As filed with the Securities and Exchange Commission on March 22, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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SMARTFORCE PUBLIC LIMITED COMPANY
(Exact name of Registrant as specified in its charter)
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Republic of Ireland 7372 Not Applicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
900 Chesapeake Drive
Redwood City, California 94063
(650) 817-5900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-----------------
Gregory M. Priest
President and Chief Executive Officer
SMARTFORCE PUBLIC LIMITED COMPANY
900 Chesapeake Drive
Redwood City, California 94063
(650) 817-5900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------
Copies to:
Steven V. Bernard, Esq. Robert L. Birnbaum, Esq.
Steve L. Camahort, Esq. Robert W. Sweet, Jr., Esq.
WILSON SONSINI GOODRICH & ROSATI FOLEY, HOAG & ELIOT LLP
PROFESSIONAL CORPORATION One Post Office Square
650 Page Mill Road Boston, Massachusetts 02109
Palo Alto, California 94304 (617) 832-1000
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________
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CALCULATION OF REGISTRATION FEE
====================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to Amount to be Offering Price Per Aggregate Offering Amount of
be Registered(1) Registered(2) Share(3) Price(3) Registration Fee
-----------------------------------------------------------------------------------------------------------------------
Ordinary Shares, par value (Euro)0.11 per share... 10,827,574 $5.10 $129,930,890 $11,954
====================================================================================================================
(1) Each ordinary share issued will have attached thereto one subscription
right.
(2) Based upon the estimated number of ordinary shares, par value (Euro)0.11
per share, represented by the American Depositary Shares, or ADSs, of the
Registrant that may be issued to stockholders of Centra Software, Inc.
pursuant to the merger described herein based on the number of shares of
Centra Software, Inc. common stock outstanding on the date hereof and the
exercise of all options to purchase Centra Software, Inc. common stock that
are expected to be vested immediately prior to such issuance. Each ADS
represents one ordinary share.
(3) Estimated solely for purposes of calculating the registration fee required
by the Securities Act of 1933, as amended, and computed pursuant to
Rules 457(f) and (c) under the Securities Act based on (i) $5.10, the
average of the high and low per share prices of common stock, par value
$0.001 per share, of Centra Software, Inc. as reported on the Nasdaq
National Market on March 20, 2002 and (ii) the maximum number of shares of
Centra common stock expected to be received by the Registrant or cancelled
pursuant to the merger described herein.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
================================================================================
Subject to completion, dated March 21, 2002
[LOGO] SMARTFORCE [LOGO] CENTRA
JOINT PROXY STATEMENT/PROSPECTUS
SMARTFORCE PLC/CENTRA SOFTWARE, INC.
To the Shareholders of SmartForce Public Limited Company and Centra
Software, Inc.:
After careful consideration, the boards of directors of SmartForce Public
Limited Company and Centra Software, Inc. have unanimously approved a merger
between SmartForce and Centra.
If the merger is completed, each share of Centra common stock will be
exchanged for 0.425 ordinary shares represented by American Depositary Shares,
or ADSs, of SmartForce. SmartForce ADSs are traded on the Nasdaq National
Market under the trading symbol "SMTF," and on March 18, 2002 the closing price
of SmartForce ADSs was $12.09 per share.
The merger cannot be completed unless a quorum of the outstanding shares of
SmartForce and Centra are represented in person or by proxy at each of the
shareholder meetings described below, and the holders of shares representing
not less than a majority of the votes cast in person or proxy in favor of the
merger and the issuance of ordinary shares (or ADSs representing ordinary
shares) and the holders of shares representing not less than a majority of the
outstanding shares of Centra common stock vote in favor of the approval and
adoption of the merger agreement. The attached joint proxy statement/prospectus
provides detailed information concerning SmartForce, Centra, the merger,
proposals related to the merger and other proposals to be presented at
SmartForce's annual general meeting and Centra's special meeting. Please give
all of the information contained in the joint proxy statement/prospectus your
careful attention. In particular, you should carefully consider the discussion
in the section entitled "Risk Factors" beginning on page 11 of this joint proxy
statement/prospectus.
After careful consideration, the boards of directors of both SmartForce and
Centra have unanimously determined the merger to be fair to the respective
shareholders of their companies and in their best interests. The boards of
directors of both companies have approved the merger agreement and unanimously
recommend that the shareholders of their respective companies vote FOR the
proposals related to the merger.
SmartForce shareholders are cordially invited to attend the annual general
meeting of SmartForce shareholders which will be held on , 2002 at
a.m. local time at . Only persons whose names appear in the register of
members of SmartForce on the date of the meeting are entitled to attend and
vote at the meeting. ADS holders may not vote at the meeting; however, The Bank
of New York, as depositary of the ordinary shares underlying the ADSs, has the
right to vote all of the ordinary shares represented by the ADSs, subject to
certain limitations described in this joint proxy statement/prospectus. Only
ADS holders who hold ADSs at the close of business on March , 2002 will
receive instructions for the exercise of voting rights at this annual general
meeting.
Centra stockholders are cordially invited to attend the special meeting of
Centra stockholders which will be held on , 2002 at a.m. local
time at the offices of Foley Hoag & Eliot, LLP One Post Office Square, Boston,
Massachusetts 02109. Only stockholders who hold shares of Centra common stock
at the close of business on March , 2002 will be entitled to vote at this
special meeting.
YOUR VOTE IS VERY IMPORTANT. Please use this opportunity to take part in
the affairs of SmartForce and Centra by voting on the merger. Whether or not
you plan to attend the SmartForce or Centra meeting, please complete, sign,
date and return the accompanying proxy in the enclosed self-addressed stamped
envelope. Returning the proxy does NOT deprive you of your right to attend the
appropriate meeting and to vote your shares in person.
We appreciate your consideration of this matter.
GREGORY M. PRIEST LEON NAVICKAS
President, Chief Executive Officer and Chairman Chief Executive Officer and Chairman
SmartForce Public Limited Company Centra Software, Inc.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined
whether this joint proxy statement/prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated , 2002 and
was first mailed to shareholders on or about , 2002.
SMARTFORCE PUBLIC LIMITED COMPANY
900 Chesapeake Drive
Redwood City, California 94063
(650) 817-5900
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NOTICE OF ANNUAL GENERAL MEETING
TO BE HELD ON , 2002
-----------------
To SmartForce Shareholders:
Notice is Hereby Given that the ANNUAL GENERAL MEETING of Shareholders of
SmartForce Public Limited Company, a corporation organized under the laws of
Ireland (the "Company" or "SmartForce"), will be held at Jury's Hotel,
Ballsbridge, Dublin 4, Ireland on , 2002 at 11:00 a.m., local time, for
the purpose of transacting the following business:
ORDINARY BUSINESS
1. To re-elect as a director Mr. James S. Krzywicki, who retires by
rotation and, being eligible, offers himself for re-election in accordance with
the Company's articles of association.
2. To elect as a director, Dr. Ferdinand von Prondzynski, who was appointed
during the year.
3. To receive and consider the Report of the Directors and the Consolidated
Financial Statements of the Company for the year ended December 31, 2001 and
the Auditors' Report to the Members.
4. To authorize the directors to fix the remuneration of SmartForce's
auditors for the year ending December 31, 2002.
SPECIAL BUSINESS
To consider and, if thought fit, to pass the following resolutions which
will be proposed as to resolution 5 as an ordinary resolution and as to
resolution 6 as a special resolution:
5. THAT the Agreement and Plan of Merger and Reorganization dated January
16, 2002 made by and among the Company, Atlantic Acquisition Corp. and Centra
Software Inc. ("Centra"), in the form produced to the meeting and initialled by
the Chairman for the purposes of identification (a copy of which was included
in the joint proxy statement/prospectus circulated to all of the members of the
Company on 2002) relating to the merger (the "Merger") of Atlantic
Acquisition Corp. (a wholly owned subsidiary of the Company) with and into
Centra and the automatic conversion of each share of common stock of Centra
immediately prior to the consummation of the Merger into a right to receive
0.425 ordinary shares of (Euro)0.11 each in the capital of the Company (or
American Depositary Shares ("ADSs") representing such ordinary shares) and the
assumption of all outstanding options to purchase shares in the capital of
Centra, the Merger and the issuance of ordinary shares of (Euro)0.11 each in
the capital of the Company (or ADSs representing such ordinary shares) pursuant
to the Merger be, and they each hereby are, approved.
6. THAT, subject to the passing of Resolution 5 above relating, inter alia,
to the approval of the Agreement and Plan of Merger and Reorganization dated
January 16, 2002 made by and among SmartForce, Atlantic Acquisition Corp. and
Centra Software Inc. ("Centra") relating to the merger (the "Merger") of
Atlantic Acquisition Corp. (a wholly owned subsidiary of the Company) with and
into Centra and in connection with the assumption by SmartForce under the
merger of all outstanding options to purchase shares in the capital of Centra,
the terms of certain contracts under which SmartForce may become entitled to
purchase certain of its own ordinary shares (or ADSs representing such ordinary
shares) held by shareholders of Centra (a written memorandum of the terms of
such contracts having been produced to the meeting and initialled for the
purposes of identification by the Chairman) be, and they each hereby are,
approved.
To conduct any other ordinary business of the Company as may properly come
before the meeting.
By Order of the Board
Jennifer M. Caldwell
Secretary
March , 2002
Registered Office:
Belfield Office Park
Clonskeagh
Dublin 4, Ireland
NOTES:
1. The foregoing items of business are more fully described in the joint
proxy statement/prospectus accompanying this Notice. You are urged to read the
joint proxy statement/prospectus carefully.
2. Those persons whose names appear in the Register of Members of
SmartForce ("Members") on the date materials are dispatched to shareholders are
entitled to receive notice of the Meeting or any adjournment of the Meeting. In
addition, Members on the date of the Meeting are entitled to attend and vote at
the Meeting.
3. Holders of SmartForce ADSs may not vote at the Meeting; however, The
Bank of New York, as depositary for the ordinary shares underlying the ADSs,
has the right to vote all of the ordinary shares represented by ADSs, subject
to certain limitations described in the joint proxy statement/prospectus.
Voting of the ADSs is more fully described in the joint proxy
statement/prospectus accompanying this notice. SmartForce, at the request of
the depositary, has set March , 2002 as the record date for the determination
of those holders of ADSs entitled to give instructions for the exercise of
voting rights at the Meeting or any adjournment of the Meeting.
4. A Member entitled to attend and vote at the Meeting may appoint a proxy
or proxies to attend, speak and vote in his, her or its place. A proxy does not
need to be a Member of SmartForce. To be valid, proxy forms must be deposited
with SmartForce's Registrars, Computershare Services (Ireland) Limited, Heron
House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland not later
than 11:00 a.m. on , 2002. A Member is not precluded from attending
the Meeting and from speaking or voting at the Meeting even if the Member has
completed a proxy form.
5. The Register of Directors' Interests and particulars of directors'
transactions in the share capital of SmartForce and its subsidiary companies
required to be kept under section 59 of the Companies Act, 1990 will be
available for inspection at the Meeting from 10:45 a.m. until the conclusion of
the Meeting. Otherwise they will be available for inspection at the registered
office of SmartForce during normal business hours on any weekday (Saturdays,
Sundays and Irish public holidays excluded) from the date of this Notice until
the date of the Meeting.
YOUR VOTE IS IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY FORM AS PROMPTLY AS POSSIBLE AND RETURN IT IN
THE POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND THE
MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE RETURNED A PROXY.
[LOGO] CENTRA
CENTRA SOFTWARE, INC.
430 Bedford Street
Lexington, Massachusetts 02420
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2002
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To our Stockholders,
We will hold a special meeting of the stockholders of Centra Software, Inc.,
a Delaware corporation, at 10:00 a.m., local time, on [day], , 2002 at
the offices of Foley, Hoag & Eliot LLP, One Post Office Square, Sixteenth
Floor, Boston, Massachusetts 02109, for the purpose of transacting the
following business:
1. To consider and vote on a proposal to approve and adopt the agreement
and plan of merger and reorganization, which was signed on January 16, 2002,
among Centra Software, Inc., SmartForce Public Limited Company and Atlantic
Acquisition Corp., a wholly owned subsidiary of SmartForce.
2. To grant Centra management the discretionary authority to adjourn the
special meeting to a date not later than [date] in order to enable the
Centra board of directors to solicit additional proxies in favor of the
merger.
3. To transact such other business as may properly come before the
special meeting or any adjournment or postponement.
We describe these items more fully in the joint proxy statement/prospectus
attached to this notice. Please give your careful attention to all of the
information in the joint proxy statement/prospectus.
Only stockholders of record at the close of business on , 2002, the
record date, are entitled to notice of and to vote at the special meeting or
any adjournment or postponement of the meeting. The merger will require the
affirmative vote of the holders of a majority of the shares of Centra's common
stock outstanding on the record date.
To ensure that your shares are represented at the special meeting, we
encourage you to complete, date, sign and promptly return your proxy card in
the enclosed postage prepaid envelope whether or not you plan to attend the
special meeting in person. You may revoke your proxy in the manner described in
the joint proxy statement/prospectus at any time before it has been voted at
the special meeting. Any stockholders attending the special meeting may vote in
person even if the stockholder has returned a proxy.
By Order of the Board of Directors
--------------------------------------
Stephen A. Johnson
Secretary
March , 2002
Lexington, Massachusetts
REFERENCE TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates by reference important
business and financial information about SmartForce and Centra from documents
that are not included in or delivered with this joint proxy
statement/prospectus. You may obtain documents incorporated by reference in
this joint proxy statement/prospectus without charge by requesting them in
writing or by telephone from the appropriate company at the following addresses:
SmartForce Public Limited
Company Centra Software, Inc.
900 Chesapeake Drive 430 Bedford Street
Redwood City, California Lexington, Massachusetts
94063 02420
Tel: (650) 817-5900 Tel: (781) 831-7000
Attn: Investor Relations Attn: Investor Relations
If you are a SmartForce shareholder and you would like to request any
documents related to SmartForce, please do so by [ ], 2002 to receive them
before the SmartForce annual general meeting. If you are a Centra stockholder
and you would like to request any documents related to Centra, please do so by
[ ], 2002 to receive them before the Centra special meeting.
For a more detailed description of the information incorporated by reference
into this joint proxy statement/prospectus and how you may obtain it, see
"Documents Incorporated by Reference" on page 142.
TABLE OF CONTENTS
Page
----
SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS........................... 1
The Companies.......................................................... 1
Summary of the Merger.................................................. 2
Our Reasons for Proposing the Merger of SmartForce and Centra.......... 5
Steps for You to Take.................................................. 6
Other Matters to Consider.............................................. 8
ENFORCEMENT OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES
LAWS.................................................................... 9
FORWARD-LOOKING STATEMENTS................................................ 9
RISK FACTORS.............................................................. 11
Risks Related to the Proposed Merger................................... 11
Risk Factors Relating to the Combined Company.......................... 15
SELECTED HISTORICAL FINANCIAL DATA OF SMARTFORCE.......................... 25
SELECTED HISTORICAL FINANCIAL DATA OF CENTRA.............................. 26
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA............ 27
COMPARATIVE PER SHARE DATA................................................ 28
COMPARATIVE PER SHARE MARKET PRICE DATA................................... 29
THE SMARTFORCE MEETING.................................................... 30
Date, Time and Place of the SmartForce Annual General Meeting.......... 30
Purpose of the Annual General Meeting.................................. 30
Record Date............................................................ 30
Quorum................................................................. 31
Voting of Ordinary Shares.............................................. 31
Voting of ADSs......................................................... 32
Expenses of Solicitation of Proxies.................................... 33
How to Revoke a Proxy.................................................. 33
Shareholder Proposals to be Presented at Next Annual General Meeting... 34
Voting Agreements...................................................... 34
Vote Required.......................................................... 34
Recommendation of the Board of Directors of SmartForce................. 35
THE CENTRA MEETING........................................................ 36
Date, Time and Place of the Centra Special Meeting..................... 36
Purpose of the Special Meeting......................................... 36
Record Date............................................................ 36
Quorum................................................................. 36
Voting of Proxies...................................................... 36
Expenses of Solicitation of Proxies.................................... 37
How to Revoke a Proxy.................................................. 37
Voting Agreements...................................................... 38
Vote Required.......................................................... 38
Recommendation of the Board of Directors............................... 38
THE PROPOSED MERGER....................................................... 39
The Merger............................................................. 39
Merger Consideration................................................... 39
i
TABLE OF CONTENTS--(Continued)
Page
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Treatment of Centra Stock Options....................................... 39
Background of the Merger................................................ 39
Recommendation of SmartForce's Board of Directors and SmartForce's
Reasons for the Merger................................................ 43
Recommendation of Centra's Board of Directors and Centra's Reasons for
the Merger............................................................ 46
Opinion of SmartForce's Financial Advisor............................... 49
Opinion of Centra's Financial Advisor................................... 57
Interests of Certain Persons in the Merger.............................. 63
Completion and Effectiveness of the Merger.............................. 63
Exchange of Centra Stock Certificates for SmartForce ADRs............... 63
No Dividends............................................................ 64
Material United States Federal Tax Consequences......................... 64
Accounting Treatment for the Merger..................................... 64
Regulatory Filings and Approvals Required to Complete the Merger........ 64
Certain Securities Laws Considerations.................................. 65
No Appraisal or Dissenters' Rights...................................... 65
Listing on the Nasdaq National Market of SmartForce ADSs to be Issued
in the Merger......................................................... 65
Delisting and Deregistration of Centra Common Stock after the Merger.... 65
THE MERGER AGREEMENT....................................................... 66
General................................................................. 66
The Exchange Ratio and Treatment of Centra Common Stock................. 66
Treatment of Restricted Stock of Centra................................. 66
Treatment of Centra Stock Options....................................... 66
Exchange of Certificates................................................ 67
Representations and Warranties.......................................... 67
Conduct of Business Before Completion of the Merger..................... 69
No Solicitation by Centra............................................... 70
Centra Stockholders Meeting............................................. 71
SmartForce Shareholders Meeting......................................... 71
Employee Benefits Matters............................................... 72
Conditions to Completion of the Merger.................................. 72
Definition of Material Adverse Effect................................... 73
Termination of the Merger Agreement..................................... 74
Payment of Termination Fee by Centra.................................... 75
Operations After the Merger............................................. 76
Extension, Waiver and Amendment of the Merger Agreement................. 76
AGREEMENTS RELATED TO THE MERGER........................................... 77
SmartForce Voting Agreements............................................ 77
Centra Voting Agreements................................................ 77
Centra Affiliate Agreements............................................. 78
Employment Agreements................................................... 78
TAX MATTERS................................................................ 81
Material United States Federal Income Tax Consequences.................. 81
Material Irish Tax Considerations....................................... 83
Irish Tax Considerations Applicable to Irish Holders.................... 84
Irish Tax Considerations Applicable to U.S. Holders..................... 85
DESCRIPTION OF SMARTFORCE SHARE CAPITAL.................................... 88
General................................................................. 88
ii
TABLE OF CONTENTS--(Continued)
Page
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Ordinary Shares........................................................ 88
Share Certificates..................................................... 88
Transfers of Ordinary Shares........................................... 88
Irish Stamp Duty....................................................... 88
Subscription Rights.................................................... 89
Transfer Agent, Registrar and Paying Agent............................. 89
DESCRIPTION OF AMERICAN DEPOSITARY SHARES................................. 90
American Depositary Receipts........................................... 90
Dividends and Other Distributions...................................... 90
Cash................................................................... 91
Ordinary Shares........................................................ 91
Other Distributions.................................................... 92
Deposit, Withdrawal and Cancellation................................... 92
Voting Rights.......................................................... 92
Fees and Expenses...................................................... 94
Payment and Taxes...................................................... 94
Reclassification, Recapitalizations and Mergers........................ 94
Amendment and Termination.............................................. 95
Limitations on Obligations and Liabilities to ADS Holder............... 95
Requirements for Depositary Actions.................................... 96
Your Right to Receive the Shares Underlying Your ADSs.................. 96
Pre-Release of ADSs.................................................... 96
Disclosure of Interests................................................ 97
Information Regarding the Depositary................................... 97
DESCRIPTION OF CENTRA'S CAPITAL STOCK..................................... 98
General................................................................ 98
Common Stock........................................................... 98
Preferred Stock........................................................ 98
Registration Rights.................................................... 98
Anti-Takeover Effects of Delaware Law and Centra's Charter and Bylaws.. 98
Transfer Agent and Registrar........................................... 99
COMPARISON OF SHAREHOLDER RIGHTS.......................................... 100
Board of Directors..................................................... 100
Shareholders' Meetings; Voting......................................... 101
Mergers and Other Fundamental Transactions............................. 104
Interested Transactions................................................ 107
Amendments to Organizational Documents................................. 108
Exculpation and Indemnification........................................ 108
Issuance of Shares; Dividends; Repurchase of Shares.................... 109
Right to Sue........................................................... 110
Liquidation; Dissolution; Winding-Up................................... 111
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS.. 112
SMARTFORCE MANAGEMENT..................................................... 118
SmartForce Board of Directors.......................................... 118
Recent SmartForce Executive Officer and Director Changes............... 119
SmartForce Officers.................................................... 119
Board of Director Meetings and Committees.............................. 120
iii
TABLE OF CONTENTS--(Continued)
Page
----
Compensation and Stock Option Committee Interlocks and Insider
Participation......................................................... 120
SmartForce Executive Compensation....................................... 121
SmartForce Director Compensation........................................ 122
2001 Director Option Plan............................................... 122
SmartForce Option Grants in Last Fiscal Year............................ 123
SmartForce Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values................................................ 124
SmartForce Employment Contracts and Arrangements........................ 124
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
SMARTFORCE............................................................... 126
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 128
BOARD COMMITTEE REPORTS.................................................... 129
Report of Compensation Committee on Executive Compensation.............. 129
REPORT OF THE COMPENSATION COMMITTEE....................................... 129
Report of the Stock Option Committee.................................... 131
Report of the Audit Committee........................................... 132
PERFORMANCE GRAPH.......................................................... 133
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................... 134
PROPOSALS TO SMARTFORCE SHAREHOLDERS TO BE VOTED ON AT THE SMARTFORCE
ANNUAL GENERAL MEETING................................................... 135
PROPOSALS TO CENTRA STOCKHOLDERS TO BE VOTED ON AT THE CENTRA SPECIAL
MEETING.................................................................. 139
OTHER MATTERS.............................................................. 141
LEGAL MATTERS.............................................................. 141
EXPERTS.................................................................... 141
DOCUMENTS INCORPORATED BY REFERENCE........................................ 142
WHERE YOU CAN FIND MORE INFORMATION........................................ 143
ANNEX A --The Merger Agreement
ANNEX B --Opinion of SmartForce's Financial Advisor, Credit Suisse First
Boston Corporation
ANNEX C --Opinion of Centra's Financial Advisor, Goldman, Sachs & Co.
iv
SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus pertains to, among other matters, the
merger of a wholly-owned subsidiary of SmartForce with and into Centra, and it
is being sent to the holders of SmartForce ordinary shares and SmartForce ADSs
and the holders of Centra common stock. This summary pertains to the merger and
may not contain all of the information that is important to you. You should
read carefully this entire document and the other documents referenced in it
for a more complete understanding of the merger. In particular, you should read
the merger agreement and its exhibits, which are attached as Annex A, the
opinion of Credit Suisse First Boston, which is attached as Annex B, and the
opinion of Goldman, Sachs & Co., which is attached as Annex C.
The Companies
[LOGO] CENTRA
[LOGO] SMARTFORCE
Centra Software, Inc.
