well a one year post-termination prohibition
on the solicitation of our customers or employees.
- The New Agreement also contains provisions concerning the protection of
Convergent's trade secrets and other intellectual property.
- In consideration for the termination of his prior employment agreement,
Xx. Xxxxxxxxxx will receive a one-time payment of $500,000.
- The New Agreement provides Xx. Xxxxxxxxxx with the discretion to allocate,
among one or more of the senior management of Convergent, no less than 25%
of any over-allotment options granted in connection with any underwritten
public offering of shares of our Parent's common stock.
THE SENIOR EXECUTIVES. The New Agreements for Messrs. Xxxxxxxx, Schley,
Xxxxxxx and Xxxxxxxxxx and for Xx. Xxxxxx are substantially similar and include
the following terms:
- The initial term of employment is for a period of three years. Thereafter,
the New Agreement will automatically renew for one year periods, provided
neither Convergent nor the senior executive give written notice of an
intent not to renew the New Agreement.
- The senior executive's annual salary will be reviewed at least annually,
and may be increased but not decreased. The senior executive will also
receive annual cost of living adjustments.
- Bonus arrangements for calendar year 2000 which were in place prior to
execution of the New Agreement will remain in place. Beginning with
calendar year 2001, the senior executive will be eligible for performance
bonuses in an amount between 50% and 100% of the senior executive's annual
salary.
- Each senior executive's New Agreement (except Xx. Xxxxxxxx'x) provides for
the sale of certain shares of Convergent to us, and each New Agreement
grants the senior executive an option to purchase certain shares in our
Parent.
- The senior executive will be entitled to participate in all employee
benefit plans generally made available to other employees. In addition,
the senior executives will be entitled to participate in certain other
fringe benefits.
- Convergent may terminate the senior executive's employment at any time for
"cause" and upon thirty days' written notice without "cause." The senior
executive may terminate his or her employment with "good reason" upon
written notice and failure by Convergent to cure within 20 days. The
Senior Executive may terminate his or her employment agreement without
"good reason" upon 30 days' notice. The New Agreement may be terminated at
any time upon the mutual agreement of the parties.
- If the senior executive's employment were to terminate without "cause," or
if the senior executive were to terminate his or her employment for "good
reason," then the senior executive would be entitled to continuation of
his or her employee benefits and salary for a period of six months and to
exercise his or her option to require our Parent to purchase his or her
remaining shares of our Parent. If the senior executive's employment were
to terminate for "cause" and such "cause" was a failure to adequately
perform material responsibilities and duties in a
professionally-reasonable manner or in accordance with Convergent's work
standards, then the senior executive would be entitled to continuation of
his or her employee benefits and salary for a period of one month. If the
senior executive's employment were to terminate because of death or
disability (as defined in the New Agreement), then either senior executive
or his or her dependents would be entitled to a six month continuation of
the senior executive's employee benefits and to payment of three months'
salary upon termination for disability and one month's salary upon the
death of the senior executive.
62
- The senior executives' New Agreements contain a one year post-termination
non-competition provision, as well a one year post-termination prohibition
on the solicitation of Convergent's customers or employees. The New
Agreements also contain provisions concerning the protection of
Convergent's trade secrets and other intellectual property.
The titles and salaries for each of the senior executives other than the CEO
are as follows:
- Xx. Xxxxxxxx: Executive Vice President of Strategic Accounts. $200,000
annual salary.
- Xx. Xxxxxx: Executive Vice President of Finance. $176,400 annual salary.
- Xx. Xxxxxx: Executive Vice President of Resource Management. $200,000
annual salary.
- Xx. Xxxxxxx: Chief Financial Officer, Treasurer and Assistant Secretary.
$200,000 annual salary.
- Xx. Xxxxxxxxxx: Executive Vice President of Global Operations. $225,000
annual salary.
13. CONDITIONS OF OUR OFFER.
Notwithstanding any other provisions of our offer, and in addition to (and
not in limitation of) our rights, subject to the provisions of the merger
agreement, to extend and amend our offer at any time in our sole discretion, we
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to our obligation to pay for or return tendered shares promptly after
termination or withdrawal of our offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered shares, if (1) all conditions to our offer, other than
necessary governmental approvals, have not been satisfied or waived on or before
the Expiration Date (as then extended), (2) any applicable waiting period under
the U.S. antitrust laws has not expired or been terminated, (3) the Minimum
Condition has not been satisfied, or (4) at any time on or after the date of the
merger agreement and before the Expiration Date (as then extended), any of the
following events shall have occurred and be continuing:
(a) there shall be pending any suit, action or proceeding by any
governmental entity (1) seeking to prohibit or impose any material limitations
on our or our Parent's ownership or operation (or that of any of our or our
Parent's subsidiaries or affiliates) of all or a material portion of our or
Convergent's businesses or assets, or to compel us, our Parent or any of our
affiliates or subsidiaries to dispose of or hold separate any material portion
of the business or assets of Convergent or Parent, (2) seeking to prohibit the
acquisition by us or our Parent of any Convergent shares under our offer or
pursuant to the subscription and contribution agreement, seeking to restrain or
prohibit the making or consummation of our offer or the merger or the
performance of any of the other transactions contemplated thereby, (3) seeking
to obtain from Convergent, our Parent or us any monetary damages related to a
violation of the U.S. antitrust laws that are material in relation to
Convergent, (4) seeking to render illegal our ability, or rendering us unable,
to accept for payment, pay for or purchase some or all of the shares pursuant to
our offer or the merger, (5) seeking to impose material limitations on our or
our Parent's ability to exercise full rights of ownership of the shares,
including the right to vote the shares purchased by us on all matters properly
presented to Convergent's stockholders or (6) which otherwise is reasonably
likely to have a material adverse effect on Convergent;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to our
offer or the merger by any governmental entity, or any other action shall be
taken by any governmental entity, other than the application to our offer or the
merger of applicable waiting periods under U.S. antitrust laws, that is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (1) through (4) of paragraph (a) above;
63
(c) Convergent's board of directors or any committee of the board (1) shall
have withdrawn, modified or changed in a manner adverse to us or our Parent, its
approval or recommendation of our offer, the merger agreement or the merger,
(2) shall have recommended the approval or acceptance of an Acquisition Proposal
or (3) shall have executed an agreement in principle or definitive agreement
relating to an Acquisition Proposal;
(d) any of the representations and warranties of Convergent contained in the
merger agreement shall not be true and correct as of October 13, 2000 or as of
the scheduled Expiration Date (taking the representations and warranties with
the same effect as if made on and as of such scheduled Expiration Date and
without giving effect to any "material," "material adverse effect" or similar
qualifications), except for representations and warranties specifically made as
of an earlier date, which shall only be required to be true and correct as of
such earlier date, and except to the extent that the aggregate of all breaches
of the representations and warranties of Convergent could not reasonably be
expected to have a material adverse effect on Convergent;
(e) Convergent shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any agreement or
covenant of Convergent to be performed or complied with by it prior to the
scheduled Expiration Date under the merger agreement;
(f) all material consents set forth in the merger agreement shall not have
been obtained and be in full force and effect, other than consents the failure
to obtain which would not reasonably be expected to have a material adverse
effect on Convergent;
(g) the merger agreement shall have been terminated in accordance with its
terms; or
(h) the employment agreement with Xxxxx X. Xxxxxxxxxx, Xx., shall not remain
in full force and effect or he shall have expressed an intention not to continue
his employment with the surviving corporation, PROVIDED, that this condition
shall be deemed satisfied in the event that he has died or become permanently
disabled.
The foregoing conditions are for the sole benefit of our Parent and us, may
be waived by our Parent or us, in whole or in part, at any time and from time to
time in the reasonable discretion of our Parent or us. Subject to the terms of
the merger agreement, the failure by Parent or us at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
right is an ongoing right which may be asserted at any time and from time to
time.
14. LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to Convergent and the review of information furnished by Convergent to
STC and its affiliates and discussions between representatives of affiliates of
STC with representatives of Convergent during STC's investigation of Convergent,
except to the extent set forth below, neither we nor STC are aware of any
approval or other action by any domestic (federal or state) or foreign
governmental authority, which in either case would be required prior to our
acquisition of shares pursuant to our offer. Should any approval or other action
be required, it is our present intention to seek the approval or action. We do
not currently intend, however, to delay the purchase of shares tendered pursuant
to our offer pending the outcome of any action or the receipt of any approval
(subject to our right to decline to purchase shares if any of the conditions in
"The Tender Offer--Conditions of Our Offer" will have occurred). There can be no
assurance that any approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
our business or the business of Convergent or STC or that parts of our business
or the businesses of Convergent or STC might not have to be disposed of or held
separate or other substantial conditions complied with in order to obtain such
approval or other action or in the event that such approval was not obtained or
such other action was not taken. Our obligation under our offer to accept for
payment and pay for shares is subject to
64
conditions, including conditions relating to the legal matters discussed in this
Section 14. See "The Tender Offer--Conditions of Our Offer" for additional
conditions of our offer.
STC and Convergent conduct operations in a number of jurisdictions where
other regulatory filings or approvals may be required or advisable in connection
with the completion of the merger. STC and Convergent are currently in the
process of reviewing whether filings or approvals may be required or desirable
in these jurisdictions which may be material to STC and Convergent and its
subsidiaries. It is possible that one or more of these filings may not be made,
or one or more of these approvals, which are not as a matter of practice
required to be obtained prior to effectiveness of a merger transaction, may not
be obtained, prior to the merger.
ANTITRUST. Under U.S. antitrust laws and the rules that have been
promulgated thereunder by the FTC, some acquisition transactions may not be
consummated unless information has been furnished to the Antitrust Division and
the FTC and waiting period requirements have been satisfied. Our acquisition of
shares pursuant to our offer is subject to these requirements. See "The Tender
Offer--Acceptance for Payment and Payment for Shares."
Schlumberger Limited, the parent company of STC, intends to file the
appropriate Premerger Notification and Report Forms in connection with the
purchase of shares pursuant to our offer with the Antitrust Division and the FTC
shortly after the initiation of our offer.
Under the applicable provisions of U.S. antitrust laws, the purchase of
shares pursuant to our offer may not be consummated until the expiration of a
15 day waiting period following the filing by Schlumberger. We expect that our
filing will be made in a timely manner such that the waiting period will expire
prior to the Expiration Date. Furthermore, Schlumberger intends to request early
termination of the waiting period applicable to the transaction. There can be no
assurance, however, that the 15-day antitrust waiting period will be terminated
early. If either the FTC or the Antitrust Division were to request additional
information or documentary material from Schlumberger, Convergent or both
companies with respect to our acquisition of shares, the waiting period would
expire at 12:00 Midnight, New York City time, on the 10th day after the date of
substantial compliance with the request(s). Thereafter, the waiting period could
be extended only with the consent of Schlumberger. If the acquisition of shares
is delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to U.S. antitrust laws,
our offer will be extended and, in any event, the purchase of and payment for
shares will be deferred until 10 days after the request is substantially
complied with, unless the waiting period is sooner terminated by the FTC and the
Antitrust Division. Only one extension of the waiting period pursuant to a
request for additional information is authorized by U.S. antitrust laws and the
rules promulgated thereunder, except by court order. Any extension of the
waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See "The Tender Offer--Withdrawal Rights." It is
a condition to our offer that the waiting period applicable under U.S. antitrust
laws to our offer expire or be terminated. See "The Tender Offer--Acceptance for
Payment and Payment for Shares" and "The Tender Offer--Conditions of Our Offer."