SmartForce Public Limited Company 430 Bedford Street
900 Chesapeake Drive Lexington, Massachusetts 02420
Redwood City, California 94063 (781) 861-7000
(650) 817-5900
Centra is a leading provider of e-Learning and
SmartForce, one of the world's largest business e-Collaboration applications. Used by more
e-Learning companies, provides integrated enterprise than 775 companies, government agencies, and
e-Learning solutions. SmartForce e-Learning is a universities worldwide, Centra offers a
comprehensive application infrastructure developed to comprehensive suite of real-time knowledge delivery
support e-Learning initiatives in enterprises globally. and management solutions, including voice-enabled
Encompassing the largest body of e-Learning content virtual classrooms, Web conferences and online
in the world, and a fully integrated student meetings. Centra offers the most advanced voice-
environment, learning management system and a over-IP technologies, with scalability across the
range of custom content creation and publication extended enterprise and seamless access through thin
tools, SmartForce e-Learning provides the client architecture. Using the broad suite of Centra
architecture that global enterprises are using today to applications, global organizations increase the overall
implement e-Learning strategies to support their effectiveness of their e-Learning and communication
critical strategic business initiatives. With more than initiatives, targeting the appropriate mix of live and
2,500 major corporate customers, SmartForce self-paced learning formats and activities for each
e-Learning solutions bring the power of the Internet to audience or strategic business task.
the critical training business process.
1
Summary of the Merger
The following questions and answers are intended to address briefly some
commonly asked questions regarding the merger. These questions and answers may
not address all the questions that may be important to you. Please refer to the
more detailed information contained elsewhere in this joint proxy
statement/prospectus including the merger agreement and the exhibits and other
documents attached to this joint proxy statement/prospectus and the other
documents referenced in it.
We are Proposing a Merger of SmartForce and Centra
Q: What is the proposed merger? (see page 39)
A: In the proposed merger, Centra will merge with a wholly-owned subsidiary of
SmartForce. Centra will survive the merger as a wholly-owned subsidiary of
SmartForce. The merger agreement is attached to this joint proxy
statement/prospectus as Annex A. You are encouraged to read it carefully.
Q: Am I being asked to vote on anything else? (see pages 135-140)
A: Yes.
. If you are a Centra common stockholder, the Centra board of directors is
asking you to authorize Centra to adjourn the Centra special meeting to a
date not later than [ ], 2002 if the number of shares of Centra common
stock present or represented and voting in favor of the merger is
insufficient to approve the merger under Delaware law. Adjourning the
special meeting to a later date will give Centra additional time to
solicit proxies to vote in favor of the merger.
. If you are a SmartForce shareholder, the SmartForce board of directors is
asking you to do the following:
--To approve the terms of contracts under which SmartForce may become
entitled to purchase some of its own ordinary shares (represented by
ADSs) to be issued in the merger in exchange for unvested Centra common
stock;
--To re-elect Mr. James S. Krzywicki, who retires by rotation, to the
board of directors of SmartForce;
--To elect Dr. Ferdinand von Prondzynski, who was appointed as a director
during the year to the board of directors of SmartForce;
--To receive and consider the Report of the Directors and the Consolidated
Financial Statements of SmartForce for the year ended December 31, 2001
and the Auditors' Report to the Members; and
--To authorize the directors to fix the remuneration of SmartForce's
auditors for the year ending December 31, 2002.
Q: What will I receive in the merger? (see page 39)
A: Following the merger:
. Centra common stockholders will receive, in exchange for each of their
Centra shares, 0.425 American Depositary Shares, or ADSs, of SmartForce.
Each ADS represents one ordinary share of SmartForce.
. Each option to purchase Centra common stock outstanding immediately before
the completion of the merger will automatically become an option to
purchase SmartForce ADSs (representing SmartForce ordinary shares). The
number of SmartForce ADSs (representing SmartForce ordinary shares) which
may be purchased under each assumed option will be equal to the product of
the number of Centra shares that were purchasable upon exercise of the
option before the merger multiplied by 0.425 and rounded down to the
nearest whole ADS. The exercise price per share will be the pre-merger
exercise price divided by 0.425 and rounded up to the nearest whole cent.
2
. Instead of fractional shares in the merger, Centra stockholders will
receive cash in an amount equal to the fraction multiplied by the average
closing price reported on the Nasdaq National Market for SmartForce ADSs
for the ten (10) trading days immediately preceding the last full trading
day prior to the effective date of the merger.
. If approved by the SmartForce shareholders, the holders of shares of
Centra common stock which are subject to a repurchase option in favor of
Centra will receive SmartForce ADSs (representing SmartForce ordinary
shares) in exchange for those shares which will be subject to an
equivalent repurchase option in favor of SmartForce.
Q: When do you expect the merger to be completed? (see page 63)
A: SmartForce and Centra are working toward completing the merger as quickly as
possible. We hope to complete the merger during the second calendar quarter
of 2002 promptly following the approval of the merger by the SmartForce
shareholders and Centra stockholders. However, the merger is subject to
several conditions that could affect the timing of its completion.
Q: Are there risks involved in undertaking the merger? (see pages 11-24)
A: Yes. In evaluating the merger, you should carefully consider the factors
discussed in the section of the joint proxy statement/prospectus entitled
"Risk Factors" beginning on page 13.
Q: What are the conditions to completion of the merger? (see page 72)
A: SmartForce's and Centra's respective obligations to complete the merger are
subject to the satisfaction or waiver of certain specified closing
conditions. If either SmartForce or Centra waives any of these conditions,
each company will consider the facts and circumstances at that time and make
a determination whether a resolicitation of proxies from its respective
shareholders or stockholders is appropriate.
Q: Is the merger subject to governmental approvals? (see page 64)
A: Yes. This merger is subject to review by the U.S. Department of Justice and
the U.S. Federal Trade Commission to determine whether it is in compliance
with applicable antitrust laws. Under the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the merger
may not be consummated until the specified waiting period requirements of
that Act have been satisfied. On February 23, 2002, the U.S. Federal Trade
Commission notified SmartForce and Centra that it was terminating early the
specified waiting period requirements. However, any time before or after the
merger, and notwithstanding that the waiting period has terminated or that
the merger may have been consummated, the U.S. Federal Trade Commission, the
U.S. Department of Justice or any state could take any action under the
applicable antitrust or competition laws as it deems necessary or desirable.
This action could include seeking to enjoin the completion of the merger.
Private parties may also institute legal actions under the antitrust laws
under some circumstances.
This merger is also subject to review by the Minister for Enterprise, Trade
and Employment of Ireland under the Mergers and Take-overs (Control) Acts,
1978 to 1996. On February 19, 2002 the Minister's office notified SmartForce
and Centra that the Minister had decided not to make an order prohibiting
the merger.
Q: What shareholder approvals are required for approval of the merger and the
related proposals? (see pages 34 and 38)
A: The holders of a majority of the ordinary shares cast in person or by proxy
on the proposal must adopt the merger agreement and approve the merger and
the issuance of the SmartForce ordinary shares, represented by the ADSs, in
the merger.
The holders of a majority of the outstanding shares of Centra common stock
must adopt the merger agreement and approve the merger.
3
Q: Are there any SmartForce shareholders or Centra stockholders already
committed to voting in favor of the merger, the share issuance and the other
proposals described in this joint proxy statement/prospectus? (see pages 34
and 38)
A: Yes.
. SmartForce shareholders who collectively hold approximately 1% of the
voting power of the SmartForce ADSs outstanding as of March 18, 2002
entered into voting agreements with Centra requiring them to vote all of
their beneficially owned shares in favor of the adoption of the merger
agreement and in favor of the approval of the merger and the issuance of
the SmartForce ordinary shares, represented by ADSs, in the merger.
. Centra stockholders who collectively hold approximately 12.3% of the
voting power of the Centra common stock outstanding as of March 18, 2002
entered into voting agreements with SmartForce requiring them to vote all
of their beneficially owned shares in favor of adoption of the merger
agreement and in favor of the approval of the merger.
Q: Who will be the directors of SmartForce following the merger?
A: Following the merger, the board of directors of SmartForce is expected to
consist of the six current members of SmartForce's board of directors and
Leon Navickas, the current Chairman of Centra's board of directors and its
Chief Executive Officer.
Q: Who will be the executive officers of SmartForce following the merger?
A: Following the merger, the executive management team of SmartForce is
expected to include:
. Gregory M. Priest, as President, Chief Executive Officer and Chairman of
the Board;
. Jeffrey N. Newton, as Chief Customer Officer; and
. Leon Navickas, as Chief Technology Officer.
SmartForce is currently engaged in an executive search for a Chief Financial
Officer, who is expected to join the executive management team of SmartForce
upon his or her hiring.
4
Our Reasons for Proposing the Merger of SmartForce and Centra
Q: Why are SmartForce and Centra proposing the merger? (see pages 43-48)
A: SmartForce and Centra are proposing the merger to create an e-Learning
company with the size, resources, breadth of solution and customer base
capable of becoming the world's leading provider of e-Learning solutions.
Q: Does the board of directors of SmartForce recommend voting in favor of the
adoption of the merger agreement and the approval of the proposed merger and
the issuance of SmartForce ordinary shares, represented by ADSs, in the
merger? (see page 43)
A: Yes. After careful consideration, SmartForce's board of directors
unanimously recommends that its shareholders vote in favor of the adoption
of the merger agreement and the approval of the merger and the issuance of
the SmartForce ordinary shares, represented by ADSs, in the merger.
Q: Does the board of directors of Centra recommend voting in favor of the
merger agreement and the merger? (see page 46)
A: Yes. After careful consideration, Centra's board of directors unanimously
recommends that its stockholders vote in favor of adoption of the merger
agreement and the approval of the proposed merger.
Q: Do persons involved in the merger have interests which may conflict with
mine? (see page 63)
A: Yes. When considering the recommendations of SmartForce's and Centra's
respective boards of directors, you should be aware that certain Centra
directors and officers have interests in the merger that are different from,
or are in addition to, yours. These interests include the employment of and
proposed grant of stock options to three of Centra's executive officers by
SmartForce after the merger, the appointment of Leon Navickas as an
executive officer and director of SmartForce, SmartForce's agreement with
two of Centra's executive officers who will resign at the time of the
closing that they will receive separation payments and continued employee
benefits from SmartForce, and the indemnification of directors and officers
of Centra against certain liabilities both before and after the merger.
Q: Did SmartForce's and Centra's financial advisors render fairness opinions in
connection with the merger? (see pages 49-62)
A: Yes.
. SmartForce's board of directors considered the opinion, dated as of
January 16, 2002, of its financial advisor, Credit Suisse First Boston, to
the effect that, as of such date, and based upon and subject to various
considerations set forth in the opinion, the exchange ratio was fair, from
a financial point of view, to SmartForce.
. Centra's board of directors considered the opinion, dated as of January
16, 2002, of its financial advisor, Goldman, Sachs & Co., to the effect
that, as of such date, the exchange ratio of 0.425 SmartForce ADSs, each
of which represents and is exchangeable for one ordinary share of
SmartForce, to be received for each share of Centra common stock pursuant
to the merger agreement was fair from a financial point of view to the
holders of shares of Centra common stock.
. The full text of the written opinions of the financial advisors are
attached to the back of this document as Annex B and Annex C, and should
be read carefully in their entirety to understand the assumptions made,
matters considered and limitations on the review undertaken in providing
the opinions.
. The opinion of Credit Suisse First Boston is addressed to the SmartForce
board and the opinion of Goldman, Sachs & Co. is addressed to the Centra
board and are provided to the respective addressees for their information
and assistance in connection with their consideration of the transactions
contemplated by the merger agreement. These opinions do not address the
prices at which SmartForce's ADSs will trade at any time and do not
constitute a recommendation to any shareholder as to how to vote with
respect to any matter relating to the proposed merger.
5
Steps for You to Take
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
joint proxy statement/prospectus, please complete, date, sign and mail your
proxy card in the enclosed return envelope as soon as possible so that your
shares will be represented at your respective shareholder meeting.
If a Centra stockholder does not include instructions on how to vote a
properly signed proxy card, such holder's common stock will be voted FOR
approval of matters related to the merger and the adjournment proposal and
any other matters to be voted upon at the meeting.
Except with respect to proposals five and six for which The Bank of New York
is not entitled to a discretionary proxy, if a holder of SmartForce ADSs
does not include instructions on how to vote a properly signed proxy card
with respect to such holder's ADSs, such holder's ADSs will be voted FOR
approval of the matters related to the merger and the other matters to be
voted upon at the meeting. If a properly signed proxy card for SmartForce
ordinary shares is submitted without instructions, however, such holder's
ordinary shares will be voted FOR approval of all matters to be voted upon
at the meeting. For a description of the matters for which The Bank of New
York is not entitled to a discretionary proxy to vote SmartForce ADSs,
please see "Description of American Depositary Shares--Voting Rights"
beginning on page 92.
Your vote is important regardless of the number of shares that you own.
Q: When and where will the vote take place? (see pages 30-38)
A. Annual General Meeting of SmartForce Shareholders. The SmartForce Annual
General Meeting will be held at Jury's Hotel, Ballsbridge, Dublin 4, Ireland
on , 2002, starting at 11:00 a.m. local time.
Special meeting of Centra stockholders. The Centra special meeting will be
held at Foley, Hoag & Eliot LLP, One Post Office Square, Sixteenth Floor,
Boston, Massachusetts 02109 on , 2002, starting at [ a/p.m.],
Eastern time.
Q: Should I send in my Centra stock certificates now? (see page 67)
A: No. After the merger is completed, SmartForce will send you written
instructions for exchanging your Centra stock certificates for American
Depositary Receipts, or ADRs, representing SmartForce ADSs.
Q: If my shares are held in street name by my broker, will my broker vote my
shares for me? (see pages 31 and 36)
A: Your broker will vote your shares only if you provide your broker with
instructions on how to vote your shares by following the information
provided to you by your broker.
Q: What do I do if I want to change my vote? (see pages 33 and 37)
A: You can change your vote at any time before your proxy is voted at your
meeting. There are four ways for you to do this:
1. Send written notice to the secretary of SmartForce or Centra (as
appropriate) that you wish to revoke your proxy,
2. In the case of Centra stockholders, send written notice to the secretary
of Centra that you wish to change your proxy,
3. Send a completed proxy to SmartForce or Centra, as applicable, bearing a
date later than your original proxy prior to the vote at your meeting, or
4. Attend the SmartForce shareholder or Centra stockholder meeting and vote
in person.
6
Q: What happens if a Centra stockholder does not vote? (see page 36)
A: If you are a Centra stockholder and you fail to submit a proxy or vote at
the special meeting, your shares will not be counted as present for purposes
of determining the presence or absence of a quorum and will have the same
effect as a vote AGAINST adoption of the merger agreement but will have no
effect on the adjournment proposal.
. If you sign and return your proxy and do not indicate how you want to
vote, your proxy will be counted as present for purposes of determining
the presence of a quorum and will be voted FOR adoption of the merger
agreement and approval of the merger and FOR approval of the adjournment
proposal.
. If you submit a proxy and affirmatively elect to ABSTAIN from voting, your
proxy will be counted as present for the purpose of determining the
presence of a quorum for the special meeting but will not be voted at the
special meeting. Consequently, your abstention will have the same effect
as a vote AGAINST adoption of the merger agreement but will have no effect
on the adjournment proposal.
Q: What happens if a SmartForce shareholder does not vote? (see page 32)
A: If you are a SmartForce shareholder and do not submit a proxy or vote at the
annual general meeting, your shares will not be counted as present for
purposes of determining the presence or absence of a quorum and will have no
effect on the outcome of the proposal to adopt the merger agreement, related
proposals or any other proposals presented at the meeting.
. If you submit a proxy with respect to your SmartForce ADSs and do not
indicate how you want to vote, your proxy will be counted as present for
the purpose of determining the presence of a quorum and will be voted FOR
proposals one, two, three and four but will not be voted at all for
proposals five and six. Consequently, your failure to indicate how you
want to vote with respect to proposals one, two, three and four, will have
the same effect as a vote FOR these proposals and, with respect to
proposals five and six, will have the same effect as a vote AGAINST these
proposals. However, if you submit a proxy with respect to your SmartForce
ordinary shares and do not indicate how you want to vote, your proxy will
be counted both as present for the purpose of determining the presence of
a quorum and will be voted FOR all of the proposals. For a description of
the matters for which The Bank of New York is not entitled to a
discretionary proxy to vote SmartForce ADSs, please see "Description of
American Depositary Shares--Voting Rights" beginning on page 92.
. If you submit a proxy and affirmatively elect to ABSTAIN from voting, your
proxy will be counted as present for the purpose of determining the
presence of a quorum but will not be voted on any of the proposals at the
annual general meeting. Consequently, your abstention will but will not
have an effect on the vote for any of the proposals to be voted upon at
the meeting.
Q: Am I entitled to dissenters' or appraisal rights in connection with the
merger? (see page 65)
A: No. Under the Irish Companies Acts and Delaware law, neither shareholders
of SmartForce nor stockholders of Centra, respectively, are entitled to
dissenters' or appraisal rights in connection with the merger.
7
Other Matters to Consider
Q: How do the market prices of SmartForce ADSs and Centra common stock compare?
(see pages 28-29)
A: SmartForce ADSs and shares of Centra common stock are listed on the Nasdaq
National Market. SmartForce's trading symbol is "SMTF," and Centra's trading
symbol is "CTRA." On January 15, 2002, the last full trading day prior to
the public announcement of the proposed merger, the last reported sale
prices were:
. $24.20 per SmartForce ADS, and
. $8.85 per share of Centra common stock.
On March 18, 2002, the last reported sale prices were:
. $12.09 per SmartForce ADS, and
. $5.10 per share of Centra common stock.
SmartForce and Centra urge you to obtain current market quotations.
Q: What are the United States federal income tax consequences of the merger?
(see pages 81-82)
A: We expect that, in general, SmartForce, SmartForce's shareholders, Centra
and Centra's stockholders will not recognize a gain or loss for United
States federal income tax purposes as a result of the merger, except for a
gain or loss attributable to cash received by Centra stockholders instead of
fractional shares.
Set forth in "Tax Matters--Material United States Federal Income Tax
Consequences" is a description of the material United States federal tax
consequences of the transaction. The tax consequences to each Centra
stockholder will depend on the facts of that stockholder's own situation.
Therefore, Centra stockholders are urged to consult their own tax advisors
to determine the particular tax consequences of the merger to them.
Q: How will the merger be accounted for? (see page 64)
A: SmartForce intends to account for the merger as a "purchase" for financial
accounting purposes, in accordance with United States generally accepted
accounting principles. As a result, the assets and liabilities of Centra,
including intangible assets, will be recorded at their fair value with the
remaining purchase price reflected as goodwill and the results of operations
and cash flows of Centra will be included in SmartForce's financial
statements prospectively as of the consummation of the merger.
Q: Does the merger agreement permit termination of the merger (see page 74)
A: Yes. The merger agreement may be terminated prior to the effectiveness of
the merger under some circumstances.
Q: Could payment of a termination fee be required in connection with the
merger? (see pages 75-76)
A: Yes. If the merger agreement is terminated upon some specified occurrences,
Centra may be required to pay to SmartForce a termination fee of $12,000,000.
Q: May Centra negotiate with other parties? (see pages 70-71)
A: No. Centra agreed, subject to limited exceptions for responses to
unsolicited bona fide offers, not to initiate or engage in discussions with
another party concerning a business combination with a party other than
SmartForce while the merger is pending.
Q: Are there restrictions on the ability to sell SmartForce ADSs received as a
result of the merger? (see page 65)
A: All SmartForce ADSs received by Centra stockholders in connection with the
merger will be freely transferable unless the holder is considered an
affiliate of either Centra or SmartForce under the Securities Act of 1933,
as amended. SmartForce ADSs issued in the merger and held by affiliates may
only be sold pursuant to a registration statement or an exemption from the
registration requirements of the Securities Act.
8
ENFORCEMENT OF CIVIL LIABILITIES
UNDER UNITED STATES FEDERAL SECURITIES LAWS
SmartForce is a public limited company organized under the laws of Ireland.
Several of SmartForce's directors and officers and experts named in this joint
proxy statement/prospectus are non-residents of the United States, and a
significant portion of the assets of SmartForce and these persons are located
outside the United States. As a result, it may not be possible for investors to
effect service of process within the United States upon these persons or to
enforce against them in United States courts judgments under the civil
liability provisions of the laws of the United States, including the federal
securities laws. SmartForce has been advised that there is doubt as to the
enforceability against such persons in Ireland, whether in original actions or
in actions for the enforcement of judgments in United States courts, of civil
liabilities based solely upon the laws of the United States, including the
Federal securities laws.
FORWARD-LOOKING STATEMENTS
You should not place undue reliance upon forward-looking statements in this
joint proxy statement/prospectus. This joint proxy statement/prospectus and the
documents incorporated by reference into this joint proxy statement/prospectus
contain forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements relate to the financial conditions, results of operations, cash
flows, dividends, financing plans, business strategies, operating efficiencies
or synergies, budgets, capital and other expenditures, competitive positions,
growth opportunities for existing products, benefits from new technology, plans
and objectives of management, markets for SmartForce's shares and Centra's
stock and other matters relating to SmartForce and Centra. We use words such as
"anticipates," "believes," "plans," "expects," "future," "intends," "may,"
"will," "should," "estimates," "predicts," "potential," "continue" and similar
expressions to identify such forward-looking statements.
These forward-looking statements, wherever they occur in this joint proxy
statement/prospectus, are estimates reflecting the present best judgment of the
senior management of SmartForce and Centra, respectively. These forward-looking
statements involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the forward-looking
statements. Forward-looking statements should, therefore, be considered in
light of various important factors, including those set forth in this joint
proxy statement/prospectus. Important factors that could cause actual results
to differ materially from the forward-looking statements include the following:
. combining the businesses of SmartForce and Centra may cost more or be more
difficult than we expect;
. the completion of the proposed merger could be materially delayed or
prohibited;
. general economic conditions or conditions in securities markets may be
less favorable than we currently anticipate resulting in, among other
things, lower than expected revenues or results of operations for the
combined company;
. cost savings and revenue enhancements that we expect from the merger may
not be fully realized or realized within the expected time frame;
. retaining key personnel may be more difficult than we expect;
. contingencies may arise of which we were not aware or of which we
underestimated the significance;
. our revenues after the merger may be lower than we expect;
. we may lose more business or customers after the merger than we expect or
our operating costs may be higher than we expect;
9
. the amount (both in absolute dollars and as a percentage of net sales) of
SmartForce and Centra expenditures for research and development, selling,
general and administrative and capital acquisitions and improvements may
be materially greater or less than those expected;
. development costs, anticipated completion, introduction and projected
revenues from SmartForce's and Centra's new and developing products and
technologies may be materially different than anticipated;
. changes in technology may increase the number of competitors SmartForce or
Centra faces or require significant capital expenditures to provide
competitive products and services;
. the effects of vigorous competition in the markets in which SmartForce and
Centra operate may be materially different from that anticipated;
. adverse changes may occur in the securities markets; or
. other risks described under "Risk Factors" beginning on page 11 may occur.
SmartForce shareholders and Centra stockholders are cautioned not to place
undue reliance on such forward-looking statements contained in this joint proxy
statement/prospectus, which speak only as of the date of this joint proxy
statement/prospectus or the date of the documents incorporated by reference in
this joint proxy statement/prospectus in which they appear.
This joint proxy statement/prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding
the growth of certain markets. Forward-looking statements are subject to known
and unknown risks, uncertainties and other factors that may cause actual
results, levels of activity, performance, achievements and prospects to be
materially different from those expressed or implied by such forward-looking
statements. These risks, uncertainties and other factors include, among others,
those identified under "Risk Factors" and elsewhere in this joint proxy
statement/prospectus.
Neither SmartForce nor Centra is under any obligation, and each expressly
disclaims any obligation, to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
statements discussed in this joint proxy statement/prospectus might not
materialize.
10
RISK FACTORS
The merger involves a high degree of risk. By voting in favor of the merger,
current Centra stockholders will be choosing to invest in SmartForce ADSs, and
current SmartForce shareholders will face dilution of their ownership interest
in SmartForce. An investment in SmartForce ADSs involves a high degree of risk.