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as our proposed acquisition of shares
pursuant to our offer. At any time before or after our purchase of shares
pursuant to our offer, the FTC or the Antitrust Division could take any action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of shares pursuant to our
offer or seeking the divestiture of shares purchased by us or the divestiture of
substantial assets of Schlumberger, Convergent or their respective subsidiaries.
The merger agreement provides that in connection with the receipt of any
necessary approvals under the U.S. antitrust laws, neither Convergent nor any of
Convergent's subsidiaries can divest or hold separate or otherwise take or
commit to take any action that limits STC's or our freedom of action with
respect of, or their ability to retain, Convergent or any of Convergent's
65
subsidiaries or any material portions thereof or any of the businesses, product
lines, properties or assets of Convergent or any of its subsidiaries, without
STC's prior written consent (which may be withheld in STC's sole and absolute
discretion).
Private parties and state attorneys general may also bring legal action
under federal or state antitrust laws under certain circumstances. Based upon an
examination of information available to STC relating to the businesses in which
STC, Convergent and their respective subsidiaries are engaged, we and STC
believe that our offer will not violate the antitrust laws. Nevertheless, there
can be no assurance that a challenge to our offer on antitrust grounds will not
be made or, if a challenge is made, what the result would be. See "The Tender
Offer--Conditions of Our Offer" for the conditions to our offer, including
conditions with respect to litigation.
SHORT-FORM MERGER. Section 253 of the Delaware General Corporation Law
provides, among other things, that, if the parent corporation owns at least 90%
of the outstanding shares of each voting class of a subsidiary corporation, the
merger of the subsidiary corporation and the parent corporation may be effected
by a resolution adopted and approved by the board of directors of the parent
corporation and the appropriate filings with the Delaware Secretary of State,
without any action or vote on the part of the stockholders of the subsidiary
corporation. Under the Delaware General Corporation Law, if we acquire at least
90% of Convergent's outstanding shares, we will be able to effect the merger
without a vote of the other stockholders of Convergent. In such event, STC, our
Parent, we and Convergent have agreed in the merger agreement to take all
necessary and appropriate action to cause the merger to become effective as soon
as practicable after such acquisition, without a meeting of Convergent's
stockholders. In the event that less than 90% of the shares then outstanding are
tendered pursuant to the offer, we may extend the offer for up to 20 business
days so that the merger may be consummated as described in this paragraph.
LITIGATION. On October 16, 2000, three class actions were filed in the
Court of Chancery of the State of Delaware against Convergent and each member of
its board of directors. Each of the actions alleges that the members of
Convergent's board of directors breached their fiduciary duties to Convergent
and to its stockholders by allegedly failing to maximize stockholder value in
connection with the merger agreement, our offer, the merger and the transactions
contemplated by the merger agreement. Two of the actions seek to enjoin
Convergent from proceeding with the offer and the merger, and all three of the
actions seek an award of unspecified damages. Xxxxxxxxxx believes that each of
the three actions is without merit, and Convergent intends to vigorously defend
itself against each action. The three actions are as follows: (1) C.A.
No. 18426: XXXXX XXXXXXXXX X. XXXXX X. XXXXXXXXXX, XX., XXXXX X. XXXXXX, XXXXXX
XXXXXX, XXXXX XXXXXXX, XXXX X. XXXXX XXX, AND CONVERGENT GROUP CORPORATION; (2)
C.A. No. 18427: XXXXX XXXXXXXXX X. XXXXX X. XXXXXXXXXX, XX., XXXXX X. XXXXXX,
XXXXXX XXXXXX, XXXXX XXXXXXX, XXXX X. XXXXX XXX, AND CONVERGENT GROUP
CORPORATION and (3) C.A. No. 18431 NC: XXXXXXXX XXXX V. XXXXX X.
XXXXXXXXXX, XX., XXXXX X. XXXXXX, XXXXXX XXXXXX, XXXXX XXXXXXX, XXXX X. XXXXX
XXX, AND CONVERGENT GROUP CORPORATION.
15. STATE TAKE-OVER LAWS.
Convergent is incorporated under the laws of the State of Delaware. In
general, Section 203 of the General Corporation Law of the State of Delaware
prevents an "interested stockholder" (generally a person who owns or has the
right to acquire 15% or more of a corporation's outstanding voting stock, or is
an affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation within the prior 3 years) from
engaging in a "business combination" (defined to include mergers and similar
transactions) with a Delaware corporation for a period of three years following
the time the person became an interested stockholder unless, among other things,
prior to the time of the business combination the board of directors of the
corporation approved either (a) the business combination or (b) the transaction
which resulted in the stockholder becoming an interested stockholder.
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On October 13, 2000, prior to the execution of the merger agreement, based
upon the unanimous recommendation of the special committee of Convergent's board
of directors approved the merger and each of the transactions contemplated by
the merger agreement, approved by the board as a unitary transaction and not
separately.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. Convergent, directly or through its
subsidiaries, conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. We do not know whether any of
these laws will, by their terms, apply to our offer or the merger and has not
complied with any such laws. Should any person seek to apply any state takeover
law, we will take any action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to our offer or the merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to our offer, we might
be required to file information with, or receive approvals from, the relevant
state authorities. In addition, if enjoined, we might be unable to accept for
payment any shares tendered pursuant to our offer, or be delayed in continuing
or consummating our offer, and the merger. In such case, we may not be obligated
to accept for payment any shares tendered. See "The Tender Offer--Conditions of
Our Offer."
16. RIGHTS OF DISSENTING STOCKHOLDERS.
We, our Parent and STC do not believe that appraisal rights are available in
connection with our offer; however, appraisal rights may be available in
connection with the merger. If the merger is consummated, stockholders who have
not tendered their shares may have the right under Delaware law to dissent from
the merger and demand appraisal of, and to receive payment in cash of the fair
value of, their shares. Stockholders who perfect appraisal rights by complying
with the procedures set forth in Section 262 of the Delaware General Corporation
Law will be entitled to an appraisal by the Delaware Court of Chancery of the
fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger. In addition, dissenting
stockholders may be entitled to receive payment of a fair rate of interest from
the date of consummation of the merger on the amount determined to be the fair
value of their shares.
STC does not intend to object, assuming the proper procedures are followed,
to the exercise of appraisal rights by any stockholder and the demand for
appraisal of, and payment in cash for the fair value of, the shares. STC
intends, however, to cause Convergent, as the surviving corporation, to argue in
an appraisal proceeding that, for purposes of the proceeding, the fair value of
each share is less than or equal to the merger consideration.
You should be aware that opinions of investment banking firms (including
Xxxxxx Xxxxxxx'x) as to the fairness from a financial point of view are not
necessarily opinions as to "fair value" under Delaware law.
This summary of the rights of dissenting stockholders under Delaware law is
not a complete statement of the procedures to be followed by stockholders
desiring to exercise any dissenters' rights under Delaware law. The preservation
and exercise of dissenters' rights require strict adherence to the applicable
provisions of Delaware law. See Section 262 of the Delaware General Corporation
Law which is incorporated herein by reference and a copy of which has been filed
with the SEC as an exhibit to the Schedule TO to which our offer is an exhibit.
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17. FEES AND EXPENSES.
Except as set forth below, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of shares pursuant to our
offer.
Xxxxxxx Xxxxx Xxxxxx Inc. is acting as Dealer Manager for our offer and as
financial advisor to Schlumberger Limited, the parent company of STC, in
connection with our offer and the merger, for which services Xxxxxxx Xxxxx
Xxxxxx Inc. will receive customary compensation. Schlumberger Limited has agreed
to reimburse Xxxxxxx Xxxxx Xxxxxx Inc. for reasonable travel and other expenses
incurred by Xxxxxxx Xxxxx Xxxxxx Inc. in performing its services, including
reasonable fees and expenses of its legal counsel, and to indemnify Xxxxxxx
Xxxxx Xxxxxx Inc. and certain related parties against certain liabilities,
including liabilities under the federal securities laws, arising out of its
engagement. In the ordinary course of business, Xxxxxxx Xxxxx Xxxxxx Inc. and
its affiliates may actively trade or hold the securities of Schlumberger,
Convergent and their respective affiliates for Xxxxxxx Xxxxx Xxxxxx Inc.'s and
its affiliates' own account or for the account of customers and, accordingly,
may at any time hold a long or short position in such securities.