In addition to the other information contained in this joint proxy
statement/prospectus, you should carefully consider all of the following risk
factors relating to the proposed merger and the combined company in deciding
whether to vote for the merger or for the issuance of SmartForce ordinary
shares, represented by SmartForce ADSs in connection with the merger.
Risks Related to the Proposed Merger
SmartForce may face challenges in integrating Centra with SmartForce and, as
a result, may not realize the expected benefits of the merger.
SmartForce may not be successful in integrating Centra's business.
Integrating SmartForce's operations and personnel with Centra's will be a
complex process. The integration may not be completed rapidly or achieve the
anticipated benefits of the merger. The successful integration of Centra's
business will require, among other things, the following:
. integration of the two companies' products and services, sales and
marketing, information and software systems and other operations;
. retention and integration of management and other key employees;
. coordination of ongoing and future research and development efforts and
marketing activities;
. retention of existing customers of both companies and attraction of
additional customers;
. retention of strategic partners of each company and attraction of new
strategic partners;
. developing and maintaining uniform standards, controls, procedures and
policies;
. minimization of disruption of SmartForce's ongoing business and
distraction of its management; and
. limiting expenses related to integration.
The combined company may not succeed in addressing these risks or any other
problems encountered in connection with the merger. The diversion of the
attention of management and any difficulties encountered in the process of
combining the companies could cause the disruption of, or a loss of momentum
in, the activities of the combined company's business or could cause the
impairment of relationships with customers and business partners. Further, the
process of combining Centra's business with SmartForce's could negatively
affect employee morale and SmartForce's ability to retain some key SmartForce
and Centra employees after the merger and customers could cancel existing
orders or choose not to place new orders with the combined company. In
addition, SmartForce intends after the merger to develop new products and
services that combine both companies' assets. Difficulties in incorporating
acquired technology and rights into the products and service offerings of the
combined company could result in disruption of customer service and longer
sales cycles and product implementations, which could cause existing customers
to reduce their future orders or cease doing business with the combined company
altogether and cause revenue and operating income to fluctuate and fail to meet
expectations.
The value of SmartForce ADSs issued in the merger will depend on their market
price at the time of the merger, and no adjustment will be made as a result
of changes in the market price of SmartForce's ADSs.
Upon completion of the merger, each share of Centra common stock will be
exchanged for 0.425 ordinary shares represented by SmartForce ADSs. The
exchange ratio will not be adjusted for changes in the market price
11
of Centra common stock or SmartForce ADSs. As a result, the specific dollar
value of SmartForce's ADSs that Centra stockholders will receive and that
SmartForce shareholders will retain upon completion of the merger will depend
on the market value of SmartForce ADSs when the merger is completed, and may
increase or decrease from the date you submit your proxy or the time of the
stockholder meetings of SmartForce and Centra. The market prices of SmartForce
ADSs and Centra common stock are subject to the general price fluctuations in
the market for publicly traded equity securities and have recently experienced
significant volatility. We cannot predict or give you any assurances as to the
market price of SmartForce ADSs at any time before or after the completion of
the merger and, therefore, we cannot value with any degree of certainty the
consideration that will be received in the merger.
The merger could harm the financial results of SmartForce.
SmartForce and Centra expect to incur transaction costs of approximately
$17.8 million in connection with the merger. If the benefits of the merger do
not exceed the associated costs, or if costs related to the merger exceed
estimates, including costs associated with integrating the two companies and
dilution of SmartForce's shareholders resulting from the issuance of SmartForce
ADSs in connection with the merger, the combined company's financial results,
including earnings per share, could be materially harmed.
Additionally, since Centra began operations, it has incurred substantial net
losses in every fiscal period, and we cannot predict when the business of
Centra will become profitable, if at all. Centra had net losses of $8.6 million
in 1999, $13.9 million in 2000 and $16.7 million in 2001. As a result of
ongoing operating losses, Centra had an accumulated deficit of $57.7 million on
December 31, 2001. In connection with the integration of Centra into SmartForce
and the continued expansion of this business, we expect to incur significant
sales and marketing and research and development expenses, and, as a result,
the business will need to generate significant revenues to achieve and maintain
profitability. If the business of Centra fails to achieve profitability, the
combined company's financial results, including earnings per share, could be
materially harmed.
The market price of SmartForce's ADSs may decline as a result of the merger.
The market price of SmartForce's ADSs may decline as a result of the merger
for a number of reasons, including if:
. the integration of SmartForce and Centra is unsuccessful or not completed
in a timely and efficient manner;
. the combined company does not achieve the expected benefits of the merger
as rapidly or to the extent anticipated by financial or industry analysts;
. the effect of the merger on the combined company's financial results is
not consistent with the expectations of financial or industry analysts; and
. significant shareholders of SmartForce following the merger decide to
dispose of their shares because the results of the merger are not
consistent with their expectations.
Failure to complete the merger could negatively impact the market price of
SmartForce ADSs and Centra common stock.
If the merger is not completed for any reason, SmartForce and Centra will be
subject to a number of material risks, including:
. in limited circumstances, the provision in the merger agreement which
provides that Centra could be required to pay SmartForce a termination fee
in the amount of $12 million;
. the market price of SmartForce's ADSs and Centra's common stock may
decline to the extent that the current market price of such shares
reflects a market assumption that the merger will be completed;
12
. costs related to the merger, such as legal and accounting fees and a
portion of the investment banking fees, must be paid even if the merger is
not completed;
. benefits that SmartForce expects to realize from the merger would not be
realized; and
. the diversion of management attention from the day-to-day businesses of
SmartForce and Centra, the scaling back of marketing and capital spending
and the unavoidable disruption to their employees and their relationships
with customers and suppliers during the period before consummation of the
merger may make it difficult for SmartForce and Centra to regain their
financial and market positions if the merger does not occur.
During the pendency of the merger, Centra may not be able to enter into a
merger or business combination with another party at a favorable price
because of restrictions in the merger agreement.
Covenants in the merger agreement may impede the ability of Centra to make
acquisitions or complete other transactions that are not in the ordinary course
of business but that could be favorable to Centra and its stockholders pending
completion of the merger. As a result, if the merger is not consummated, Centra
may be at a disadvantage to its competitors. In addition, while the merger
agreement is in effect and subject to very narrowly defined exceptions, Centra
is prohibited from soliciting, initiating, encouraging or entering into certain
extraordinary transactions, such as a merger, sale of assets or other business
combination outside the ordinary course of business, with any third party.
Charges to earnings resulting from the application of the purchase method of
accounting may adversely affect the market value of SmartForce ADSs following
the merger.
In accordance with United States generally accepted accounting principles,
the combined company will account for the merger using the purchase method of
accounting, which will result in charges to earnings that could have a material
adverse effect on the market value of SmartForce ADSs following completion of
the merger. Under purchase accounting, SmartForce will record the market value
of its ordinary shares, represented by SmartForce ADSs issued in connection
with the merger, the fair market value at the announcement date of the options
to purchase Centra common stock that will be converted into options to purchase
ordinary shares represented by SmartForce ADSs and the amount of direct
transaction costs, as the cost of acquiring the business of Centra. The
combined company will allocate the cost of acquiring Centra to Centra's net
tangible assets, amortizable intangible assets, intangible assets with
indefinite lives and in-process research and development based on their fair
values as of the date of completion of the merger, and record the excess of the
purchase price over those fair values as goodwill. The portion of the estimated
purchase price allocated to in-process research and development will be
expensed by SmartForce in the quarter in which the merger is completed.
SmartForce will incur additional depreciation and amortization expense over the
useful lives of certain of the net tangible and intangible assets acquired in
connection with the merger. In addition, to the extent the value of these
assets, including goodwill or intangible assets with indefinite lives becomes
impaired, SmartForce may be required to incur material charges relating to the
impairment of those assets. These depreciation, amortization, in-process
research and development and potential impairment charges will decrease the net
income of SmartForce for the foreseeable future, which could have a material
impact on SmartForce's results of operations and the market value of its ADSs
following the merger.
Action by governmental regulators could prevent or delay consummation of the
merger.
The merger is subject to review by the U.S. Federal Trade Commission and
U.S. Department of Justice under the Hart-Scott-Rodino Improvements Act of
1976. In addition, other filings with the Minister for Enterprise, Trade and
Employment of Ireland under the Mergers and Take-overs (Control) Acts, 1978 to
1996, with respect to the merger and other transactions contemplated by the
merger agreement, relating primarily to antitrust issues, must be made prior to
the consummation of the merger. Under each of these statutes, SmartForce and
Centra were required to make pre-merger notification filings and to await the
expiration or early termination of statutory waiting periods and clearance
prior to completing the merger.
13
On February 26, 2002, the U.S. Federal Trade Commission notified SmartForce
and Centra that it was terminating early the Hart-Scott-Rodino waiting period
requirements. At any time before or after the merger, and notwithstanding that
the waiting period has terminated or that the merger may have been consummated,
the U.S. Federal Trade Commission, the U.S. Department of Justice or any state
could take any action under the applicable antitrust or competition laws as it
deems necessary or desirable. This action could include seeking to enjoin the
completion of the merger. Private parties may also institute legal actions
under the antitrust laws under some circumstances. On February 19, 2002, the
office of the Minister for Enterprise, Trade and Employment of Ireland informed
SmartForce and Centra that the Minister had decided not to make an order
prohibiting the merger.
If we are unable to take advantage of opportunities to market and sell
SmartForce's and Centra's products and services to each other's traditional
customers, distribution channels and business partners, we may not realize
some of the expected benefits of the merger.
Prior to the merger, SmartForce and Centra have each maintained separate and
distinct customer bases, distribution channels and business partners specific
to their respective businesses. Following the merger, the combined company
expects to take advantage of the customer bases and distribution channels of
the formerly separate businesses in order to promote and sell the products and
services of one company to the traditional customers and business partners of
the other company. The products and services of SmartForce and Centra are
highly technical and the salespersons of one company may not be successful in
marketing the products and services of the other company. In the event that the
traditional customers and business partners of either SmartForce or Centra are
not receptive to the products and services of the other, we may not realize
some of the expected benefits of the merger, and the business of the combined
company may be harmed.
SmartForce and Centra may lose key personnel, customers and business partners
due to uncertainties associated with the merger.
Current and prospective employees, customers and business partners of
SmartForce and Centra may experience uncertainty about their future
relationships with the combined company. Such uncertainty may adversely affect
the combined company's ability to attract and retain key management, sales,
marketing and technical personnel. Current and prospective customers and
business partners may, in response to the announcement or consummation of the
merger, delay or cancel purchasing decisions as they evaluate the likelihood of
successful integration of the combined company or may instead purchase products
or services from competitors. Additionally, some of these customers and
business partners may feel that the combined company poses new competitive
threats to their businesses and as a result may seek to discontinue their
relationships with SmartForce or Centra or avoid renewing or entering new
relationships with the combined company. Any delay in, or cancellation of,
purchasing decisions could adversely affect the business of the combined
company.
Some of SmartForce's and Centra's officers and directors have conflicts of
interest that may influence them to support or approve the merger.
The directors and officers of SmartForce and Centra participate in
arrangements and have continuing indemnification against liabilities that
provide them with interests in the merger that are different from yours,
including the following:
. Leon Navickas will become the Chief Technology Officer and will sit on the
board of directors of SmartForce.
. In connection with the merger, Leon Navickas, Steve Lesser and Joe
Gruttadauria have entered into employment agreements, whereby each has
been provided with certain incentives to remain employed by SmartForce
following the effectiveness of the merger. Further, Tony Mark and Steve
Johnson have entered into separation agreements with Centra which
agreements provide for each of their resignations upon the effectiveness
of the closing, the payment of severance and the extension of certain
14
benefits subsequent to their resignations. These separation agreements
supersede previously existing agreements providing for, among other
things, the partial acceleration of their stock options and the partial
termination of Centra's right to repurchase certain unvested stock upon a
change in control.
. SmartForce has agreed to cause its wholly owned subsidiary, SmartForce
(USA), to indemnify each present and former Centra officer and director
against liabilities arising out of such person's services as an officer or
director. SmartForce will also cause SmartForce (USA) to maintain
officers' and directors liability insurance to cover any such liabilities
for the next six years.
The receipt of compensation or other benefits in or contingent upon the
merger, or the continuation of indemnification arrangements for current
officers or directors of SmartForce or Centra may influence such persons to
support or approve the merger.
Risk Factors Relating to the Combined Company
The combined company's quarterly operating results may fluctuate
significantly. This limits your ability to evaluate historical financial
results and increases the likelihood that the combined company's results will
fall below market analysts' expectations, which could cause the price of
SmartForce's ADSs to drop rapidly and severely.
SmartForce and Centra have in the past experienced fluctuations in their
quarterly operating results, and we anticipate that these fluctuations will
continue and could intensify in the future for the combined company. As a
result, we believe that the combined company's quarterly revenue, expenses and
operating results are likely to vary significantly in the future. Thus, it is
likely that in some future quarters its results of operations will be below the
expectations of public market analysts and investors, which could have a severe
adverse effect on the price of SmartForce's ADSs. For example, SmartForce's
revenue for the quarter ended September 30, 1998 did not increase at a rate
comparable to prior quarters. As a direct result, the trading price of
SmartForce's ADSs decreased rapidly and significantly, having an extreme
adverse effect on the value of an investment in its securities.
SmartForce's and Centra's operating results have historically fluctuated,
and the combined company's operating results may in the future continue to
fluctuate, as a result of factors, which include:
. the size and timing of new and renewal agreements;
. the number and size of outsourced virtual university agreements or other
agreements providing for professional services or the resale of
instructor-led training;
. the mix of revenue between access to hosted content or platform services,
up-front software licenses, software rental, professional services,
maintenance and resale of third parties products and services;
. royalty rates;
. the announcement, introduction and acceptance of new products, product
enhancements and technologies by the combined company and its competitors;
. the mix of sales between the combined company's field sales force, its
other direct sales channels and its telesales channels;
. the impact of any unanticipated decline in net revenues in any particular
quarter as compared to the relatively fixed nature of the combined
company's expense levels in the short term;
. general conditions in our market or markets served by our customers;
. general conditions in the U.S. or the international economy;
. general conditions in the combined company's market or the markets served
by its customers;
. the loss of significant customers;
15
. delays in availability of existing or new products;
. product or service quality problems;
. the spending patterns of the combined company's customers;
. litigation costs and expenses;
. currency fluctuations; and
. the length of the combined company's sales cycles.
The fluctuations in quarterly operating results are likely to be even
greater for the combined company than for SmartForce alone. Although both
companies are dependent on contracts booked each quarter in order to achieve
that quarter's revenue and earnings targets, SmartForce typically enters each
quarter with a significant portion of its expected revenues for that quarter
(although generally not materially more than 50%) already under contract.
Centra typically enters each quarter with a significantly smaller portion of
its expected quarterly revenues already under contract. The combined company is
therefore likely to be even more subject to quarterly fluctuations based on
bookings achieved within the previous quarters than is SmartForce prior to the
merger.
Demand for the combined company's products and services may be especially
susceptible to adverse economic conditions.
The combined company's business and financial performance may be damaged by
adverse financial conditions affecting its target customers or by a general
weakening of the economy. Some companies may not view training products and
services as critical to the success of their businesses. If these companies
experience disappointing operating results, whether as a result of adverse
economic conditions, competitive issues or other factors, they may decrease or
forego education and training expenditures before limiting their other
expenditures.
In addition, the general condition of the economy, and by extension the
combined company's business, can be affected by social, political and military
conditions. For example, the terrorist events of September 11, 2001 and their
aftermath had a material adverse effect on SmartForce's bookings in the second
half of 2001. It is not possible to predict the outcome of the escalation of
hostilities between the United States and certain countries and persons related
to the events of September 11. The continuation of these hostilities could
result in further weakness in the economy that would have an adverse impact on
the combined company's operating results and financial condition.
SmartForce's experience in selling fully integrated, Internet-based learning
solutions and Centra's experience in selling application service provider
services are relatively limited.
In the fourth quarter of 1999 SmartForce introduced SmartForce e-Learning,
its Internet-based learning solution. Additionally, Centra began operating its
CentraNow(TM) application service provider, or ASP, service in June 2000.
Centra also introduced during 2000 ASP versions of its Centra Symposium(TM),
Centra Conference(TM) and Centra eMeeting(TM) products. While the results of
SmartForce's and Centra's efforts to market these solutions to their customers
have been positive, SmartForce and Centra have relatively limited experience
with these solutions, which makes their historical results of limited value in
predicting the potential success of this initiative. The ultimate success of
this initiative will depend on the combined company's ability to continue to
expand and enhance its e-Learning infrastructure, to market and sell the new
e-Learning solutions to existing and prospective customers, to host, operate
and manage its site, and to attract and retain key management and technical
personnel.
The combined company may not be successful in these efforts and the economic
terms of any arrangements that might result from these efforts may not be as
favorable as the traditional licensing agreements. We believe that a lack of
success in this regard could have a material adverse effect on the combined
company.
16
SmartForce's and Centra's operating results have been, and the combined
company's operating results will be, subject to seasonal fluctuations which
may adversely impact its business.
SmartForce's and Centra's operating results have been, and the combined
company's operating results will be, subject to seasonal fluctuations, based in
part on customers' annual budgetary cycles and in part on the annual nature of
sales quotas. These seasonal trends have in the past caused bookings in the
first quarter of a year to be less, perhaps substantially so, than bookings for
the immediately preceding fourth quarter. We expect that these seasonal trends
could continue to adversely affect the combined company's operating results. In
addition, SmartForce and Centra have in past years added significant headcount
in the sales and marketing and research and development functions in the first
quarter, and to a lesser extent, the second quarter. Because these headcount
additions do not immediately contribute significant revenues, SmartForce's and
Centra's operating margins in the earlier part of the year have tended to be
significantly lower than in the later parts of the year. In addition, many
technology companies also experience a seasonal downturn in demand during the
summer months. These seasonal trends may have a material adverse effect on the
combined company's results of operations.
SmartForce and Centra rely on strategic alliances that may not continue in
the future.
SmartForce and Centra have developed strategic alliances to develop and
market many of their respective products, and believe that an increasing
proportion of the combined company's future revenues may be attributable to
products developed and marketed through these and other future alliances.
However, these relationships are not exclusive and the combined company may be
unable to continue to develop future products through these alliances in a
timely fashion or may be unable to negotiate additional alliances in the future
on acceptable terms, if at all.
The marketing efforts of the combined company's partners may also disrupt
its direct sales efforts. The combined company's development and marketing
partners could pursue their existing or alternative training programs in
preference to and in competition with those being developed by the combined
company. In the event that the combined company is unable to maintain or expand
its current development and marketing alliances or enter into new development
and marketing alliances, its operating results and financial condition could be
materially adversely affected. Furthermore, it will be required to pay
royalties to the combined company's development and marketing partners on
products developed with them, which could reduce the combined company's gross
margins. We expect that cost of revenues may fluctuate from period to period in
the future based upon many factors, including the revenue mix and the timing of
expenses associated with development and marketing alliances. In addition, the
collaborative nature of the development process under these alliances may
result in longer development times and less control over the timing of product
introductions than for e-Learning offerings developed solely by the combined
company. The combined company's strategic alliance partners may from time to
time renegotiate the terms of their agreement with the combined company, which
could result in changes to the royalty or other arrangements, adversely
affecting the combined company's results of operations.
The combined company's success depends on its ability to meet the needs of
the rapidly changing market.
The market for interactive education and training is influenced by rapidly
changing technology, evolving industry standards, changes in customer
requirements and preferences and frequent introductions of new products and
services embodying new technologies. New methods of providing interactive
education in a technology- based format are being developed and offered in the
marketplace, including intranet and Internet offerings. Many of these new
offerings involve new and different business models and contracting mechanisms.
In addition, multimedia and other product functionality features are being
added to educational software. Accordingly, the combined company's future
success will depend upon the extent to which it is able to develop and
implement products which address these emerging market requirements on a cost
effective and timely basis. Product development is risky because it is
difficult to foresee developments in technology, coordinate technical personnel
and identify and eliminate design flaws. Any significant delay in releasing new
products could have a material adverse effect on the ultimate success of the
combined company's products and could reduce sales of predecessor
17
products. The combined company may not be able to introduce new products on a
timely basis. In addition, new products introduced by the combined company may
fail to achieve a significant degree of market acceptance or, once accepted,
may fail to sustain viability in the market for any significant period. If the
combined company is unsuccessful in addressing the changing needs of the
marketplace due to resource, technological or other constraints, or in
anticipating and responding adequately to changes in customers' software
technology and preferences, the combined company's business and results of
operations would be materially adversely affected.
The success of the combined company's e-Learning strategy depends on the
reliability and consistent performance of its information systems and
Internet infrastructure.
The success of the combined company's e-Learning strategy is highly
dependent on the consistent performance of its information systems and Internet
infrastructure. If the combined company's Web site or ASP server site fails for
any reason or if it experiences any unscheduled down times, even for only a
short period, the combined company's business and reputation could be
materially harmed. SmartForce and Centra have in the past experienced
performance problems and unscheduled downtime, and these problems could recur.
SmartForce and Centra currently rely on, and the combined company will rely on,
third parties for proper functioning of computer infrastructure, delivery of
its e-Learning applications and the performance of its destination site. The
combined company's systems and operations could be damaged or interrupted by
fire, flood, power loss, telecommunications failure, break-ins, earthquake,
financial patterns of hosting providers and similar events. Any system failures
could adversely affect customer usage of the combined company's solutions and
user traffic results in any future quarters, which could adversely affect the
combined company's revenues and operating results and harm the combined
company's reputation with corporate customers, subscribers and commerce
partners. A key element of the combined company's strategy will be to generate
a high volume of traffic to the Web site and ASP server site and create a
significant subscriber base. Accordingly, the satisfactory performance,
reliability and availability of the combined company's Web site and ASP server
site and computer infrastructure is critical to the combined company's
reputation and ability to attract and retain corporate customers, subscribers
and commerce partners. We cannot accurately project the rate or timing of any
increases in traffic to the combined company's Web site or ASP server site and,
therefore, the integration and timing of any upgrades or enhancements required
to facilitate any significant traffic increase to the Web site and ASP server
site are uncertain. SmartForce and Centra have in the past experienced
difficulties in upgrading their site infrastructure to handle increased
traffic, and these difficulties could recur. The failure to expand and upgrade
the Web site and ASP server site or any system error, failure or extended down
time, could materially harm the combined company's business, reputation,
financial condition or results of operations.
The e-Learning market is a developing market, and the combined company's
business will suffer if e-Learning is not widely accepted.
The market for e-Learning is a new and emerging market. Corporate training
and education has historically been conducted primarily through classroom
instruction and has traditionally been performed by a company's internal
personnel. Many companies have invested heavily in their current training
solutions. Although technology-based training applications have been available
for several years, they currently account for only a small portion of the
overall training market.
Accordingly, the combined company's future success will depend upon the
extent to which companies adopt technology-based solutions and use the Internet
in connection with their training activities, and the extent to which companies
utilize the services or purchase products of third-party providers. Many
companies that have already invested substantial resources in traditional
methods of corporate training may be reluctant to adopt a new strategy that may
compete with their existing investments. Even if companies implement
technology-based training or Internet learning solutions, they may still choose
to design, develop, deliver or manage all or part of their education and
training internally. If technology based learning and the use of the Internet
for learning does not become widespread, or if companies do not use the
products and services of third parties to develop, deliver or manage their
training needs, then the combined company's products and service, may not
achieve commercial success.
18
The combined company may fail to integrate adequately acquired products,
technologies and businesses.
SmartForce and Centra regularly evaluate acquisition opportunities and have
made, and will likely in the future continue to make, acquisitions that would
provide additional product or service offerings, additional industry expertise
or an expanded geographic presence. For example, in April 2001 SmartForce
acquired icGlobal, a provider of learning management system software. In August
2001 SmartForce acquired substantially all of the assets of Impaxselling.com, a
sales performance company providing global enterprises with web-based learning
solutions designed to improve sales and account management performance. In
October 2001 SmartForce acquired SkillScape Solutions, Inc., a provider of
competency management systems. And in April 2001, Centra acquired
Mindlever.com, Inc, a provider of standards-based learning content management
systems. The combined company may be unable to locate attractive opportunities
or acquire any opportunities that it locates on attractive terms. Future
acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities and amortization
expenses related to goodwill and other intangible assets, which could
materially adversely affect the combined company's results of operations.