In connection with its services as Dealer Manager, Xxxxxxx Xxxxx Xxxxxx Inc.
may solicit tenders of shares pursuant to the tender offer and may communicate
with brokers, dealers, commercial banks and trust companies with respect to the
tender offer. Xxxxxxx Xxxxx Xxxxxx Inc. will receive a customary fee for its
services as Dealer Manager, and will receive no additional compensation for any
solicitation services it provides.
STC has retained X.X. Xxxx & Co., Inc., as our Information Agent, and
Citibank, N.A., as our Depositary, in connection with our offer. The Information
Agent may contact holders of shares by mail, telephone, telex, telecopy,
telegraph and personal interview and may request banks, brokers, dealers and
other nominee stockholders to forward materials relating to our offer to
beneficial owners. As compensation for acting as Information Agent in connection
with our offer, X.X. Xxxx & Co., Inc. will be paid a reasonable and customary
fee for its services and will also be reimbursed for out-of-pocket expenses and
may be indemnified against liabilities and expenses in connection with our
offer, including liabilities under the federal securities laws.
We will pay our Depositary reasonable and customary compensation for its
services in connection with our offer, plus reimbursement for out-of-pocket
expenses, and will indemnify our Depositary against liabilities and expenses in
connection with its services, including under federal securities laws. We will
reimburse brokers, dealers, commercial banks and trust companies for customary
handling and mailing expenses incurred by them in forwarding material to their
customers.
Including the fees described above, we have paid or will be responsible for
paying certain out-of-pocket expenses and the following expenses incurred or
estimated to be incurred in connection with the tender offer and the merger:
IN THOUSANDS
------------
Dealer Manager and Financial Advisor........................ 2,500
Legal....................................................... 1,150
Filing (HSR and SEC)........................................ 166
Information Agent........................................... 20
Depositary.................................................. 15
Printing.................................................... 350
Accounting and Appraisal.................................... 100
Miscellaneous............................................... 80
------
Total..................................................... 4,381
======
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Convergent has paid or will be responsible for paying the following expenses
incurred or estimated to be incurred in connection with the tender offer and the
merger:
IN THOUSANDS
------------
Financial Advisor........................................... 4,000
Legal....................................................... 1,250
Printing.................................................... 50
Miscellaneous............................................... 10
------
Total..................................................... 5,310
======
18. MISCELLANEOUS.
We are making our offer to Convergent stockholders solely through this
document and the related Letter of Transmittal. We are not aware of any
jurisdiction where the making of our offer is prohibited by any administrative
or judicial action pursuant to any valid state statute. If we become aware of
any valid state statute prohibiting the making of our offer or the acceptance of
shares pursuant thereto, we will make a good faith effort to comply with that
state statute. If, after a good faith effort, we cannot comply with that state
statute, our offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of shares in that state. In any jurisdiction where the
securities, blue sky or other laws require our offer to be made by a licensed
broker or dealer, our offer will be deemed to be made on our behalf by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF US, OUR PARENT OR STC NOT CONTAINED IN THIS DOCUMENT
OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, THAT INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 under the Exchange Act, we and STC have filed with
the SEC the Schedule TO, together with exhibits, furnishing additional
information with respect to our offer. The Schedule TO and any amendments to the
Schedule TO, including exhibits, may be inspected at, and copies may be obtained
from, the same places and in the same manner as set forth in "The Tender
Offer--Information Concerning Convergent" (except that they will not be
available at the regional offices of the SEC).
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