Product and technology acquisitions also entail numerous risks, including
difficulties in the assimilation of acquired operations, technologies and
products, diversion of management's attention to other business concerns, risks
of entering markets in which the combined company has no or limited prior
experience and the potential loss of key employees of acquired companies. The
combined company may be unable to integrate successfully any operations,
personnel or products that have been acquired or that might be acquired in the
future. Further, the revenues from the acquired businesses may not be
sufficient to support the costs associated with those businesses, without
adversely affecting the combined company's operating margins in the future. The
combined company's failure to successfully complete the integration of acquired
businesses in a timely fashion, if at all, or to generate sufficient revenues
from acquired businesses could have a material adverse effect on its business
and results of operations.
The combined company's failure to manage its rapid expansion effectively
could hurt the combined company's operations and business.
SmartForce and Centra have recently experienced rapid expansion of their
operations, which has placed, and is expected to continue to place, significant
demands on the combined company's executive, administrative, operational and
financial personnel and systems. The combined company's future operating
results will substantially depend on the ability of its officers and key
employees to manage changing business conditions and to implement and improve
its operational, financial control and reporting systems. In particular, the
combined company will require significant improvement in its order entry,
fulfillment and management information systems in order to support its expanded
operations. If the combined company is unable to respond to and manage changing
business conditions, its business and results of operations could be materially
adversely affected.
SmartForce's and Centra's expense levels are fixed in the short term. As a
result, the combined company may be unable to adjust spending to compensate
for unexpected revenue shortfalls.
SmartForce's and Centra's expense levels are based in significant part on
their respective expectations regarding future revenues and are fixed to a
large extent in the short term. Accordingly, following the merger, the combined
company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Any significant revenue shortfall would
therefore have a material adverse effect on the combined company's results of
operations. This risk materialized for SmartForce in the third quarter of 1998,
where profit was dramatically negatively affected by a shortfall in revenues
compared to management's expectations.
The combined company will depend on a few key personnel to manage and operate
the business and must be able to attract and retain highly qualified
employees.
The combined company's success will be largely dependent on the personal
efforts and abilities of its senior management. Failure to retain these
executives, or the loss of certain additional senior management personnel or
19
other key employees, could have a material adverse effect on the combined
company's business and future prospects.
The combined company will also be dependent on the continued service of its
key sales, content development and operational personnel and on its ability to
attract, train, motivate and retain highly qualified employees. In addition,
the combined company will depend on writers, programmers, Web designers and
graphic artists. We expect to continue to hire additional content development,
programming, sales and marketing, information systems and accounting staff.
However, the combined company may be unsuccessful in attracting, training,
retaining or motivating key personnel. The inability to hire, train and retain
qualified personnel or the loss of the services of key personnel could have a
material adverse effect upon the combined company's business, new product
development efforts and future business prospects.
Increased competition may result in decreased demand for the combined
company's products and services, which may result in reduced revenues and
gross margins and loss of market share.
The market for business education training solutions is immature, highly
fragmented and competitive, and is subject to rapid technological change. We
expect the market to become increasingly competitive due to the lack of
significant barriers to entry. In addition to increased competition from new
companies entering into the market, established companies are entering into the
market through acquisitions of smaller companies, which directly compete with
SmartForce and Centra, and this trend is expected to continue. The combined
company may also face competition from publishing companies and vendors of
application software, including those vendors with whom SmartForce or Centra
have formed development and marketing alliances.
SmartForce's and Centra's primary source of direct competition comes from
third-party suppliers of instructor-led information technology, business,
management and professional skills education and training as well as suppliers
of computer-based training and e-Learning solutions. SmartForce and Centra also
face indirect competition from internal education and training departments of
their potential customers. With respect to different aspects of Centra's
collaboration solution, competition occurs from a variety of software and
service vendors. SmartForce and Centra also compete to a lesser extent with
consultants, value-added resellers and network integrators. Certain of these
value-added resellers also market products that compete with those of
SmartForce and Centra. We expect that as organizations increase their
dependence on outside suppliers of training, the combined company will face
increasing competition from these other suppliers as education and training
managers more frequently compare training products provided by outside
suppliers.
Growing competition may result in price reductions, reduced revenue and
gross margins and loss of market share, any one of which would have a material
adverse effect on the combined company's business. Many of SmartForce's and
Centra's current and potential competitors have substantially greater
financial, technical, sales, marketing and other resources, as well as greater
name recognition, and we expect to face increasing price pressures from
competitors as managers demand more value for their training budgets.
Accordingly, following the merger, the combined company may be unable to
provide e-Learning solutions that compare favorably with new instructor-led
techniques, other interactive training software or new e-Learning solutions or
competitive pressures may require the combined company to reduce its prices
significantly.
The combined company's business will be subject to currency fluctuations that
could adversely affect its operating results.
Due to SmartForce's multinational operations, SmartForce's business is
currently subject to, and the combined company's business will be subject to,
fluctuations based upon changes in the exchange rates between the currencies in
which revenues are collected or expenses are paid. In particular, the value of
the U.S. dollar against the euro and related currencies will impact the
combined company's operating results. The combined company's expenses will not
necessarily be incurred in the currency in which revenue is generated, and, as
a result, the combined company will be required from time to time to convert
currencies to meet its obligations.
20
These currency conversions are subject to exchange rate fluctuations, and
changes to the value of the euro, pound sterling and other currencies relative
to the U.S. dollar could adversely affect the combined company's business and
results of operations.
The combined company's corporate tax rate may increase, which could adversely
affect the combined company's cash flow, financial condition and results of
operations.
SmartForce currently has significant foreign operations and generates a
majority of its taxable income in the Republic of Ireland, and some of
SmartForce's Irish operating subsidiaries are taxed at rates substantially
lower than tax rates in effect in the United States and other countries in
which SmartForce has operations. If at any time following the merger the
combined company's Irish subsidiaries were no longer to qualify for these lower
tax rates or if the applicable tax laws were rescinded or changed, the combined
company's operating results could be materially adversely affected. Moreover,
because the combined company will incur income tax in several countries, an
increase in the combined company's profitability in one or more of these
countries could result in a higher overall tax rate. In addition, if U.S. or
other foreign tax authorities were to change applicable tax laws or
successfully challenge the manner in which the combined company's subsidiaries'
profits are currently recognized, the combined company's taxes could increase,
and the combined company's business, cash flow, financial condition and results
of operations could be materially adversely affected.
The combined company may be unable to protect its proprietary rights.
Unauthorized use of the combined company's technology may result in
development of products or services that compete with those of the combined
company.
The success of the combined company depends to a significant degree upon the
protection of its rights in intellectual property and its trade secrets.
SmartForce and Centra currently rely upon, and the combined company will rely
upon, a combination of patent, copyright, trademark and trade secret laws and
customer license agreements, and other methods to protect their proprietary
rights. SmartForce and Centra have also entered into, and the combined company
will continue to enter into, confidentiality agreements with their employees,
consultants and third parties to seek to limit and protect the distribution of
their proprietary information. However, neither SmartForce nor Centra has
signed protective agreements in every case.
Although SmartForce and Centra have taken steps to protect their respective
proprietary technologies, these steps may be inadequate. Existing patent,
copyright, trademark and trade secret laws offer only limited protection,
Moreover, the laws of other countries in which SmartForce and Centra market
their products may afford little or no effective protection of their
intellectual property. Additionally, unauthorized parties may copy aspects of
the combined company's products, services or technology or obtain and use
information that the combined company will regard as proprietary. Other parties
may also breach confidentiality agreements and other protective contracts
SmartForce or Centra have executed or the combined company will in the future
execute. The combined company may not become aware of, or have adequate
remedies in the event of, a breach. Litigation may be necessary in the future
to enforce the combined company's intellectual property rights, to protect
trade secrets or to determine the validity and scope of the proprietary rights
of others. Even if the combined company were to prevail, this litigation could
result in substantial costs and diversion of management and technical resources.
Some parties may claim that the combined company infringes upon their
intellectual property rights, which could result in costly litigation or
require the combined company to reengineer or cease sales of its products or
services.
Third parties could in the future claim that SmartForce's or Centra's
current or the combined company's future products infringe their intellectual
property rights. Any claim, with or without merit, could result in costly
litigation or require the combined company to reengineer or cease sales of the
combined company's products or services, any of which could have a material
adverse effect on the combined company's business. Infringement
21
claims could also result in an injunction in the use of the combined company's
products or require the combined company to enter into royalty or licensing
agreements. Licensing agreements, if required, may not be available on terms
acceptable to the combined company or at all. Though no legal actions are
pending at this time, from time to time SmartForce and Centra learn of parties
that claim broad intellectual property rights in the e-Learning area that might
implicate SmartForce's and Centra's offerings. These parties or others could
initiate actions against the combined company in the future.
SmartForce is subject to a pending legal proceeding and may become subject to
additional proceedings and adverse determinations in these proceedings could
harm its business.
Since the end of the third quarter of 1998, a class action lawsuit has been
pending in the United States District Court for the Northern District of
California against SmartForce, one of SmartForce's subsidiaries, SmartForce
USA, and certain of SmartForce's former and current officers and directors,
alleging violation of the federal securities laws. It has been alleged in this
lawsuit that SmartForce misrepresented or omitted to state material facts
regarding SmartForce's business and financial condition and prospects in order
to artificially inflate and maintain the price of SmartForce's ADSs, and
misrepresented or omitted to state material facts in SmartForce's registration
statement and prospectus issued in connection with SmartForce's merger with
Forefront, which also is alleged to have artificially inflated the price of
SmartForce's ADSs.
We believe that this action is without merit and intend to vigorously defend
ourselves. Although we cannot presently determine the outcome of this action,
an adverse resolution of this matter could significantly negatively impact the
combined company's financial position and results of operations.
The combined company may be from time to time involved in various lawsuits
and legal proceedings, which arise in the ordinary course of business. An
adverse resolution of these matters could significantly negatively impact the
combined company's financial position and results of operations.
The combined company's non-U.S. operations will be subject to risks which
could negatively impact its future operating results.
We expect that international operations will continue to account for a
significant portion of the combined company's revenues, and intend to continue
to expand the combined company's operations outside of the United States.
Operations outside of the United States are subject to inherent risks,
including difficulties or delays in developing and supporting non-English
language versions of the combined company's products and services, political
and economic conditions in various jurisdictions, difficulties in staffing and
managing foreign subsidiary operations, longer account receivable payment
cycles, potential adverse tax consequences and the absence or significant lack
of legal protection for intellectual property rights. Any of these factors
could have a material adverse effect on the combined company's future
operations outside of the United States, which could negatively impact the
combined company's future operating results.
Because many users of the combined company's e-Learning solutions will access
them over the Internet, factors adversely affecting the use of the Internet
could harm the combined company's business.
Many of SmartForce's and Centra's users currently access, and the combined
company's users will access, their e-Learning solutions over the Internet. Any
factors that adversely affect Internet usage could disrupt the ability of those
users to access the combined company's e-Learning solutions, which would
adversely affect customer satisfaction and therefore the combined company's
business.
For example, the combined company's ability to increase the effectiveness
and scope of its services to customers is ultimately limited by the speed and
reliability of both the Internet and its customers' internal networks.
Consequently, the emergence and growth of the market for the combined company's
products and services depends upon the improvements being made to the entire
Internet as well as to its individual customers'
22
networking infrastructures to alleviate overloading and congestion. If these
improvements are not made, the ability of the combined company's customers to
use its products and services will be hindered, and its revenues may suffer.
Additionally, a requirement for the continued growth of accessing e-Learning
solutions over the Internet is the secure transmission of confidential
information over public networks. Failure to prevent security breaches into the
combined company's products or its customers' networks, or well-publicized
security breaches affecting the Internet in general could significantly harm
its growth and revenue. Advances in computer capabilities, new discoveries in
the field of cryptography or other developments may result in a compromise or
breach of the algorithms the combined company uses to protect content and
transactions, its products or its customers' proprietary information in its
databases. Anyone who is able to circumvent the combined company's security
measures could misappropriate proprietary and confidential information or could
cause interruptions in its operations. The combined company may be required to
expend significant capital and other resources to protect against such security
breaches or to address problems caused by security breaches. The privacy of
users may also deter people from using the Internet to conduct transactions
that involve transmitting confidential information.
The market price for SmartForce's ADSs may fluctuate and may not be
sustainable.
The market price of SmartForce's ADSs has fluctuated significantly since
SmartForce's initial public offering and is likely to continue to be volatile.
We believe that many factors, including the following, could cause the price of
SmartForce's ADSs to fluctuate, perhaps substantially:
. announcements of developments related to the combined company's or its
competitors' business;
. announcements of new products or enhancements by the combined company or
its competitors;
. the evolution of the market for live e-Learning and business collaboration
solutions;
. the combined company's success and timing in developing and introducing
new products and enhancements to existing products;
. changes in pricing policies by the combined company or its competitors;
. the length of the combined company's sales cycle;
. changes in customer buying patterns;
. market entry by new competitors;
. sales of SmartForce's ADSs into the public market;
. developments in the combined company's relationships with its customers,
partners and distributors;
. shortfalls or changes in revenues, gross margins, earnings or losses or
other financial results which differ from public market expectations;
. changes in the public market expectation of the combined company's
performance or industry performance;
. changes in market valuations of competitors;
. regulatory developments;
. additions or departures of key personnel;
. fluctuations in results of operations; and
. general conditions in the combined company's markets or the markets served
by the combined company's customers or in the U.S. and/or the
International economy.
In addition, in recent years the stock market in general, and the market for
shares of technology stocks in particular, has experienced extreme price and
volume fluctuations, which have often been unrelated to the
23
operating performance of affected companies. The market price of SmartForce's
ADSs may continue to experience significant fluctuations in the future,
including fluctuations that are unrelated to the combined company's
performance. To succeed, the combined company must continue to expand its
content offerings, upgrade its technology and distinguish its solution. The
combined company may not be able to do so successfully. Any failure by the
combined company to anticipate or respond adequately to changes in technology
and customer preferences or any significant delays in content development or
implementation could impact the combined company's ability to capture market
share.
The combined company's sales cycle may make it difficult to predict its
operating results.
SmartForce and Centra have long sales cycles because they generally need to
educate potential customers regarding the benefits of their live online
e-Learning and business collaboration products and services prior to sale.
SmartForce's and Centra's sales cycle vary depending on the size and type of
customer contemplating a purchase and whether they have conducted business with
a potential customer in the past. Potential customers frequently need to obtain
approvals from multiple decision makers within their organization prior to
making purchase decisions. These long sales cycles which typically range from
three to six months or more, make it difficult to predict the quarter in which
sales may occur. Delays in sales could cause significant variability in the
combined company's revenues and operating results for any particular period.
The combined company's business could be adversely affected if its products
contain errors.
Software products as complex as the combined company's may contain
undetected errors or "bugs" that result in product failures. From time to time
SmartForce and Centra have identified errors in their products after commercial
introduction of the products. The occurrence of errors could result in loss of
or delay in revenues, loss of market share, diversion of product development
resources, injury to reputation or damage to efforts to build brand awareness,
any of which could have a material adverse effect on the combined company's
business, operating results and financial condition.
The combined company could incur substantial costs resulting from product
liability claims relating to its customers' use of the combined company's
products and services.
Many of the business interactions supported by SmartForce's and Centra's
products and services are critical to their customers' businesses. Any failure
in a customer's business interaction or other collaborative activity caused or
allegedly caused in the future by the combined company's products and services
could result in a claim for substantial damages against the combined company,
regardless of its responsibility for the failure. Although the combined company
will maintain general liability insurance, including coverage for errors and
omissions, there can be no assurance that existing coverage will continue to be
available on reasonable terms or will be available in amounts sufficient to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim.
24
SELECTED HISTORICAL FINANCIAL DATA OF SMARTFORCE
The following selected consolidated financial data are only a summary and
should be read in conjunction with SmartForce's financial statements and
related notes included in SmartForce's annual reports and other financial
information included in SmartForce's filings with the SEC. See "Where You Can
Find More Information" on page 143. The statement of operations data for each
of the years ended December 31, 2001, 2000 and 1999 and the balance sheet data
at December 31, 2001 and 2000, which have been prepared in accordance with
accounting principles generally accepted in the U.S., are derived from
financial statements audited by Ernst & Young, independent auditors, that are
incorporated by reference in this joint proxy statement/prospectus. The
statement of operations data for the years ended December 31, 1998 and 1997 and
balance sheet data at December 31, 1999, 1998 and 1997, which have been
prepared in accordance with accounting principles generally accepted in the
U.S., are derived from audited financial statements that are not incorporated
by reference in this joint proxy statement/prospectus. Except as otherwise
noted in this joint proxy statement/prospectus, all references to "$" shall
mean U.S. dollars.
SMARTFORCE SELECTED HISTORICAL FINANCIAL DATA
(dollars in thousands, except per share amounts)
Years Ended December 31,
------------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
Statement of Operations Data:
Revenues........................................... $137,047 $162,232 $197,754 $168,197 $260,875
Cost of revenues................................... 22,502 25,137 29,675 27,452 43,064
-------- -------- -------- -------- --------
Gross profit....................................... 114,545 137,095 168,079 140,745 217,811
Operating expenses:
Research and development........................ 20,878 25,832 31,713 42,085 51,328
Sales and marketing............................. 59,160 75,395 93,841 105,618 132,793
General and administrative...................... 11,601 15,893 17,042 19,703 21,727
Amortization of acquired intangibles............ -- -- 3,441 8,603 10,158
Acquired research and development............... 4,097 -- 5,900 -- --
Cost of acquisitions............................ 1,534 5,505 -- -- --
-------- -------- -------- -------- --------
Total operating expenses.................... 97,270 122,625 151,937 176,009 216,006
-------- -------- -------- -------- --------
Income/(loss) from operations...................... 17,275 14,470 16,142 (35,264) 1,805
Other income, net.................................. 4,710 4,734 3,192 4,372 3,037
-------- -------- -------- -------- --------
Income/(loss) before (provision)/benefit for income
taxes............................................ 21,985 19,204 19,334 (30,892) 4,842
(Provision)/benefit for income taxes............... (3,916) (2,666) (3,708) 2,229 (1,800)
-------- -------- -------- -------- --------
Net income/(loss).................................. $ 18,069 $ 16,538 $ 15,626 $(28,663) $ 3,042
======== ======== ======== ======== ========
Net income/(loss) per share--Basic................. $ 0.45 $ 0.38 $ 0.33 $ (0.56) $ 0.06
======== ======== ======== ======== ========
Net income/(loss) per share--Diluted............... $ 0.41 $ 0.36 $ 0.30 $ (0.56) $ 0.05
======== ======== ======== ======== ========
As of December 31,
------------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
Balance Sheet Data:
Cash, cash equivalents and short term investments.. $ 71,543 $102,034 $108,173 $107,957 $109,276
Working capital.................................... 84,018 116,841 134,121 112,382 159,340
Total assets....................................... 141,329 190,244 289,717 334,783 396,194
Shareholders' equity............................... 107,679 154,801 242,723 245,638 319,550
25
SELECTED HISTORICAL FINANCIAL DATA OF CENTRA
The following selected consolidated financial data are only a summary and
should be read in conjunction with Centra's financial statements and related
notes included in Centra's annual reports and other financial information
included in Centra's filings with the SEC. See "Where You Can Find More
Information" on page 143. The statement of operations data for each of the
years ended December 31, 2001, 2000 and 1999 and the balance sheet data at
December 31, 2001 and 2000, which have been prepared in accordance with
accounting principles generally accepted in the U.S., are derived from
financial statements audited by Arthur Andersen LLP, independent public
accountants, incorporated by reference in this joint proxy
statement/prospectus. The statement of operations data for the years ended
December 31, 1998 and 1997 and balance sheet data as at December 31, 1999, 1998
and 1997, which have been prepared in accordance with accounting principles
generally accepted in the U.S., are derived from audited financial statements
not incorporated by reference in this joint proxy statement/prospectus. Except
as otherwise noted in this joint proxy statement/prospectus, all references to
"$" shall mean U.S. dollars.
CENTRA SELECTED HISTORICAL FINANCIAL DATA
(dollars in thousands, except per share amounts)
Year Ended December 31,
-----------------------------------------------
1997 1998 1999 2000 2001
------- -------- -------- -------- --------
Statement of Operations Data:
Revenues:
License......................................................... $ 234 $ 3,356 $ 7,017 $ 18,697 $ 28,815
Services........................................................ 55 870 1,578 4,276 10,302
------- -------- -------- -------- --------
Total revenues................................................ 289 4,226 8,595 22,973 39,117
------- -------- -------- -------- --------
Cost of revenues:
License......................................................... 75 185 173 314 505
Services........................................................ 130 919 1,543 3,381 6,552
------- -------- -------- -------- --------
Total cost of revenue......................................... 205 1,104 1,716 3,695 7,057
------- -------- -------- -------- --------
Gross profit.................................................. 84 3,122 6,879 19,278 32,060
------- -------- -------- -------- --------
Operating expenses:
Sales and marketing............................................. 2,465 5,066 8,040 22,563 25,481
Product development............................................. 3,042 3,078 4,594 8,481 12,516
General and administrative...................................... 983 1,442 2,440 4,977 7,418
Compensation charge for issuance of stock options............... -- -- 736 925 887
Acquired in process research and development.................... -- -- -- -- 2,200
Amortization of goodwill........................................ -- -- -- -- 783
Amortization of intangible assets............................... -- -- -- -- 533
------- -------- -------- -------- --------
Total operating expenses...................................... 6,490 9,586 15,810 36,946 49,818
------- -------- -------- -------- --------
Operating loss................................................ (6,406) (6,464) (8,931) (17,668) (17,758)
Other income, net.................................................. 35 211 308 3,810 1,076
------- -------- -------- -------- --------
Net loss........................................................... (6,371) (6,253) (8,623) (13,858) (16,682)
Accretion of discount on preferred stock........................... 506 506 507 649 --
------- -------- -------- -------- --------
Net loss attributable to common stockholders....................... $(6,877) $ (6,759) $ (9,130) $(14,507) $(16,682)
======= ======== ======== ======== ========
Basic and diluted net loss per share............................... $ (1.33) $ (1.16) $ (1.39) $ (0.67) $ (0.68)
======= ======== ======== ======== ========
Weighted average shares outstanding--Basic and diluted............. 5,156 5,845 6,588 21,781 24,449
======= ======== ======== ======== ========
Pro forma basic and diluted net loss per share..................... $ (0.64) $ (0.64)
======== ========
Pro forma weighted average shares outstanding--Basic and diluted... 15,281 22,608
======== ========
As of December 31,
-----------------------------------------------
1997 1998 1999 2000 2001
------- -------- -------- -------- --------
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments.................. $ 8,079 $ 1,979 $ 7,878 $ 65,187 $ 48,183
Working capital.................................................... 7,241 1,541 5,828 59,927 42,188
Total assets....................................................... 9,238 4,753 13,296 75,064 70,977
Term loan, net of current maturities............................... 158 530 376 1,894 2,631
Redeemable convertible preferred stock............................. 17,992 18,498 32,480 -- --
Total stockholders' equity (deficit)............................... (9,977) (16,672) (24,787) 61,874 51,347
26
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined financial data
present the effect of the pending merger between SmartForce and Centra as if
the merger had been completed on January 1, 2001 for results of operations
purposes and on December 31, 2001 for balance sheet purposes. The unaudited pro
forma combined financial data was prepared using the purchase method of
accounting.
The selected unaudited pro forma condensed combined financial data is based
on estimates and assumptions which are preliminary. This data is presented for
information purposes only and is not intended to represent or be indicative of
the consolidated results of operations or financial condition of SmartForce
that would have been reported had the merger been completed as of the dates
presented, and should not be taken as representative of future consolidated
results of operations or financial condition of SmartForce.
This selected unaudited pro forma condensed combined financial data should
be read in conjunction with the unaudited pro forma condensed combined
financial statements and notes thereto appearing on page 115 of this joint
proxy statement/prospectus and the historical consolidated financial statements
and notes thereto of SmartForce, the historical consolidated financial
statements and notes thereto of Centra, and other financial information
pertaining to the two companies incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page 143.
Year Ended
December 31, 2001
---------------------
(in thousands, except
per share amounts)
(unaudited)
Statement of Operations Data:
Revenue.................................................... $299,992
Gross profit............................................... 249,871
Total operating expenses................................... 272,450
Loss from operations....................................... (22,579)
Loss before provision of income taxes...................... (18,466)
Net loss................................................... (20,266)
Basic and diluted net loss per share....................... (0.31)
Shares used in computing basic and diluted net loss per
share.................................................... 64,869
As of
December 31, 2001
-----------------
(unaudited)
Balance Sheet Data:
Cash, cash equivalents and short-term investments.......... $ 90,558
Working capital............................................ 183,748
Intangible assets.......................................... 304,762
Total assets............................................... 690,021
Long-term obligations, less current portion................ 2,631
Total shareholders' equity................................. 575,967
Book value per share....................................... 8.47
27
COMPARATIVE PER SHARE DATA
The following table presents comparative historical per share data of
SmartForce and Centra and unaudited combined pro forma per share data after
giving effect to the merger as a purchase of Centra by SmartForce assuming the
merger had been consummated at the beginning of the period presented below. The
following data assumes 0.425 of a SmartForce ordinary share, represented by
0.425 of an ADS, will be issued in exchange for each share of Centra common
stock in connection with the merger and assumes the assumption of Centra
options based upon the same exchange ratio. This data has been derived from,
and should be read in conjunction with, the selected historical financial data,
selected unaudited pro forma condensed combined financial data, unaudited pro
forma combined condensed financial statements and notes thereto appearing
elsewhere in this joint proxy statement/prospectus, and the separate audited
financial statements of SmartForce and Centra and notes thereto, that are
incorporated by reference in this joint proxy statement/prospectus. The
unaudited pro forma per share data is presented for information purposes only
and is not intended to represent or be indicative of the consolidated results
of operations or financial condition of SmartForce that would have been
reported had the merger been completed as of the dates presented, and should
not be taken as representative of the future consolidated results of operations
or financial condition of SmartForce.
Historical Pro Forma
----------------- ------------------------
SmartForce Centra Combined(1) Equivalent(2)
---------- ------ ----------- -------------
Twelve Months Ended December 31, 2001:
Basic income (loss) per share......... $0.06 $(0.68) $(0.31) $(0.13)
Diluted income (loss) per share....... 0.05 (0.68) (0.31) (0.13)
Book value per share(3)............... 5.61 1.97 8.47 3.60
--------
(1) Basic pro forma loss per share is calculated based on the exchange of
24,449,253 shares of Centra common stock outstanding on a weighted average
basis during the twelve-month period ended December 31, 2001 for SmartForce
ordinary shares. Diluted pro forma loss per share was the same as basic pro
forma loss per share due to anti-dilutive impact of common stock
equivalents.
(2) Computed by multiplying pro forma combined information by the exchange
ratio of 0.425.
(3) Computed by dividing total shareholders' equity by the number of shares of
capital stock outstanding at the end of the period on a historical and pro
forma combined basis, as applicable.
28
COMPARATIVE PER SHARE MARKET PRICE DATA
SmartForce ADSs trade on the Nasdaq National Market under the symbol "SMTF."
Centra common stock trades on the Nasdaq National Market under the symbol
"CTRA."
The following table shows the high and low per share sale prices of
SmartForce ADSs and Centra common stock each as reported on the Nasdaq National
Market on (1) January 15, 2002, the last full trading day preceding the public
announcement that Centra and SmartForce had entered into the merger agreement
and (2) March 18, 2002, the last full trading day for which high and low prices
were available at the time of the printing of this joint proxy
statement/prospectus.
The table also includes the comparable high and low per share sale price of
Centra common stock on those dates. This comparable high and low per share
price data reflects the fluctuating value of the SmartForce ADSs that Centra
stockholders would receive in exchange for each share of Centra common stock if
the merger was completed on either of those dates, applying the exchange ratio
of 0.425 SmartForce ordinary shares, represented by ADSs, for each share of
Centra common stock.
As of March 18, 2002, there were approximately 230 holders of record of
Centra common stock and 310 holders of record of SmartForce ADSs.
Equivalent Centra
SmartForce ADSs Centra Common Stock Price per Share
--------------- ------------------- -----------------
High Low High Low High Low
------ ------ ----- ----- ------ -----
January 15, 2002............. $24.90 $23.51 $8.85 $7.95 $10.58 $9.99
March 18, 2002............... $12.30 $11.90 $5.11 $5.24 $ 5.23 $5.06
The above table shows only historical comparisons. These comparisons may not
provide meaningful information to SmartForce shareholders in determining
whether to approve and adopt the merger agreement and approve the merger and
the issuance of the SmartForce ordinary shares, represented by ADSs, in
connection with the merger or to Centra stockholders in determining whether to
approve and adopt the merger agreement. SmartForce shareholders and Centra
stockholders are urged to obtain current market quotations for SmartForce ADSs
and Centra common stock and to review carefully the other information contained
in this joint proxy statement/prospectus or incorporated by reference into this
joint proxy statement/prospectus in considering whether to approve the
proposals contained in this joint proxy statement/prospectus. See "Where You
Can Find More Information" on page 143 of this joint proxy statement/prospectus.
29
THE SMARTFORCE MEETING
Date, Time and Place of the SmartForce Annual General Meeting
The date, time and place of the annual general meeting of SmartForce
shareholders are as follows:
, 2002
11 a.m. Local Time
at Jury's Hotel, Ballsbridge, Dublin 4, Ireland
Purpose of the Annual General Meeting
At the SmartForce annual general meeting, SmartForce shareholders will be
asked to consider and vote upon the following proposals:
1. To re-elect as a director Mr. James S. Krzywicki, who retires by
rotation and, being eligible, offers himself for re-election in accordance
with SmartForce's articles of association.
2. To elect as a director, Dr. Ferdinand von Prondzynski, who was
appointed during the year.
3. To receive and consider the Report of the Directors and the
Consolidated Financial Statements of SmartForce for the year ended December
31, 2001 and the Auditors' Report to the Members.
4. To authorize the directors to fix the remuneration of SmartForce's
auditors for the year ending December 31, 2002.
5. To approve the Agreement and Plan of Merger and Reorganization dated
January 16, 2002 made by and among SmartForce, Atlantic Acquisition Corp.
and Centra in the form produced to the meeting and initialed by the Chairman
for the purposes of identification (a copy of which was included in the
joint proxy statement/prospectus circulated to all of the members of
SmartForce on 2002) relating to the merger of Atlantic Acquisition
Corp. (a wholly owned subsidiary of the Company) with and into Centra, and
the automatic conversion of each share of common stock of Centra immediately
prior to the consummation of the merger into a right to receive 0.425
ordinary shares of (Euro)0.11 each in the capital of SmartForce (or ADSs
representing such ordinary shares) and the assumption of all outstanding
options to purchase shares in the capital of Centra, the merger and the
issuance of ordinary shares of (Euro)0.11 each in the capital of SmartForce
(or ADSs representing such ordinary shares) pursuant to such merger.
6. Subject to the passing of Resolution 5 above relating, inter alia, to
the approval of the Agreement and Plan of Merger and Reorganization dated
January 16, 2002 made by and among SmartForce, Atlantic Acquisition Corp.
and Centra relating to the merger of Atlantic Acquisition Corp. (a wholly
owned subsidiary of the Company) with and into Centra and in connection with
the assumption by SmartForce under the merger of all outstanding options to
purchase shares in the capital of Centra, to approve the terms of certain
contracts under which SmartForce may become entitled to purchase certain of
its own ordinary shares (or ADSs representing such ordinary shares) held by
shareholders of Centra (a written memorandum of the terms of such contracts
having been produced to the meeting and initialled for the purposes of
identification by the Chairman).
To conduct any other ordinary business of the Company as may properly come
before the meeting.
For more information regarding the proposals described above, see "Proposals
to SmartForce Shareholders To Be Voted On At SmartForce Annual General Meeting"
on page 135.
Record Date
Record Date for Holders of SmartForce Ordinary Shares. Holders of
SmartForce ordinary shares, or Members, whose names appear in the Register of
Members, maintained by our registrars, Computershare
30
Services (Ireland) Limited, on the date materials are mailed to Members are
entitled to receive notice of the annual general meeting or any adjournment of
the annual general meeting. In addition, any person who is a Member on the date
of the annual general meeting is entitled to attend and vote at the annual
general meeting.
Record Date for Holders of SmartForce ADSs. The Bank of New York, as the
registrar and transfer agent for our ADSs, as well as the depositary for our
ordinary shares represented by the ADSs, has fixed the close of business on
, 2002 as the record date for determining the ADS holders entitled to
give instructions for the exercise of voting rights at the annual general
meeting and any adjournment of the meeting.
As of the ADS record date, there were [ ] SmartForce ordinary
shares, par value (Euro)0.11 per share, issued and outstanding (or [ ]
equivalent ADSs ) held by approximately [ ] holders of record. Each ADS
represents one SmartForce ordinary share. The ADSs are quoted on the Nasdaq
National Market under the symbol "SMTF." As of the record date, there were
approximately [ ] registered holders of SmartForce ADSs. The SmartForce
ordinary shares represented by the ADSs are owned of record by AIB Custodial
Nominees Limited on behalf of The Bank of New York.
Quorum
To conduct business at the annual general meeting, a quorum must be present.
SmartForce's articles of association provide that the presence at an annual
general meeting, either in person or by proxy, of three (3) persons entitled to
vote at the annual general meeting, and who together hold not less than
one-third of our voting share capital in issue, each being a Member or a proxy
for a Member or a duly authorized representative of a corporate Member,
constitutes a quorum for the transaction of business. SmartForce will treat
ordinary shares represented by a properly signed and returned proxy, including
abstentions, as present at the meeting for the purposes of determining the
presence or absence of a quorum for the transaction of business.
Voting of Ordinary Shares
Generally. Votes may be given at the annual general meeting either
personally or by proxy. Voting at the annual general meeting will be by a show
of hands, unless a poll (a count of the number of shares voted) is duly
demanded. On a show of hands, each shareholder present in person and every
proxy shall have one vote, provided that no individual shall have more than one
vote, and, on a poll, each shareholder shall have one vote for each share of
which he, she or it is the holder. Where there is a tie, whether on a show of
hands or on a poll, the chairman of the meeting is entitled to a casting vote
in addition to any other vote he may have. A proxy has the right to demand or
join in demanding a poll. Whether a poll will be taken shall be determined in
accordance with Irish law and SmartForce's articles of association. On a poll,
a person entitled to more than one vote need not use all his, her or its votes
or cast all the votes he, she or it uses in the same way.
Proxies. SmartForce ordinary shares represented by a properly signed and
dated proxy will be voted at the annual general meeting in accordance with
instructions indicated on the proxy. Proxies that are properly signed and dated
but which do not contain voting instructions will be voted FOR approval of each
of the proposals presented at the annual general meeting as more fully
described in this joint proxy statement/prospectus. A proxy holder may vote the
proxy in his, her or its discretion as to any other matter which may properly
come before the annual general meeting.
Abstentions. SmartForce will count a properly executed proxy marked ABSTAIN
as present for purposes of determining whether a quorum is present, but the
shares represented by that proxy will not be voted at the annual general
meeting. Your abstention, however, will not have an effect on the vote for any
of the proposals to be voted upon at the meeting.
31
Voting of ADSs
Generally. Holders of ADSs may not vote at the annual general meeting. The
Bank of New York has the right, subject to certain limitations set forth in the
deposit agreements among SmartForce, The Bank of New York and the owners and
beneficial owners of American Depositary Receipts representing ADSs, to vote
all of the SmartForce ordinary shares represented by SmartForce ADSs. Under the
terms of the deposit agreements, however, The Bank of New York is required to
cast its votes with respect to those SmartForce ordinary shares for which it
receives instructions from the holders of the ADSs representing such ordinary
shares in accordance with the instructions received.
Record Date; Notice of Annual General Meeting. Under the terms of the
deposit agreements, whenever The Bank of New York receives notice of any
meeting of holders of ordinary shares, The Bank of New York is required to fix
a record date, which shall be the record date, if any, established by
SmartForce for the purpose of such meeting or, if different, as close to the
date established by SmartForce as practicable, for the determination of the
owners of ADSs who will be entitled to give instructions for the exercise of
voting rights at any such meeting, subject to the provisions of the deposit
agreements.
Upon receipt of notice of any meeting of SmartForce or the solicitation for
consents or proxies from the holders of ordinary shares, The Bank of New York
is required, if so requested in writing by SmartForce, as soon as practicable
thereafter, to mail to all owners of ADSs a notice, the form of which shall be
in the sole discretion of The Bank of New York, containing:
. the information contained in the notice of meeting received by The Bank of
New York from SmartForce;
. a statement that the owners of ADSs at the close of business on a
specified record date are entitled, subject to any applicable provisions
of Irish law and of SmartForce's articles of association, to instruct The
Bank of New York as to the exercise by The Bank of New York of the voting
rights, if any, pertaining to the number of ordinary shares represented by
their respective ADSs;
. a statement that owners of ADSs who instruct The Bank of New York as to
the exercise of their voting rights will be deemed to have instructed The
Bank of New York or its authorized representative to call for a poll with
respect to each matter for which instructions are given, subject to any
applicable provisions of Irish law and of SmartForce's articles of
association; and
. a statement as to the manner in which the instructions may be given,
including an express indication that instructions may be given or deemed
to be given in accordance with the next paragraph, if no instruction is
received, to The Bank of New York to give a discretionary proxy to a
person designated by SmartForce.
Voting of Ordinary Shares Underlying SmartForce ADSs. Upon the written
request of an owner of ADSs on the record date, received on or before the date
established by The Bank of New York for the purpose of such meeting, The Bank
of New York will, insofar as practicable, vote or cause to be voted the number
of ordinary shares represented by such ADSs in accordance with the instructions
set forth in such request. Accordingly, pursuant to SmartForce's articles of
association and applicable Irish law, The Bank of New York will cause its
authorized representative to attend each meeting of holders of ordinary shares
and call for a poll as instructed for the purpose of effecting such vote. The
Bank of New York will not vote or attempt to exercise the rights to vote that
attach to the ordinary shares other than in accordance with such instructions
or deemed instructions.
Discretionary Proxies. The deposit agreements provide that if no
instructions are received by The Bank of New York from any owner of ADSs with
respect to any of the ordinary shares represented by the ADSs on or before the
date established by The Bank of New York for the purpose of such meeting, The
Bank of New York will deem such owner of ADSs to have instructed The Bank of
New York to give a discretionary proxy to a person designated by SmartForce
with respect to such ordinary shares and The Bank of New York will give a
discretionary proxy to a person designated by SmartForce to vote such ordinary
shares, under circumstances and according to the terms as set forth in the
deposit agreements. However, no such instructions will be deemed given
32
and no such discretionary proxy will be given when SmartForce notifies The Bank
of New York, and it has agreed to provide such notice as promptly as
practicable in writing, that the matter to be voted upon is one that is set
forth in the deposit agreements as more fully described in "Description of
American Depositary Shares--Voting Rights" on page 92.
The fifth and sixth proposals to be acted upon at the annual general
meeting, which relate to approving and adopting the merger agreement and
approving the merger and the issuance of the ordinary shares represented by
SmartForce ADSs in the merger and the terms of certain contracts under which
SmartForce may become entitled to certain repurchase rights of ordinary shares
to be issued in the merger in exchange for unvested Centra common stock are not
matters for which The Bank of New York may deem that instruction has been given
for it to give a discretionary proxy to a person designated by SmartForce where
no instruction is received. Therefore, The Bank of New York will not give a
discretionary proxy to a person designated by SmartForce to vote such ordinary
shares for which no instruction has been given on either of these proposals.
Other than proposals five and six, each proposal to be acted upon at the
annual general meeting is a matter for which The Bank of New York may deem that
instruction has been given for The Bank of New York to give a discretionary
proxy to a person designated by SmartForce where no instruction is received.
Therefore, in relation to proposals other than proposals five and six, The Bank
of New York will give a discretionary proxy to a person designated by
SmartForce to vote such ordinary shares for which no instruction has been given.
Inspection of Reports. The Bank of New York will make available for
inspection by the owners of ADSs at its Corporate Trust Office any reports and
communications, including any proxy soliciting material, received from
SmartForce, which are both (a) owned of record by AIB Custodial Nominees
Limited on behalf of and for the benefit of The Bank of New York as depositary
and (b) generally made available to the holders of ordinary shares by
SmartForce. The Bank of New York will also send to the owners of ADSs copies of
such reports when furnished by SmartForce pursuant to the deposit agreements.
Expenses of Solicitation of Proxies
SmartForce will pay its own costs of soliciting proxies and will share
equally with Centra the expenses incurred in connection with the filing and
printing of this joint proxy statement/prospectus. Following the original
mailing of the proxies and other solicitation materials, SmartForce will
request banks, brokers, dealers and voting trustees or other nominees,
including The Bank of New York in the case of the ADSs, to solicit their
customers who are owners of shares listed of record and names of nominees, and
will reimburse them for reasonable out-of-pocket expenses of such solicitation.
SmartForce expects to engage the proxy solicitation firm of [ ] in
connection with the annual general meeting and will pay a fee of approximately
[$ ] plus reasonable expenses for these services.
In addition to solicitation by mail, directors, officers and key employees
of SmartForce may solicit proxies in person or by telephone, telegram or other
means of communications. These persons will receive no additional compensation
for solicitation of proxies but may be reimbursed for reasonable out-of-pocket
expenses.
How to Revoke a Proxy
You may revoke your proxy before it is voted by:
. providing written notice before the meeting that you have revoked your
proxy by mail or facsimile to:
SmartForce Public Limited Company
900 Chesapeake Drive
Redwood City, California 94063
Attention: Investor Relations
Fax: 650-817-5080
33
. submitting a new signed proxy with a later date; or
. attending the meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to us a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
annual general meeting and voting in person.
Shareholder Proposals to be Presented at Next Annual General Meeting
Subject to applicable laws, proposals of SmartForce's shareholders that are
intended to be presented by such shareholders at its 2003 annual general
meeting of shareholders must have been received at our offices located at 900
Chesapeake Drive, Redwood City, California 94063 no later than , 2003 and
must have satisfied the conditions established by the SEC for proposals to be
considered for possible inclusion in the proxy statement and form of proxy
relating to that meeting.
Voting Agreements
As of the record date, SmartForce directors, executive officers and
shareholders holding as a group approximately 1% of the voting power of
SmartForce ordinary shares entitled to vote on the proposals to be presented at
the annual general meeting have agreed to vote all of their SmartForce ADSs
(representing ordinary shares) in favor of the approval and adoption of the
merger agreement and the approval of the merger and the issuance of the
ordinary shares (represented by ADSs) in the merger and have executed and
delivered to Centra irrevocable proxies to vote their SmartForce ADSs
(representing ordinary shares) in favor of the approval and adoption of the
merger agreement and the approval of the merger and the issuance of the
SmartForce ordinary shares (represented by ADSs).
Vote Required
The affirmative vote of the holders of a majority of the outstanding
ordinary shares represented, in person or by proxy at the annual general
meeting and voting on the proposal to approve and adopt the merger agreement,
approve the merger and the issuance of the SmartForce ordinary shares
(represented by ADSs) pursuant to the merger is required to approve such
proposal. The affirmative vote of the holders of three fourths of the
outstanding ordinary shares represented, in person or by proxy, at the annual
general meeting and voting on the proposal to approve the terms of certain
contracts under which SmartForce may become entitled to purchase some of its
ordinary shares (represented by ADSs) to be issued in the merger in exchange
for unvested Centra common stock is required to approve such proposal. The
affirmative vote of the holders of a majority of the outstanding ordinary
shares represented, in person or by proxy, at the annual general meeting and
voting on the proposals to elect or re-elect directors is required to approve
such proposals. The affirmative vote of the holders of a majority of the
outstanding ordinary shares represented, in person or by proxy, at the annual
general meeting and voting on the proposal to approve the resolution to receive
and consider SmartForce's consolidated financial statements and the directors'
and auditors' reports for the fiscal year ended December 31, 2001 is required
to approve such proposal. The affirmative vote of the holders of a majority of
the ordinary shares represented, in person or by proxy, at the annual general
meeting and voting on the proposal to authorize the board of directors to fix
the remunerations of SmartForce's auditors is required to approve such proposal.
Unless otherwise instructed, the proxies will vote FOR the adoption of the
proposals set forth in the accompanying notice of annual general meeting.
34
Recommendation of the Board of Directors of SmartForce
The board of directors of SmartForce believes that each of the proposals is
in the best interests of SmartForce and the shareholders of SmartForce.
SmartForce's board of directors has, by unanimous vote, approved each of the
proposals and unanimously recommends that SmartForce shareholders vote FOR the
approval of each of the proposals.
To ensure that your shares are represented at the meeting, please complete,
date and sign the enclosed proxy and mail it promptly in the postage prepaid
envelope provided, whether or not you plan to attend the meeting. You may
revoke your proxy at any time before it is voted.
35
THE CENTRA MEETING
We are sending you this document to provide you with important information
regarding the merger in connection with the solicitation of proxies by Centra's
board of directors for use at the special meeting of its stockholders and at
any adjournment or postponement of the special meeting.
Date, Time and Place of the Centra Special Meeting
The date, time and place of the special meeting of Centra stockholders are
as follows:
, 2002,
at 10:00 a.m. Eastern Time
at the offices of Foley, Hoag & Eliot LLP, One Post Office Square,
Boston, Massachusetts 02109
Purpose of the Special Meeting
At the Centra special meeting, Centra stockholders will be asked to consider
and vote upon the following proposals:
1. To approve and adopt the merger agreement and the merger.
2. To grant Centra management the discretionary authority to adjourn the
special meeting to a date not later than [date] in order to enable the
Centra board of directors to solicit additional proxies in favor of the
merger.
3. To consider and vote upon any other matters that may properly come
before the special meeting or any adjournment or postponement of the special
meeting. Centra is not currently aware of any other matter that will come
before the special meeting.
For more information regarding the proposals described above, see "Proposals
to Centra Stockholders to be Voted on at Centra Special Meeting" on page 139.
Record Date
The Centra board of directors has fixed the close of business on ,
2002 as the record date for determining the Centra stockholders entitled to
vote at the special meeting. Only holders of record of Centra common stock as
of the close of business on that date are entitled to vote at the special
meeting. As of the record date, there were [ ] shares of Centra common
stock issued and outstanding, held by approximately [ ] shareholders of
record. Each share of Centra common stock issued and outstanding as of the
record date entitles its holder to cast one vote at the special meeting.
Quorum
To conduct business at the special meeting, a quorum must be present.
Centra's by-laws provide that a quorum at the special meeting will be the
holders of a majority of the stock issued, outstanding and entitled to vote at
the special meeting. Centra will treat shares of common stock represented by a
properly signed and returned proxy, including abstentions and broker non-votes,
as present at the meeting for purposes of determining the existence of a
quorum. If a quorum is not present at the special meeting, the special meeting
will be adjourned or postponed to solicit additional proxies.
Voting of Proxies
General. Shares represented by a properly signed and dated proxy will be
voted at the special meeting in accordance with the instructions indicated on
the proxy. Proxies that are properly signed and dated but which do
36
not contain voting instructions will be voted FOR approval and adoption of the
merger agreement and the merger and FOR the adjournment proposal. The proxy
holder may vote the proxy in its discretion as to any other matter which may
properly come before the meeting.
Abstentions. Centra will count a properly executed proxy marked ABSTAIN as
present for purposes of determining whether a quorum is present, but the shares
represented by that proxy will not be voted at the special meeting. Because the
affirmative vote of a majority of the outstanding shares of Centra common stock
is required to approve and adopt the merger agreement and the merger, if you
mark your Centra proxy ABSTAIN, it will have the effect of a vote against
approval and adoption of the merger agreement and the merger. Because only
votes cast on the adjournment proposal will determine the outcome of any vote
on the adjournment proposal, if you mark your Centra proxy ABSTAIN, your proxy
will have no effect on the adjournment proposal.
Broker Non-Votes. If your shares of Centra common stock are held by your
broker, your broker will vote your shares for you only if you provide
instructions to your broker on how to vote your shares. You should follow the
directions provided by your broker regarding how to instruct your broker to
vote your shares. Your broker cannot vote your shares of Centra common stock
without specific instructions from you. Because the affirmative vote of a
majority of the outstanding shares of Centra common stock is required to
approve and adopt the merger agreement and the merger, if you do not instruct
your broker how to vote, it will have the effect of a vote AGAINST approval and
adoption of the merger agreement. Because only votes cast on the adjournment
proposal will determine the outcome of any vote on the adjournment proposal, if
you do not instruct your broker how to vote, your proxy will have no effect on
the adjournment proposal.
Voting Shares In Person That Are Held Through Brokers. If your shares are
held by your broker or another nominee and you wish to vote those shares in
person at the special meeting, you must obtain from the nominee holding your
Centra common stock a properly executed legal proxy identifying you as a Centra
stockholder, authorizing you to act on behalf of the nominee at the special
meeting and identifying the number of shares with respect to which the
authorization is granted.
Expenses of Solicitation of Proxies
Centra will pay its own costs of soliciting proxies and will share equally
with SmartForce the expenses incurred in connection with the filing and
printing of this joint proxy statement/prospectus. Centra will reimburse
brokers, banks, fiduciaries, nominees and others for the out-of-pocket expenses
and other reasonable clerical expenses they incur in forwarding proxy materials
to beneficial owners of Centra common stock held in their names. Certain
directors, officers and employees of Centra may solicit proxies, without
additional remuneration, by telephone, facsimile, electronic mail, telegraph
and in person. Centra expects that the expenses of this special solicitation
will be nominal. Centra expects to engage the proxy solicitation firm of
[ ] in connection with the special meeting and pay a fee of
approximately [$ ] plus reasonable expenses for these services.
How to Revoke a Proxy
You may revoke your proxy before it is voted by:
. providing written notice before the special meeting that you have revoked
your proxy by mail or fax to:
Centra Software, Inc.
430 Bedford Street
Lexington, MA 02420
Attention: Secretary
Fax: (781) 863-7288
. submitting a new, signed proxy with a later date; or
. attending the special meeting.
37
Voting Agreements
As of the record date, Centra directors, executive officers and stockholders
holding as a group approximately 12.3% of the outstanding voting power of the
Centra common stock entitled to vote on the merger agreement and the merger
have agreed to vote all of their shares of Centra common stock in favor of the
approval and adoption of the merger agreement and the merger and have executed
and delivered to SmartForce irrevocable proxies to vote their shares in favor
of the approval and adoption of the merger agreement and the merger.
Vote Required
The affirmative vote of the holders of a majority of the shares of Centra's
common stock outstanding on the record date is required to approve and adopt
the merger agreement and the merger in order for the merger proposal to pass.
The affirmative vote of the holders of a majority of the shares of common stock
outstanding on the record date and voting on the adjournment proposal at the
special meeting is required to approve the adjournment proposal.
Recommendation of the Board of Directors
After careful consideration, the Centra board of directors has unanimously
approved the merger agreement and the transactions it contemplates, including
the merger. The Centra board of directors has determined the merger agreement
and the merger to be fair to and in the best interests of the Centra
stockholders and unanimously recommends that Centra stockholders vote FOR
approval and adoption of the merger agreement and the merger. The Centra board
of directors also unanimously recommends that the Centra stockholders vote FOR
the adjournment proposal.
To ensure that your shares are represented at the meeting, please complete,
date and sign the enclosed proxy and mail it promptly in the postage prepaid
envelope provided, whether or not you plan to attend the meeting. You may
revoke your proxy at any time before it is voted.
38
THE PROPOSED MERGER
This section of the joint proxy statement/prospectus describes the material
aspects of the proposed merger. While SmartForce and Centra believe that the
following summary describes all the material terms of the merger and the
related transactions, this summary may not contain all of the information that
is important to you. You should carefully read this entire document and the
other documents SmartForce and Centra refer to for a more complete
understanding of the merger.
The Merger
In accordance with the merger agreement and Delaware law, Atlantic
Acquisition Corp., a wholly-owned Delaware subsidiary of SmartForce, will be
merged with and into Centra. As a result of the merger, the separate corporate
existence of Atlantic Acquisition Corp. will cease and Centra will survive the
merger as a wholly-owned subsidiary of SmartForce.
Merger Consideration
In the merger, Centra stockholders will receive 0.425 ADSs for each share of
Centra common stock they hold. The number of SmartForce ADSs that Centra
stockholders will receive in the merger will be appropriately adjusted for any
stock splits, combinations and other similar events that occur between the date
of the merger agreement and the completion of the merger. SmartForce will not
issue fractional SmartForce ADSs in the merger. Instead, each Centra
stockholder otherwise entitled to a fractional share will receive cash, without
interest, in lieu of a fraction of a SmartForce ADS. Specifically, the exchange
agent in the merger will, as promptly as practicable after the determination of
the amount of cash, if any, to be paid to holders of fractional interests,
notify SmartForce of such amount, and SmartForce will deposit such amount with
the exchange agent and will cause the exchange agent to forward payments to the
owners of fractional interests.
Treatment of Centra Stock Options
At the effective time of the merger, each outstanding Centra stock option
will cease to represent a right to acquire shares of Centra common stock and
will be converted into an option to purchase a number of ordinary shares of
SmartForce represented by SmartForce ADSs equal to the number of shares of
Centra common stock subject to such option times 0.425, at a per share exercise
price equal to the per share exercise price of such option divided by 0.425.
Background of the Merger
Both SmartForce and Centra regularly evaluate different strategies to
improve their competitive positions and enhance their respective shareholder
and stockholder values, including opportunities for acquisitions of other
companies or their assets, possible partnerships or alliances and other
significant transactions.
Beginning in the late summer of 2001 through the end of the year, Leon
Navickas, the chief executive officer of Centra, had conversations with various
companies to discuss potential strategic transactions. Except as otherwise
described below, none of these discussions led to any definitive proposals.
Centra executed an engagement letter with Goldman Sachs, dated as of September
7, 2001, to act as its financial advisor in connection with a potential
business combination with another public e-Learning company and other strategic
alternatives available to Centra. The terms proposed by the other e-Learning
company were ultimately rejected by Centra's board of directors at a meeting on
November 20, 2001 in favor of continued negotiations toward a merger with
SmartForce.
In July 2001, Greg Priest and Fran McKeagney, the chief executive officer
and executive vice president, research and development of SmartForce,
respectively, met Leon Navickas and Tony Mark, the chief
39
executive officer and the president and chief operating officer of Centra,
respectively, at SmartForce's headquarters in Redwood City, California to
discuss a range of potential business opportunities between the two companies
including the licensing by SmartForce of Centra's collaborative solutions. At
the meeting, the parties agreed to evaluate various alternatives and to
continue discussions in the future. The participants did not discuss a merger,
acquisition or other business combination during the meeting.
On July 26, 2001, Mr. Mark, Ronnie Thomson, Centra's Director of
Engineering, Rajesh Rao, Centra's General Manager and various other Centra
representatives met with Mr. McKeagney and Paul Ryan, Vice President of
Software Engineering of SmartForce to discuss technical synergies relating to a
possible technology partnering agreement between the parties. The participants
did not discuss a merger or acquisition during the meeting.
At a meeting of Centra's board of directors on November 6, 2001,
representatives of Goldman Sachs reviewed various potential strategic
alternatives available to Centra. After discussing the potential strategic
alternatives, the board concluded that Centra was not for sale, but that
management should explore other strategic transactions.
On November 8, 2001, a group of Centra's senior executives, including
Messrs. Navickas, Mark and Johnson, along with Steven N. Lesser, Centra's vice
president, worldwide sales and Joseph N. Gruttadauria, its senior vice
president, professional services, met with representatives of the Gunnison
Companies, a strategic consultancy firm, to discuss issues relating to
consolidation in the e-Learning industry, Centra's competitive position in the
e-Learning industry, and potential strategic alternatives for Centra.
On November 9, 2001, Mr. Priest telephoned Mr. Navickas and indicated that
he was planning to visit Boston on November 13, 2001 and asked Mr. Navickas if
he would like to meet on that date to follow up their September conversation.
On November 13, 2001, the Centra board met with representatives of the
Gunnison Companies and Goldman Sachs. At this meeting, representatives from the
Gunnison Companies presented the results of their meeting with Centra's senior
management and their analysis concerning possible business combinations and
other strategic transactions for Centra.
On the evening of November 13, 2001, Mr. Navickas met with Mr. Priest.
During this meeting they discussed the respective businesses of Centra and
SmartForce, the competitive climate in which each company operated and
potential business opportunities for each company. They agreed to initiate
substantive discussions between the managements for both companies concerning
potential synergies and cost efficiencies that might result from a business
combination between the two companies. The meeting concluded without any
discussion of the financial terms of the potential transaction.
On November 14, 2001, Mr. Navickas briefed the Centra board of directors by
telephone call on the results of the meeting with Mr. Priest. The Centra board
of directors authorized Mr. Navickas to continue discussions with SmartForce
concerning a potential business combination between SmartForce and Centra.
During the week of November 19, 2001, senior financial managers of Centra
and SmartForce had various discussions concerning the potential synergies and
cost efficiencies that could result from a business combination between the two
companies.
On November 26 and 28, 2001, Mr. Navickas and Mr. Johnson had various
meetings with representatives of Goldman Sachs to discuss possible approaches
to the negotiation process with SmartForce, potential issues for discussion
between the two companies, and potential terms for a business combination
transaction between the companies.
On November 30, 2001, Mr. Navickas and Mr. Johnson met with Mr. Priest,
David Drummond, the chief financial officer of SmartForce, and various other
members of SmartForce senior management, including Duncan Thomas, executive
vice president, business planning of SmartForce, Jeff Newton, chief customer
officer of
40
SmartForce and Mr. McKeagney. During a series of meetings throughout the day,
senior management of SmartForce and Centra made presentations relating to their
respective companies, potential synergies that could result from a combination
between the companies, and the strategic rationale for a business combination
of the two companies.
On December 6, 2001, the SmartForce board of directors held its regularly
scheduled quarterly meeting in Ireland. At the meeting, Mr. Priest updated the
SmartForce board of directors regarding the conversations with Centra and
presented an analysis of the potential strategic and operating benefits that
could be achieved through a combination of SmartForce and Centra, as well as of
the risks associated with any potential transaction. The SmartForce board
discussed the possible advantages and risks of a strategic business
combination. Following the discussion, the SmartForce board authorized
management to continue due diligence and negotiations with Centra regarding a
proposed business combination.
From December 6 through the week of December 10, 2001, Mr. Navickas and Mr.
Priest exchanged numerous telephone calls to discuss the potential transaction.
During this period, SmartForce and Centra exchanged views reflecting differing
valuation methodologies that might be used in connection with a combination.
On December 7, 2001, Mr. Newton, Tom Parry, Vice President of Sales of
SmartForce, and Paul Henry, Senior Vice President of Marketing of SmartForce,
visited the Centra headquarters in Lexington to meet with Mr. Mark, Mr.
Johnson, Mr. Gruttadauria, and other management of Centra to discuss the
companies' sales and marketing strategies, common customers and other potential
revenue synergies.
On December 10 and December 11, 2001, members of SmartForce's finance
department visited the Lexington headquarters of Centra to undertake a
financial and organizational due diligence review with respect to Centra.
During the week of December 17, 2001, Mr. Priest and Mr. Drummond, had a
number of telephone conversations with representatives of Credit Suisse First
Boston, SmartForce's financial advisor, regarding the proposed business
combination. On December 18, 2001, SmartForce engaged CSFB to provide financial
advisory and investment banking services in connection with the proposed
business combination.
On December 19, 2001, Mr. Priest called Mr. Navickas to confirm SmartForce's
desire to explore in earnest a business combination between SmartForce and
Centra. Mr. Priest suggested that SmartForce and Centra and their respective
financial advisors commence work on formulating specific terms of the proposed
transaction.
During the week of December 24, 2001, there were numerous discussions among
Mr. Navickas, Mr. Priest and representatives of Goldman Sachs and of CSFB
concerning the financial terms of the proposed combination.
During the week of December 31, 2001, Mr. Navickas and Mr. Priest discussed
the progress of the negotiations between the parties. They agreed that the
ongoing discussion of proposed exchange ratios between the parties was not
working effectively due to continuing disagreement about the assumptions on
which the respective proposed exchange ratios were based. Mr. Navickas asked
Mr. Priest to present a definitive written proposal concerning the financial
terms of the proposed transaction.
On January 3, 2002, Mr. Priest initiated a negotiation of proposed merger
terms with Mr. Navickas, which negotiations resulted in preliminary agreement
by the end of that day on the terms of a proposed transaction.
Between January 3 and January 9, 2002, Wilson Sonsini Goodrich & Rosati,
legal counsel to SmartForce, and Foley, Hoag & Eliot LLP, legal counsel to
Centra, negotiated the form of a non-binding term sheet containing a
confidentiality and exclusivity agreement.
On January 7, 2002, WSGR distributed an initial draft of the merger
agreement to Foley Hoag. On that same day, the revised term sheet was presented
to a meeting of the Centra board of directors. During the Centra Board
41
meeting, representatives of Foley Hoag described the outstanding issues
relating to the term sheet and representatives of Goldman Sachs described the
proposed financial terms of the merger. After discussion of the financial and
other terms of the term sheet, the Centra board authorized Mr. Navickas to
continue negotiation of the term sheet and to seek to negotiate a definitive
merger agreement with SmartForce.
On January 7, 2002, the SmartForce board of directors met at the offices of
SmartForce, together with representatives of WSGR and CSFB, to review the
proposed transaction terms and the revised term sheet, which was delivered to
each of the members of the SmartForce board, and to discuss valuation issues,
due diligence, the strategic rationale and other considerations related to the
proposed merger. Representatives of WSGR advised the board of directors as to
their fiduciary duties and reviewed the terms and documentation of the proposed
merger. After discussion of the financial and other terms of the term sheet,
the SmartForce board authorized Mr. Priest and Mr. Drummond to continue
negotiation of the term sheet and to seek to negotiate a definitive merger
agreement with SmartForce.
During the week of January 7, 2002, Mr. Navickas, Mr. Johnson, Mr. Priest
and Mr. Drummond discussed various issues relating to the terms of the merger.
After further negotiation of the certain terms of the term sheet between WSGR
and Foley Hoag on January 8, 2002, WSGR sent a further revised term sheet to
Foley Hoag. On January 9, 2002, the Centra board met to discuss the revised
term sheet and exclusivity agreement. The Centra board authorized Mr. Navickas
to continue to negotiate a definitive merger agreement consistent with the
revised term sheet and authorized Mr. Navickas to execute the exclusivity
agreement.
On January 10, 2002 and January 11, 2002 representatives of CSFB visited the
Lexington headquarters of Centra to undertake a financial and organizational
due diligence review with respect to Centra. On January 11, 2002, Mr. Johnson,
Mr. Mark, representatives of Goldman Sachs, and a representative of Arthur
Andersen, independent auditors to Centra, visited SmartForce headquarters in
Redwood, California to undertake a financial and organizational due diligence
review with respect to SmartForce.
From January 10 through January 13, 2002, representatives of WSGR and Foley
Hoag negotiated the definitive merger agreement, the form of voting agreements
of the directors and officers of SmartForce and the form of voting and
affiliate agreements of directors and officers of Centra to be signed
simultaneously with the definitive merger agreement. During this period,
representatives of Foley Hoag conducted additional due diligence at the offices
of WSGR in California.
From January 9 through January 14, 2002, representatives of WSGR visited the
office of Foley Hoag in Boston to undertake legal due diligence review with
respect to Centra.
On January 14, 2002, Centra's board of directors met. Mr. Johnson and
representatives of Foley Hoag, Arthur Andersen and Goldman Sachs participated
in the meeting. Mr. Navickas summarized for the board the final terms of the
proposed business combination as well as the strategic rationale for and
potential synergies that could result from the business combination.
Representatives of Foley Hoag described the material terms of the merger
agreement and ancillary documents, summarized the outstanding issues, and
outlined the results to date of its legal due diligence review with respect to
SmartForce. Mr. Johnson and a representative of Arthur Andersen summarized the
results to date of the financial due diligence undertaken with respect to
SmartForce. Representatives from Goldman Sachs reviewed the financial terms of
the merger agreement with the board, described the financial analyses they had
performed to date in connection with the proposed transaction, and also
reviewed the other strategic alternatives that were available to Centra and
that had been considered by management. After lengthy discussion of the terms
of the merger agreement and the strategic rationale for the merger and the
status of the due diligence investigation, the board authorized management and
Centra's advisors to continue their due diligence investigation of SmartForce
and their negotiations with SmartForce regarding the definitive merger
agreement, and a further board meeting was scheduled for January 15, 2002.
From January 14 through January 16, 2002, representatives of WSGR and Foley
Hoag continued negotiation of the definitive merger agreement and the forms of
voting and affiliate agreement and representatives of Centra,
42
Foley Hoag and Arthur Andersen continued their due diligence investigation of
SmartForce, and WSGR continued its due diligence investigation of Centra.
On January 15, 2002, the SmartForce board of directors met together with
representatives of WSGR and CSFB. At such meeting, Mr. Priest summarized the
status of the proposed transaction and the business terms being discussed. Mr.
Drummond presented the results of SmartForce's financial and business due
diligence. Representatives of WSGR updated the board as to the material terms
and conditions of the merger agreement and the status of their diligence
review. CSFB presented various financial analyses to the board of directors and
indicated that they expected to be in a position to render an opinion to the
board on January 16, 2002 as to the fairness, from a financial point of view,
of the exchange ratio to SmartForce. Following these events, the SmartForce
board of directors determined that the merger was fair to, and in the best
interests of, SmartForce and its shareholders and, subject to the receipt of
the fairness opinion from CSFB, approved the merger, the issuance of the
SmartForce ordinary shares (represented by ADSs) and related matters.
On January 15, 2002, Centra's board of directors met by telephone and
received reports from Centra's management and its advisors concerning the
status of their due diligence investigation and negotiations toward a
definitive merger agreement. After extensive discussion, the board authorized
management to continue its negotiations with SmartForce. That evening, Messrs.
Priest, Drummond and Navickas in Redwood, California and representatives of
WSGR and Foley Hoag met by telephone to discuss due diligence and open issues
with respect to the definitive merger agreement.
On January 15 and 16, 2002, Mr. Navickas met in Redwood, California, with
Mr. Priest and Mr. Drummond to discuss the terms of the definitive merger
agreement, integration planning and the communications strategy for the
announcement of the merger and the terms of new employment agreements to be
entered into between Centra and members of Centra's senior management.
On the afternoon of January 16, 2002, the Centra board met by telephone
conference call. Mr. Navickas summarized the financial terms of the proposed
transaction. He also summarized the terms of his own proposed employment
agreement and those of other key Centra executives. Representatives of Foley
Hoag described the final terms of the definitive merger agreement.
Representatives of management, Foley Hoag and Arthur Andersen summarized the
results of their due diligence investigation. Representatives of Goldman Sachs
made a presentation to the board with respect to the financial terms of the
transaction, and delivered their oral opinion, which was later confirmed in
writing, to the effect that, as of January 16, 2002, and subject to the
considerations described in their opinion, the exchange ratio of 0.425
SmartForce ADSs, each of which represents and is exchangeable for one ordinary
share of SmartForce, to be received for each share of Centra common stock
pursuant to the merger agreement was fair from a financial point of view to the
holders of shares of Centra common stock. After receiving the opinion of
Goldman Sachs, and after further discussion, the Board concluded that the
strategic benefits of a combination with SmartForce offered Centra's
stockholders greater long-term value than Centra could provide as an
independent company. The board of directors unanimously approved the merger and
the merger agreement, declared them advisable, authorized their submission for
adoption by the stockholders of Centra, and recommended that the stockholders
of Centra adopt them.
On January 16, 2002, CSFB rendered its oral opinion to the SmartForce board,
subsequently confirmed in writing, that as of January 16, 2002 and based upon
and subject to various considerations described in the opinion, the exchange
ratio was fair, from a financial point of view, to SmartForce and its
shareholders.
On the afternoon of January 16, 2002, the definitive merger agreement was
executed on behalf of each of SmartForce and Centra. Following the close of
market on January 16, 2002 SmartForce and Centra jointly issued a news release
announcing the merger.
Recommendation of SmartForce's Board of Directors and SmartForce's Reasons for
the Merger
At a meeting held on January 15, 2002, the board of directors of SmartForce
concluded that the merger is consistent with and in furtherance of the
long-term business strategy of SmartForce and is fair to, and in the best
43
interests of, SmartForce and SmartForce shareholders. Accordingly, subject to
receipt of a fairness opinion from its financial advisor and completion of the
definitive transaction documentation, the board of directors determined to
recommend that the SmartForce shareholders approve and adopt the merger
agreement and approve the merger and the issuance of the SmartForce ordinary
shares, represented by SmartForce ADSs, in the merger. On January 16, 2002,
Credit Suisse First Boston, SmartForce's financial advisor, delivered to the
SmartForce board its oral opinion, subsequently confirmed in writing, that, as
of such date and based upon various considerations described in the opinion,
the exchange ratio was fair, from a financial point of view, to SmartForce. On
the same day, the definitive transaction documentation was completed. The
summary set forth below briefly describes certain of the reasons, factors and
information taken into account by the SmartForce board in reaching its
conclusion. The SmartForce board did not assign any relative or specific
weights to the factors considered in reaching such determination, and
individual directors may have given differing weights to different factors.
In reaching its determination, the SmartForce board consulted with
SmartForce's management and legal and financial advisors, and carefully
considered a number of factors, including:
. The potential strategic benefits of the merger, including without
limitation, the ability to expand and enhance SmartForce's comprehensive
e-Learning solutions;
. Historical information concerning SmartForce's and Centra's respective
businesses, financial performance and condition, operations, technology
and management, including public reports concerning results of operations
during recent fiscal periods for each company filed with the SEC;
. SmartForce management's view of the financial condition, results of
operations and businesses of SmartForce and Centra before and after giving
effect to the merger and the merger's effect on shareholder value;
. Current financial market conditions and historical market prices,
volatility and trading information with respect to SmartForce's ADSs and
Centra's common stock;
. The consideration to be received by Centra's stockholders in the merger
and the relationship between the current and historical market values of
SmartForce's ADSs and Centra's common stock and a comparison of comparable
merger transactions;
. The belief that the terms of the merger agreement, including the parties'
respective representations, warranties and covenants, and the conditions
to their respective obligations, are reasonable;
. The potential for other parties to enter into strategic relationships with
or to acquire SmartForce or Centra;
. Detailed financial analysis and pro forma and other information with
respect to the companies presented to the board, including the opinion of
Credit Suisse First Boston, dated as of January 16, 2002, to the effect
that as of such date, and based upon and subject to various considerations
set forth in the opinion, the exchange ratio was fair, from a financial
point of view, to SmartForce. This opinion is subject to assumptions and
limitations noted in the opinion and described under "--Opinion of
SmartForce's Financial Advisor," and you should carefully read both that
section and the opinion that is attached to this document as Annex B;
. The impact of the merger on SmartForce's customers and employees; and
. Reports from management, legal, financial and accounting advisors as to
the results of the due diligence investigation of Centra.
In its decision to recommend and approve the merger and the share issuance,
the most important benefits identified by the board of directors of SmartForce
were the following:
. SmartForce management's belief that, given the complementary nature of the
technologies, business strategies and customer base of SmartForce and
Centra as well as the size, breadth of solution and
44
technology leadership of the combined company, the merger would enhance
the opportunity for the potential realization of SmartForce's strategic
objective to become the world's leading provider of e-Learning solutions;
. The potential impact on SmartForce's financial condition, results of
operations and businesses including the costs and synergies associated
with the combination of the two companies and the additional benefits from
incremental bookings;
. The increased customer base of the combined company, including
SmartForce's more than 2,500 corporate customers, and Centra's 775
corporate customers, fewer than half of whom are SmartForce customers;
. The benefits of becoming a larger organization with over 2,000 employees,
including over 900 customer facing employees, which would provide access
to greater financial, development, distribution channel and other
resources;
. The opportunity to leverage the significant research and development
capabilities of the two companies, which include a combined 2001 research
and development investment of over $60 million, allowing duplicate
resources to be re-deployed to facilitate faster introduction and
additional feature developments of the products of the combined company;
. The potential for customers to benefit from the integration of Centra's
collaboration technology with SmartForce's key capabilities, including
content, platform, tools and services, which can help SmartForce to more
rapidly develop and deploy preconfigured e-Learning solutions that address
the processes and solutions that customers can customize for their
specific objectives;
. The further expansion and strengthening of the sales and distribution
system, including the leveraging of existing channels and enhanced
expertise in content and technology/software sales;
. More substantial resources and a larger capital base to enable faster
growth and expansion in the rapidly-evolving e-Learning market;
. The benefits derived from the addition of members of a respected
management team with complementary strengths; and
. The opportunity of SmartForce's shareholders to participate in the
potential growth of the combined company after the merger.
Potential risks or other negative factors identified by the SmartForce board
of directors include the following:
. The risk that the potential benefits and costs synergies of the merger may
not be realized;
. The challenges of integrating the businesses of the combined company and
management and employee disruption associated with the merger, including
the risk that despite the efforts of the combined company, key personnel
might not remain employed by the combined company;
. The risk that Centra's financial results will not meet expectations given
the current e-Learning market environment and Centra's customer base;
. The risk of disruption of sales momentum as a result of uncertainties
created by the announcement of the merger;
. The risk that the merger might not be consummated on a timely basis, if at
all, despite the parties' efforts, and even if approved by each company's
shareholders;
. The substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
arising from the merger;
. The effect of public announcement of the merger and the possibility that
the merger might not be consummated on (a) SmartForce's sales and
operating results, (b) SmartForce's ability to attract and retain key
management, marketing and technical personnel and (c) progress of certain
development projects; and
45
. Other applicable risks described in the section of this joint proxy
statement/prospectus entitled "Risk Factors" on page 12.
The foregoing discussion of the information and factors considered by the
SmartForce board of directors is not intended to be exhaustive but includes the
material factors considered by the SmartForce board of directors. In view of
the complexity and wide variety of information and factors, both positive and
negative, considered by the SmartForce board of directors, it did not find it
practical to quantify, rank or otherwise assign relative or specific weights to
the factors considered. In addition, the SmartForce board did not reach any
specific conclusion with respect to each of the factors considered, or any
aspect of any particular factor. Instead, the SmartForce board of directors
conducted an overall analysis of the factors described above, including
discussions with SmartForce's management and legal, financial and accounting
advisors. In considering the factors described above, individual members of the
SmartForce board of directors may have given different weight to different
factors. The SmartForce board considered all these factors as a whole and
believed the factors supported its determination to approve the merger.
After taking into consideration all of the factors set forth above,
SmartForce's board of directors unanimously concluded that the merger is
consistent with and in furtherance of the long-term business strategy of
SmartForce and is fair to, and in the best interests of, SmartForce and
SmartForce shareholders and that SmartForce should proceed with the merger.
SmartForce's board of directors recommends that its shareholders vote FOR the
adoption of the merger agreement and the approval of the merger and the
issuance of the SmartForce ordinary shares, represented by ADSs, in connection
with the merger.
Recommendation of Centra's Board of Directors and Centra's Reasons for the
Merger
At a meeting held on January 16, 2002 the board of directors of Centra
determined that the merger is consistent with, and in furtherance of, Centra's
long-term business strategy and that the terms of the merger agreement and the
merger are fair to, and in the best interests of, Centra and its stockholders.
In reaching its unanimous decision to approve the merger agreement, Centra's
board consulted Centra's management, financial advisors, legal counsel and
independent accountants, and considered the results of their due diligence
investigations of SmartForce, including information and presentations
concerning the business, technology, products and services, operations,
financial condition, organizational structure and competitive position of
SmartForce on both a historical and prospective basis.
In reaching its decision, Centra's board of directors identified and
considered the following material factors which, when taken as a whole,
supported its decision:
. The complementary nature of Centra's collaboration software and technology
and SmartForce's e-Learning content, tools and services. The board
considered management's view that the integration of the respective
technologies of the two companies would enable the combined company to
offer comprehensive e-Learning solutions and to deliver a broad range of
content and applications which would be attractive to existing and
potential customers of the combined company. The board considered that
combining the two companies would simplify the e-Learning procurement
process for many businesses since they could look to one vendor to deliver
effective and low-cost e-Learning solutions, and this could increase the
sales of the combined company.
. The integration of the respective technologies of SmartForce and Centra
would benefit existing Centra customers by enabling those customers to
seamlessly deploy SmartForce's content over the customers' existing Centra
infrastructure.
. The combined company might be able to create significant sales and
marketing synergies and cost efficiencies. In particular, the board
considered management's view that the combined company would have the
opportunity to capitalize on each company's customer and partner
relationships and established reputations, brands and global presence to
provide additional offerings to each company's existing customers and to
create new customer opportunities for the combined company.
46
. The greater financial resources of the combined company and its ability to
take advantage of the combined development and deployment expertise and
the larger research and development budget of the combined company in
order to bring new solutions to market in a timely fashion.
. The merger consideration to be received by Centra stockholders represented
a premium of approximately 16.2% over the closing price of the Centra
common stock on January 15, 2002, the last trading day before the meeting
at which the Centra board of directors approved the merger, a premium that
the board considered reasonable in light of Centra's recent operating
performance, current industry and financial market conditions, and recent
comparable transactions. The board also considered current financial
market conditions and the historical volatility and trading prices of the
Centra common stock and the SmartForce ADSs, as well as the board's
expectations regarding the potential for increases in the trading prices
of Centra common stock and SmartForce ADSs in the near future and in the
longer term.
. The risks and potential rewards associated with continuing to operate as
an independent company as an alternative to the merger, including, among
others, risks associated with remaining independent in light of increasing
consolidation and competition in the e-Learning market. The board also
considered potential rewards associated with the opportunity for
stockholders to participate in the future growth of SmartForce.
. The possibility, as an alternative to the merger, of seeking to acquire
another company, seeking to engage in one or more joint ventures or
seeking to engage in a combination with a company other than SmartForce,
including another e-Learning company with which Centra had held
preliminary discussions, and the Centra board's conclusion that a
transaction with SmartForce was the best strategic alternative available
at that time.
. The larger market capitalization and public float of SmartForce and the
corresponding likelihood of broader research coverage and increased
trading liquidity for former Centra stockholders as a result of the merger.
. The analysis and presentation of Goldman, Sachs & Co. on January 16, 2002
and the opinion delivered by that firm to Centra's board of directors
dated as of January 16, 2002 to the effect that, as of that date, the
exchange ratio of 0.425 SmartForce ADSs, each of which represents and is
exchangeable for one ordinary share of SmartForce, to be received for each
share of Centra common stock pursuant to the merger agreement was fair
from a financial point of view to the holders of shares of Centra common
stock. A copy of Goldman, Sachs & Co.'s written opinion is attached as
Annex C to this joint proxy statement/prospectus.
. The financial strength of SmartForce and the likelihood that it would be
able to complete the merger.
. The fact that the merger will be tax-free to Centra's U.S. stockholders
who exchange their shares in the merger (except to the extent that they
receive cash for any fractional shares).
. The limited rights that SmartForce has to terminate the merger agreement,
including the fact that SmartForce may not terminate the merger agreement
merely on the basis of changes in the price of the Centra common stock.
. The board's rights under the merger agreement to consider superior
acquisition proposals and to alter or withdraw its recommendation of the
merger and, in the event the stockholders do not approve the merger,
pursue superior acquisition proposals.
In reaching its decision to approve the merger and recommend approval of the
merger to Centra's stockholders, Centra's board of directors also considered a
number of potentially negative factors concerning the merger. These factors
included the following:
. The volatility of the trading price of SmartForce ADSs, the fact that the
exchange ratio for the merger consideration to be received by Centra
stockholders is fixed and will not increase in the event of a decline in
the trading price of SmartForce ADSs, and the fact that Centra may not be
able to terminate the merger agreement merely on the basis of changes in
the price of the SmartForce ADSs.
47
. The risk that SmartForce will not successfully integrate the operations of
the two companies or achieve the anticipated synergies of the combination,
which might adversely affect the trading price of the SmartForce ADSs
received in the merger.
. The possible adverse effects of the public announcement of the merger on
Centra's sales and its relationships with its employees, customers,
suppliers and strategic partners.
. The loss of control that would result from the fact that the combined
company's board of directors will consist of seven directors, only one of
which will be an existing Centra director or officer.
. The significant costs that have been and will be incurred in seeking to
consummate the merger.
. The risk that the integration of Centra and SmartForce will be an
expensive, complex and time-consuming process that could disrupt the
business of either or both companies if not completed in a timely and
efficient manner.
. The risk that the potential benefits of the merger may not be realized.
. The risk that the merger might not be consummated and the potential
adverse effects of the failure to consummate the merger on:
--Centra's operating results.
--The trading price of Centra common stock.
--Centra's ability to attract and retain key management and other
personnel.
. The decreased likelihood that Centra would receive a third-party
acquisition proposal because of the termination fee and, to a lesser
extent, the voting agreements that were executed by Centra's directors and
executive officers.
. Other applicable risks described in this joint proxy statement/prospectus
under the heading "Risk Factors" on page .
In addition, Centra's board of directors considered the interests that
certain of its officers and directors may have with respect to the merger in
addition to their interests as Centra stockholders. See "Interests of Certain
Persons in the Merger" on page 63 for a more complete discussion of these
interests.
Centra's board of directors evaluated these factors in light of their
knowledge of Centra's business, Centra's customers and partners, the market for
e-Learning solutions, and their business judgment. In view of the variety of
factors and the amount of information considered, Centra's board of directors
did not find it practicable to, and did not, quantify, rank or otherwise assign
relative weights to the specific factors it considered in reaching its
decision. The determination was made after consideration of all of the factors
taken as a whole. In addition, individual members of Centra's board of
directors may have given different weights to different factors. The foregoing
discussions of the information and factors considered by Centra's board of
directors are not intended to be exhaustive but are believed to include all of
the material factors considered by Centra's board.
After taking into consideration all of the factors set forth above, Centra's
board of directors has unanimously approved the merger agreement, the merger
and the other transactions contemplated by the merger agreement. Centra's board
of directors believes that the merger is consistent with, and in furtherance
of, Centra's long-term business strategy and that the merger agreement and the
merger are advisable, fair to and in the best interests of Centra and its
stockholders. Centra's board of directors recommends that its stockholders vote
FOR the approval and adoption of the merger agreement and the merger.
If the merger is not completed, Centra intends to continue as an independent
public company and will continue to evaluate other strategic transactions or
alternatives to realize value for its stockholders.
48
Opinion of SmartForce's Financial Advisor
SmartForce retained Credit Suisse First Boston Corporation to act as its
financial advisor in connection with the merger. In connection with Credit
Suisse First Boston's engagement, SmartForce requested that Credit Suisse First
Boston evaluate the fairness, from a financial point of view, of the exchange
ratio to SmartForce. On January 15, 2002, the SmartForce board of directors met
to review the proposed merger and the terms of the merger agreement. During
this meeting, Credit Suisse First Boston reviewed with the SmartForce board of
directors certain financial analyses, as described below. On January 16, 2002,
Credit Suisse First Boston rendered its oral opinion to the SmartForce board of
directors, subsequently confirmed in writing, that, as of January 16, 2002 and
based upon and subject to the various considerations set forth in the Credit
Suisse First Boston opinion, the exchange ratio was fair, from a financial
point of view, to SmartForce.
The full text of the Credit Suisse First Boston opinion, which sets forth,
among other things, assumptions made, procedures followed, matters considered
and limitations on the scope of the review undertaken by Credit Suisse First
Boston in rendering its opinion is attached as Annex B to this joint proxy
statement/prospectus and is incorporated by reference in its entirety.
SmartForce shareholders are urged to, and should, read the Credit Suisse First
Boston opinion carefully and in its entirety. The Credit Suisse First Boston
opinion addresses only the fairness, from a financial point of view, of the
exchange ratio to SmartForce as of the date of the Credit Suisse First Boston
opinion, and does not constitute a recommendation to any shareholder as to how
such shareholder should vote or act on any matter relating to the merger. The
summary of the Credit Suisse First Boston opinion in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the Credit Suisse First Boston opinion.
In connection with its opinion, Credit Suisse First Boston, among other
things,
. reviewed the merger agreement;
. reviewed certain publicly available business and financial information
relating to SmartForce and Centra;
. reviewed certain other information, including financial forecasts,
provided to it or discussed with it by SmartForce and Centra, and met with
the managements of SmartForce and Centra to discuss the businesses and
prospects of SmartForce and Centra, respectively;
. considered certain financial and stock market data of SmartForce and
Centra and compared that data with similar data for other publicly held
companies in businesses similar to SmartForce and Centra;
. considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions that have been
recently effected or announced; and
. considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which Credit
Suisse First Boston deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the foregoing information
and relied on such information being complete and accurate in all material
respects. With respect to the publicly available financial forecasts relating
to SmartForce and Centra, Credit Suisse First Boston reviewed and discussed
such forecasts with the managements of SmartForce and Centra and Credit Suisse
First Boston was advised and assumed, with SmartForce's consent, that such
forecasts represent reasonable estimates and judgments as to the future
financial performance of SmartForce and Centra, respectively. In addition,
SmartForce's management reviewed with Credit Suisse First Boston certain pro
forma financial forecasts for Centra assuming completion of the merger and
advised Credit Suisse First Boston, and Credit Suisse First Boston assumed,
that, such pro forma forecasts represent reasonable estimates and judgments as
to the future financial performance of Centra following the merger. In
addition, Credit Suisse First Boston relied upon, without independent
verification, the assessment of the managements of SmartForce and Centra as to:
. the ability of SmartForce and Centra to retain key employees;
49
. the strategic benefits and potential cost savings and other synergies
(including the amount, timing and achievability of such benefits, savings
and other synergies) anticipated to result from the merger;
. the existing technology, products and services of SmartForce and Centra
and the validity of, and risks associated with, the future technology,
products and services of SmartForce and Centra; and
. SmartForce's ability to integrate the businesses of SmartForce and Centra.
SmartForce also informed Credit Suisse First Boston, and Credit Suisse First
Boston assumed, that the merger will be treated as a tax-free reorganization
for federal income tax purposes. Credit Suisse First Boston also assumed, with
SmartForce's consent, that in the course of obtaining necessary regulatory and
third party approvals and consents for the merger, no modification, delay,
limitation, restriction or condition will be imposed that will have a material
adverse effect on SmartForce or Centra or the contemplated benefits of the
merger and that the merger will be consummated in accordance with the terms of
the merger agreement without waiver, modification or amendment of any material
terms, conditions or agreements contained in the merger agreement. Credit
Suisse First Boston was not requested to make, and did not make, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of SmartForce or Centra, nor was Credit Suisse First Boston furnished with any
such evaluations or appraisals. The Credit Suisse First Boston opinion is
necessarily based upon information available to it as of the date of its
opinion, and upon financial, economic, market and other conditions as they
existed and could be evaluated on the date of the Credit Suisse First Boston
opinion. Credit Suisse First Boston did not express any opinion as to what the
value of the SmartForce ADSs actually will be when issued to holders of Centra
common stock pursuant to the merger or the prices at which SmartForce ADSs will
trade at any time. The Credit Suisse First Boston opinion does not address the
relative merits of the merger as compared to other business strategies that
might be available to SmartForce, nor does it address the underlying business
decision of SmartForce to engage in the merger.
In preparing its opinion, Credit Suisse First Boston performed a variety of
financial and comparative analyses. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Credit Suisse First Boston believes that its analyses must
be considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, could
create a misleading view of the processes underlying the Credit Suisse First
Boston opinion. No company or transaction used in the analysis performed by
Credit Suisse First Boston as a comparison is identical to SmartForce, Centra
or the contemplated merger. In addition, Credit Suisse First Boston may have
given various analyses more or less weight than other analyses, and may have
deemed various assumptions more or less probable than other assumptions, so
that the range of valuation resulting from any particular analysis described
below should not be taken to be Credit Suisse First Boston's view of the actual
value of SmartForce or Centra. The analyses performed by Credit Suisse First
Boston are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. In addition, analyses relating to the value of businesses or
assets do not purport to be appraisals or to necessarily reflect the prices at
which businesses or assets may actually be sold. The analyses performed were
prepared solely as part of Credit Suisse First Boston's analysis of the
fairness, from a financial point of view, of the exchange ratio to SmartForce
and were provided to the board of directors of SmartForce in connection with
the delivery of the Credit Suisse First Boston opinion.
The following is a summary of material financial analyses performed by
Credit Suisse First Boston in connection with the preparation of its opinion,
and reviewed with the SmartForce board of directors at a meeting of the
SmartForce board of directors held on January 15, 2002. Certain of the
following summaries of financial analyses that were performed by Credit Suisse
First Boston include information presented in tabular format. In order to
understand fully the material financial analyses that were performed by Credit
Suisse First Boston, the tables should be read together with the text of each
summary. The tables alone do not constitute a complete description of the
material financial analyses.
50
Centra Historical Stock Trading Performance. Credit Suisse First Boston
analyzed the prices at which Centra common stock traded from February 3, 2000
(the date of the initial public offering of Centra common stock) through
January 15, 2002. Credit Suisse First Boston noted that the high closing price
of Centra common stock during this period was $36.88 on February 29, 2000, and
that the low closing price of Centra common stock was $3.13 on December 27,
2000. Credit Suisse First Boston also noted the average closing price of Centra
common stock over various periods prior to January 15, 2002, as summarized
below:
Average
Period Prior to January 15, 2002 Closing Price
-------------------------------- -------------
Current.................................................... $8.85
Last 5 trading days........................................ $8.35
Last 10 trading days....................................... $8.20
Last 30 trading days....................................... $8.00
Last 60 trading days....................................... $7.17
Last 90 trading days....................................... $7.88
Credit Suisse First Boston also noted the volume of shares traded at
different price levels between January 2, 2001 and January 15, 2002, as
summarized in the following table:
Trading Price $4-$6 $6-$8 $8-$10 $10-$12 $12-$14 $14-$16 $16-$18
------------- ----- ----- ------ ------- ------- ------- -------
Percentage Traded
Within and Below
Range............... 10.1% 30.7% 48.1% 66.5% 83.0% 99.0% 100.0%
Comparative Stock Price Performance. Credit Suisse First Boston reviewed
the recent stock price performance of SmartForce and Centra and compared their
performance with indices comprised of the selected companies in the e-Learning
industry and the Nasdaq composite index over the one year period from January
12, 2001 to January 15, 2002 and the six month period from July 14, 2001 to
January 15, 2002. The following tables set forth the changes in stock prices
over such periods:
Stock Price Increase/(Decrease) from
January 12, 2001 to January 15, 2002
------------------------------------
SmartForce........................... 38.8 %
Centra............................... (29.6)%
e-Learning Companies................. (30.7)%
Nasdaq............................... (23.8)%
Stock Price Increase/(Decrease) from
July 14, 2001 to January 15, 2002
------------------------------------
SmartForce........................... (33.7)%
Centra............................... (35.4)%
e-Learning Companies................. (36.1)%
Nasdaq............................... 4.0 %
Trading Statistics of Selected Software Companies. Credit Suisse First
Boston compared certain financial information of Centra with that of other
companies in certain sectors of the software industry, including:
. SmartForce
. e-Learning Vendors
. University of Phoenix Online
. SkillSoft Corporation
. Digitalthink, Inc.
. Saba Software, Inc.
. Docent, Inc.
51
. eBusiness Software Vendors
. Vignette Corporation
. Vitria Technology, Inc.
. Interwoven, Inc.
. Broadvision, Inc.
. E.Piphany Inc.
. Category Leading Software Vendors
. Microsoft Corporation
. Oracle Corporation
. SAP AG
. Veritas Software Corporation
. Siebel Systems, Inc.
. Peoplesoft, Inc.
. BEA Systems, Inc.
Such information included, among other things, the median and mean of
several financial metrics for the companies in each industry sector, including
fully-diluted aggregate values as multiples of revenues, earnings and
P/E-to-growth for calendar years 2001, 2002 and 2003. The multiples were
calculated using publicly available information and publicly available
forecasts of securities research analysts. The following table summarizes the
results of this analysis.
Fully-Diluted Fully-Diluted
Aggregate Value/ Aggregate Value/
Revenues Earnings Per Share P/E-to-Growth
----------------- ------------------ -----------------
2001E 2002E 2003E 2001E 2002E 2003E 2001E 2002E 2003E
----- ----- ----- ------ ----- ----- ----- ----- -----
SmartForce........................ 5.1x 4.1x 3.3x 108.4x 40.6x 24.2x 2.4x 0.9x 0.5x
Centra............................ 5.0x 3.5x NA NM 92.9x 19.7x NM 2.0x 0.4x
e-Learning Vendors
Median......................... 7.4x 4.5x 3.1x 81.9x 61.6x 39.0x 2.0x 1.5x 0.9x
Mean........................... 7.3x 4.9x 4.2x 81.9x 62.9x 39.0x 2.0x 1.5x 0.9x
eBusiness Software Vendors
Median......................... 3.7x 3.6x 2.6x NA NA 78.9x NA NA 2.0x
Mean........................... 3.9x 3.9x 2.8x NA NA 84.8x NA NA 2.2x
Category Leading Software Vendors
Median......................... 8.6x 8.0x 6.6x 64.6x 52.8x 41.1x 2.4x 2.1x 1.6x
Mean........................... 9.0x 8.0x 6.4x 59.4x 51.9x 40.9x 2.3x 2.0x 1.6x
Transaction Multiples. Credit Suisse First Boston calculated several values
implied by the merger exchange ratio, including the implied price per Centra
share and the fully-diluted equity value and fully-diluted aggregate value of
Centra. The following table summarizes the results of this analysis.
Implied Centra Implied Centra
Implied Price Fully-Diluted Fully-Diluted
Per Centra Share Equity Value Aggregate Value
---------------- -------------- ---------------
$10.29 $284 million $240 million
52
Credit Suisse First Boston also calculated the implied Centra aggregate
value as a multiple of estimated revenues for Centra calendar year 2002 and the
implied Centra P/E-to-growth rate as a multiple of estimated earnings per
Centra share for calendar year 2002. The multiples were calculated using
publicly available forecasts of securities research analysts for calendar year
2002 (Street Case), and such forecasts as adjusted in consultation with
SmartForce's management to account for the potential effect on Centra of
migration to a subscription revenue recognition model in calendar years 2002
and 2003 (Adjusted Street Case). The Street Case and Adjusted Street Case also
assumed either no synergies arising from the merger (No Synergies Case) or
various synergies anticipated by SmartForce management to result from the
merger (Base Case and Upside Case). The following table summarizes the results
of this analysis:
Street Case Adjusted Street Case
---------------------- ----------------------
No No
Synergies Base Upside Synergies Base Upside
Case Case Case Case Case Case
--------- ----- ------ --------- ----- ------
Implied Centra Fully-Diluted
Aggregate Value/ Centra
2002E Revenues............. 4.3x 4.2x 4.2x 4.8x 4.7x 4.7x
Implied P/E-to-Growth Rate... 2.32x 0.74x 0.61x NM 1.75x 1.15x
Historical Exchange Ratio Analysis. Credit Suisse First Boston compared the
average of the exchange ratios of the closing price of Centra common stock to
the closing price of SmartForce ADSs for various periods ended January 15,
2002. The following table sets forth such average exchange ratios for various
periods ended January 15, 2002 and the premium/(discount) of the merger
exchange ratio to the average market exchange ratio over such periods:
Premium/(Discount) of the Merger
Average Market Exchange Exchange Ratio over the Average Market
Period Prior to January 15, 2002 Ratio over Period Exchange Ratio over Period
-------------------------------- ----------------------- --------------------------------------
Last Twelve Month Average 0.334x 27.1%
Last 180 trading days 0.384x 10.8%
Last 90 trading days 0.378x 12.5%
Last 60 trading days 0.328x 29.5%
Last 30 trading days 0.325x 30.9%
Last 10 trading days 0.319x 33.0%
January 15, 2002 0.366x 16.2%
Contribution Analysis. Credit Suisse First Boston analyzed the relative
contributions of Centra and SmartForce to the pro forma total revenues, gross
profit and net income of the combined company, based on estimates for calendar
year 2002 prepared by securities research analysts. Credit Suisse First Boston
also analyzed the relative contributions of Centra and SmartForce to net income
based on estimates for calendar year 2003 prepared by securities research
analysts. Credit Suisse First Boston derived, among other things, the pro forma
fully-diluted ownership of SmartForce by Centra stockholders and the exchange
ratio implied by such relative contributions, based on the closing share prices
of Centra and SmartForce on January 15, 2002. The following table summarizes
the results of this analysis:
Implied Pro Forma Implied
Fully-Diluted Centra Exchange
Ownership in SmartForce Ratio
----------------------- --------
2002E Revenues............................. 16.0% 0.416x
2002E Gross Profit......................... 16.3% 0.424x
2002E Net Income........................... 6.3% 0.161x
2003E Net Income
Low Street Case(1)...................... 15.6% 0.404x
High Street Case(2)..................... 17.9% 0.470x
--------
(1) Based on 2003 earnings per share of $0.45 from analyst research estimates.
(2) Based on 2003 earnings per share of $0.53 from analyst research estimates.
53
Precedent Exchange Ratio Premiums Analysis. Credit Suisse First Boston
reviewed the exchange ratio premiums paid in 249 precedent stock-for-stock
transactions in the technology industry since January 1, 1990 and 51 precedent
stock-for-stock transactions in the software industry since January 1, 1994.
For each group of transactions, Credit Suisse First Boston calculated the
premium implied by the exchange ratio in each transaction relative to the ratio
of the closing stock prices for the target company and the acquiror company in
the transaction over various periods prior to public announcement of the
transaction. Credit Suisse First Boston then applied the median of such
premiums to ratios of the closing price of Centra common stock to the closing
price of SmartForce ADSs over the same periods, to calculate the exchange
ratios implied by such precedent exchange ratio premiums. The following tables
summarize the results of this analysis:
Exchange Ratio Premiums Paid in 249 Precedent Stock-for-Stock Technology
Transactions
Since January 1, 1990
Last Twelve
Months Trailing Trailing Trailing Trailing
Average 90 Days 60 Days 30 Days 10 Days Market Average
----------- -------- -------- -------- -------- ------ -------
Median Premium in Precedent Transactions 19.0% 30.4% 36.2% 35.8% 32.3% 28.3% 30.3%
Average Premium in Precedent
Transactions.......................... 21.1% 35.0% 40.2% 42.4% 39.4% 32.9% 35.2%
Centra/SmartForce Observed Exchange
Ratios................................ 0.334x 0.378x 0.328x 0.325x 0.319x 0.366x 0.342x
Implied Merger Exchange Ratio Based on
Precedent Median Premium.............. 0.398x 0.492x 0.447x 0.441x 0.423x 0.469x 0.445x
Exchange Ratio Premiums Paid in 51 Precedent Stock-for-Stock Software
Transactions
Since January 1, 1994
Last Twelve
Months Trailing Trailing Trailing Trailing
Average 90 Days 60 Days 30 Days 10 Days Market Average
----------- -------- -------- -------- -------- ------ -------
Median Premium in Precedent Transactions 19.4% 29.3% 40.5% 37.4% 33.3% 27.9% 31.3%
Average Premium in Precedent
Transactions.......................... 16.1% 41.1% 50.8% 52.4% 46.5% 37.5% 40.7%
Centra/SmartForce Observed Exchange
Ratios................................ 0.334x 0.378x 0.328x 0.325x 0.319x 0.366x 0.342x
Implied Merger Exchange Ratio Based on
Precedent Median Premium.............. 0.399x 0.489x 0.461x 0.446x 0.426x 0.468x 0.449x
Precedent Transactions Analysis. Credit Suisse First Boston reviewed
several financial metrics from the following seventeen precedent transactions:
. SkillSoft Corporation / Books24x7
. Riverdeep Group Plc / The Learning Company, Inc.
. DigitalThink, Inc. / LearningByte International
. Sun Microsystems Inc. / Isopia
. Centra / MindLever
. Riverdeep Group Plc / Smartstuff Software
. Plato Learning, Inc. / Wasatch Interactive Learning
. Digitalthink, Inc. / Arista Knowledge Systems
. Pearson Plc / FamilyEducation Network
. ProsoftTraining.com / ComputerPREP
. Kaplan, Inc. / Quest Education Corp.
54
. Thomson Corp. / Wave Technologies International, Inc.
. Thomson Corp. / Sylvan Learning Systems Inc.
. National Computer Systems Inc. / NovaNET Learning
. 7th Street.com / Learn2.com (Panmedia)
. 7th Level, Inc. / Street Technologies
Credit Suisse First Boston calculated the mean and median of several
financial metrics for the precedent transactions, including the multiples of
the aggregate values paid in such transactions to revenues and earnings before
interest and taxes (EBIT) of the acquired company. Credit Suisse First Boston
compared these values to the same multiples for Centra implied by the merger
exchange ratio. The following table summarizes the results of this analysis:
Aggregate Aggregate Aggregate
Value/Last Value/Next Value/Last
Twelve Months Twelve Months Twelve Months
Revenues Revenues EBIT
------------- ------------- -------------
Implied Multiples for Centra........... 6.1x 4.3x NM
Mean Statistic from Precedent
Transactions......................... 4.4x 4.2x 59.1x
Median Statistic from Precedent
Transactions......................... 2.4x 2.0x 40.9x
No transaction utilized as a comparison in the precedent exchange ratio
premiums analysis or precedent transactions analysis is identical to the
merger. Mathematical analysis, such as determining the average or the median,
is not in itself a meaningful method of using comparable transaction data.
Pro Forma Earnings Per Share Impact Analysis. Credit Suisse First Boston
analyzed certain pro forma effects expected to result from the merger,
including, among other things, the expected effect of the merger on estimated
SmartForce earnings per share for calendar years 2002 and 2003. The following
table sets forth estimated accretion/(dilution) to the combined company's
earnings per share for calendar years 2002 and 2003 based on street estimates
for Centra (Street Case) and street estimates for Centra as adjusted in
consultation with SmartForce's management to account for the potential effect
on Centra of migration to a subscription revenue recognition model in calendar
years 2002 and 2003 (Adjusted Street Case). The Street Case and Adjusted Street
Case assumed either no synergies arising from the merger or synergies
anticipated by SmartForce management to result from the merger (Synergies Base
Case and Synergies Upside Case). The following table summarizes the results of
this analysis:
Synergies
No Synergies Case Synergies Base Case Upside Case
--------------- ------------------ ----------------
Calendar Calendar Calendar Calendar Calendar Calendar
Year Year Year Year Year Year
2002 2003 2002 2003 2002 2003
-------- -------- -------- -------- -------- --------
Street Case
Accretion/(Dilution)....... (1.5)% 0.9% 11.2% 21.4% 15.3% 27.3%
Adjusted Street Case
Accretion/(Dilution)....... (12.3)% (15.2)% 0.4% 5.3% 4.6% 11.3%
The actual results achieved by the combined company after the merger may
vary from such estimated results and the variations may be material.
Pro Forma Future Trading Analysis. Credit Suisse First Boston calculated
the potential future trading prices of SmartForce ADSs one year after January
16, 2002, assuming that SmartForce ADSs traded at certain price-to-earnings
multiples (based on 2003 estimated earnings) ranging from 30.0x to 66.3x. The
estimated earnings for calendar year 2003 were based on publicly available
forecasts from securities research analysts (Street Case) and such forecasts as
adjusted in consultation with SmartForce's management to account for the
55
potential effect on Centra of migration to a subscription revenue recognition
model in calendar years 2002 and 2003 (Adjusted Street Case). The Street Case
and Adjusted Street Case were also adjusted to account for various synergies
anticipated by SmartForce management to result from the merger (Base Case and
Upside Case). The following table summarizes the results of this analysis:
Pro Forma Earnings Trading Multiple
--------------------------------------------------------------
SmartForce Median Centra
Current P/E P/E-to-Growth Current P/E
----------- ------------- -----------
Pro Forma Earnings Trading
Multiple..................... 30.0x 35.0x 40.6x 50.0x 66.3x 92.9x
P/E-to-Growth.................. 0.65x 0.76x 0.88x 1.09x 1.44x 2.02x
Street Case
Base Case
Implied Price Per
SmartForce ADS............... $ 36.41 $ 42.47 $ 49.29 $ 60.68 $ 80.43
% Premium to Current Price Per
SmartForce ADS............... 50.4% 75.5% 103.7% 150.7% 232.4%
% Premium to Stand-Alone
Prospects.................... (10.4)% 4.6% 21.4% 49.4% 98.0%
Upside Case
Implied Price Per SmartForce
ADS.......................... $38.20 $44.57 $51.72 $63.67 $84.40
% Premium to Current Price Per
SmartForce ADS............... 57.9% 84.2% 113.7% 163.1% 248.7%
% Premium to Stand-Alone
Prospects.................... (5.9)% 9.7% 27.3% 56.8% 107.8%
Adjusted Street Case
Base Case
Implied Price Per SmartForce
ADS.......................... $31.58 $36.84 $42.75 $52.63 $69.77
% Premium to Current Price Per
SmartForce ADS............... 30.5% 52.2% 76.7% 117.5% 188.3%
% Premium to Stand-Alone
Prospects.................... (22.2)% (9.3)% 5.3% 29.6% 71.8%
Upside Case
Implied Price Per SmartForce
ADS.......................... $33.38 $38.94 $45.18 $55.63 $73.73
% Premium to Current Price Per
SmartForce ADS............... 37.9% 60.9% 86.7% 129.9% 204.7%
% Premium to Stand-Alone
Prospects.................... (17.8)% 4.1% 11.3% 37.0% 81.5%
Credit Suisse First Boston's opinion and presentation to the SmartForce
board of directors was one of many factors taken into consideration by the
SmartForce board of directors in making its determination to engage in the
merger. Consequently, the analyses described above should not be viewed as
determinative of the opinion of the SmartForce board of directors or the
management of SmartForce with respect to the value of Centra or whether the
SmartForce board of directors would have been willing to agree to a different
exchange ratio.
The SmartForce board of directors retained Credit Suisse First Boston to act
as its financial advisor in connection with the merger. Credit Suisse First
Boston was selected by the SmartForce board of directors based on Credit Suisse
First Boston's qualifications, expertise and reputation. Credit Suisse First
Boston is an internationally recognized investment banking and advisory firm.
Credit Suisse First Boston, as part of its
56
investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the past, Credit Suisse First
Boston and its affiliates have provided certain investment banking and
financial services to SmartForce. In the ordinary course of its business,
Credit Suisse First Boston and its affiliates may actively trade the debt and
equity securities of SmartForce and Centra for their own accounts and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Pursuant to an engagement letter dated December 18, 2001, SmartForce engaged
Credit Suisse First Boston to provide financial advisory services to the
SmartForce board of directors in connection with the merger, including, among
other things, rendering its opinion. Pursuant to the terms of the engagement
letter, SmartForce has agreed to pay Credit Suisse First Boston a customary fee
in connection therewith. Credit Suisse First Boston will also receive a fee for
rendering its opinion. In addition, SmartForce has agreed to reimburse Credit
Suisse First Boston for its out-of-pocket expenses, including attorney's fees,
incurred in connection with its engagement and to indemnify Credit Suisse First
Boston and certain related persons against certain liabilities and expenses
arising out of or in conjunction with its rendering of services under its
engagement, including liabilities arising under the federal securities laws.
Opinion of Centra's Financial Advisor
On January 16, 2002, Goldman Sachs delivered its oral opinion, which was
subsequently confirmed in writing as of January 16, 2002, to the board of
directors of Centra to the effect that, as of such date, the exchange ratio of
0.425 SmartForce ADSs, each of which represents and is exchangeable for one
ordinary share of SmartForce, to be received for each share of Centra common
stock pursuant to the merger agreement was fair from a financial point of view
to the holders of shares of Centra common stock.
The full text of the written opinion of Goldman Sachs dated January 16,
2002, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached as Annex C to
this joint proxy statement/prospectus and is incorporated herein by reference.
Goldman Sachs provided its opinion for the information and assistance of
Centra's board of directors in connection with its consideration of the
transaction contemplated by the merger agreement. The Goldman Sachs opinion is
not a recommendation as to how any holder of shares of Centra common stock
should vote with respect to the transaction. We urge you to read the opinion in
its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things:
. the merger agreement;
. the registration statement on Form S-1, including the prospectus contained
therein dated February 3, 2000, of Centra relating to the initial public
offering of shares of its common stock;
. the Annual Reports to Shareholders and Annual Reports on Form 10-K of
Centra for the year ended December 31, 2000 and SmartForce for the five
years ended December 31, 2000;
. selected interim reports to shareholders and Quarterly Reports on Form
10-Q of Centra and SmartForce;
. selected other communications from Centra and SmartForce to their
respective shareholders; and
. selected financial analyses and forecasts for Centra and SmartForce
prepared by their respective managements, including certain cost savings
and operating synergies projected by the managements of Centra and
SmartForce to result from the merger.
Goldman Sachs also held discussions with members of the senior managements
of Centra and SmartForce regarding their assessment of the strategic rationale
for, and the potential benefits of, the transaction contemplated by the merger
agreement and the past and current business operations, financial condition and
57
future prospects of their respective companies. In addition, Goldman Sachs held
discussions with the senior management of Centra regarding the risks and
uncertainties of achieving the internal financial forecasts for Centra prepared
by its management. Goldman Sachs also:
. reviewed the reported price and trading activity for shares of common
stock of Centra and the SmartForce ADSs;
. compared certain financial and stock market information for Centra and
SmartForce with similar information for certain other companies the
securities of which are publicly traded; and
. reviewed the financial terms of certain recent business combinations in
the e-Learning industry specifically and in other industries generally and
performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial, accounting and other information discussed with or reviewed by it
and assumed such accuracy and completeness for purposes of rendering its
opinion. In that regard, Goldman Sachs has assumed with the consent of the
board of directors of Centra that the financial forecasts prepared by the
management of SmartForce have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of SmartForce and that the
synergies have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of Centra and SmartForce. In
addition, Goldman Sachs did not make an independent evaluation or appraisal of
the assets and liabilities of Centra or SmartForce or any of their subsidiaries
and no such evaluation or appraisal was furnished to Goldman Sachs.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its written opinion to Centra's
board of directors. This summary does not purport to be a complete description
of the analyses performed by Goldman Sachs. In arriving at its opinion, Goldman
Sachs considered the results of all of its analyses as a whole and did not
attribute any particular weight to any analysis or factor considered by it.
The following summaries of financial analyses include information presented
in tabular format. You should read these tables together with the text of each
summary.
(i) Historical Stock Trading Analysis. Using the most recent publicly
available information at the time of preparation, Goldman Sachs reviewed the
historical daily closing prices and trading volumes for shares of Centra common
stock for the one-month period from December 17, 2001 to January 15, 2002, for
the three-month period from October 15, 2001 to January 15, 2002, for the
period following the Centra earnings announcement on October 12, 2001 to
January 15, 2002 and for the six-month period from July 16, 2001 to January 15,
2002. The results of these analyses are set forth below:
Weighted
Time Period* Average Price
------------ -------------
One Month.................................................. $8.18
Three Months............................................... $6.58
Post Earnings.............................................. $6.64
Six Months................................................. $9.02
--------
* Based upon periods ending January 15, 2002.
(ii) Exchange Ratio History Analysis. Goldman Sachs also reviewed the
relationship between the daily closing prices of shares of Centra common stock
and SmartForce ADSs on January 15, 2001 and for selected periods ending January
15, 2002 and the implied historical exchange ratios determined by dividing the
price per share of Centra common stock by the price per SmartForce ADS on
January 15, 2002 and the average price per share of Centra common stock by the
average price per SmartForce ADS over these periods. The following table
58
compares the exchange ratio pursuant to the merger agreement with the
historical average exchange ratios set forth below:
Period Exchange Ratio
------ --------------
Proposed Transaction....................................... 0.425x
January 15, 2002........................................... 0.366x
One-Week Average........................................... 0.331x
One-Month Average.......................................... 0.329x
Three-Month Average........................................ 0.330x
Post Earnings Announcement Average(1)...................... 0.331x
Six-Month Average.......................................... 0.378x
--------
(1) October 12, 2001
(iii) Future Stock Price Analysis. Using the Centra common stock closing
share price of $8.85 on January 15, 2002, ranges for the estimated earnings per
share, or EPS, of Centra for calendar years 2002 and 2003 of $0.08 to $0.14 and
$0.14 to $0.64, respectively, and Institutional Brokers Estimate System, or
IBES, 5 year estimated EPS growth rate of 50% for Centra, Goldman Sachs
calculated the future value of shares of Centra common stock using price to
earnings, or P/E, multiples ranging from 40.0x to 70.0x, and P/E to growth, or
PEG, multiples of 0.8x to 1.4x, for calendar years 2002 and 2003. The result of
these analyses for calendar year 2002 was $3.20 to $9.80 and for calendar year
2003 was $5.50 to $44.77.
Using the closing share prices for SmartForce ADSs and shares of Centra
common stock of $24.20 and $8.85, respectively, on January 15, 2002, ranges for
the estimated EPS of the combined company for calendar year 2003 of $1.15 to
$1.40 and $1.03 to $1.25, respectively, corresponding to the lower and upper
end of an estimated range for migration of Centra's license revenue to a
subscription based model of 0% and 0% migration in calendar years 2002 and
2003, respectively, and 25% and 50% migration in calendar years 2002 and 2003,
respectively, IBES 5 year estimated EPS growth rate of 30% for SmartForce and
the synergies projected by the management of SmartForce to result from the
merger, Goldman Sachs calculated ranges of the implied future price per Centra
share based on the exchange ratio pursuant to the merger agreement and the
implied future pro forma share price of the combined company using pro forma
price to earnings multiples ranging from 24.0x to 42.0x, and P/E to growth
multiples of 0.8x to 1.4x, for calendar year 2003. These analyses resulted in
an implied future price per Centra share of $11.03 to $25.25 and an implied
future pro forma share price of the combined company of $24.63 to $58.85.
(iv) Selected e-Learning Companies Common Stock Comparison. Goldman Sachs
reviewed and compared selected financial information and multiples for Centra
to corresponding financial information and multiples for the companies in the
following sectors:
Content/Content Learning Management Broad Software
Collaborative Learning Management Systems Systems Companies
---------------------- --------------------- ------------------- ----------------------
Centra DigitalThink, Inc. Docent International Business
Machines Corporation
Raindance Communications, Inc. SkillSoft Corporation Saba Software Inc. Microsoft Corporation
WebEx Communications SmartForce Siebel Systems, Inc.
Goldman Sachs calculated the multiples and other financial information for
Centra at the closing price for shares of Centra common stock on January 15,
2002. The multiples and other financial information for the selected companies
calculated by Goldman Sachs were based on the closing prices on January 15,
2002 for shares of the selected companies' common stock. The earnings per share
and revenue estimates for Centra and SmartForce calculated by Goldman Sachs
were based on respective management estimates. All earnings per share and
revenue estimates for the other selected companies were based on IBES estimates
and Wall Street
59
research, respectively. Goldman Sachs' analysis of the selected companies
compared the following to the results for Centra:
. share price as a percentage of the 52-week high share price;
. equity market capitalization, based on diluted shares outstanding;
. levered market capitalization;
. levered market capitalization as a multiple of revenues for 2001 and 2002;
. share price as a multiple of estimated earnings per share for 2002 and
2003;
. IBES 5 year estimated EPS growth rate; and
. 2002 and 2003 price to earnings as a multiple of growth.
The results of these analyses with respect to Centra, are summarized as
follows:
Share price as a percentage of 52-week high share price........... 52.1%
Equity market capitalization (in millions)........................ $ 241
Levered market capitalization (in millions)....................... $ 198
Levered market capitalization as a multiple of revenue for 2001... 5.0x
Levered market capitalization as a multiple of revenue for 2002... 3.4x
Share price as a multiple of earnings per share for 2002.......... 81.5x
Share price as a multiple of earnings per share for 2003.......... 15.2x
IBES 5 year estimated EPS growth rate............................. 50.0%
2002 price to earnings as a multiple of growth.................... 1.6x
2003 price to earnings as a multiple of growth.................... 0.3x
The results of the analysis with respect to the companies in the selected
industry sectors is as follows:
Collaborative Learning Mean Median
---------------------- ----- ------
Share price as a percentage of 52-week high share price.... 70.3% 72.9%
Equity market capitalization (in millions)................. NA NA
Levered market capitalization (in millions)................ NA NA
Levered market capitalization as a multiple of revenue for
2001..................................................... 8.6x 7.0x
Levered market capitalization as a multiple of revenue for
2002..................................................... 5.5x 5.7x
Share price as a multiple of earnings per share for 2002... 94.9x 94.9x
Share price as a multiple of earnings per share for 2003... 39.8x 50.2x
IBES 5 year estimated EPS growth rate...................... 43.3% 40.0%
2002 price to earnings as a multiple of growth............. 2.2x 2.2x
2003 price to earnings as a multiple of growth............. 1.0x 1.3x
Content/Content Management Systems Mean Median
---------------------------------- ----- ------
Share price as a percentage of 52-week high share price.... 61.8% 55.6%
Equity market capitalization (in millions)................. NA NA
Levered market capitalization (in millions)................ NA NA
Levered market capitalization as a multiple of revenue for
2001..................................................... 7.0x 5.4x
Levered market capitalization as a multiple of revenue for
2002..................................................... 5.2x 4.5x
Share price as a multiple of earnings per share for 2002... 58.0x 58.7x
Share price as a multiple of earnings per share for 2003... 32.2x 34.9x
IBES 5 year estimated EPS growth rate...................... 36.7% 40.0%
2002 price to earnings as a multiple of growth............. 1.6x 1.5x
2003 price to earnings as a multiple of growth............. 0.9x 0.9x
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Learning Management Systems Mean Median
--------------------------- ------ ------
Share price as a percentage of 52-week high share price.... 28.9% 28.9%
Equity market capitalization (in millions)................. NA NA
Levered market capitalization (in millions)................ NA NA
Levered market capitalization as a multiple of revenue for
2001..................................................... 3.2x 3.2x
Levered market capitalization as a multiple of revenue for
2002..................................................... 2.9x 2.9x
Share price as a multiple of earnings per share for 2002... 203.0x 203.0x
Share price as a multiple of earnings per share for 2003... 36.9x 36.9x
IBES 5 year estimated EPS growth rate...................... 37.5% 37.5%
2002 price to earnings as a multiple of growth............. 8.1x 8.1x
2003 price to earnings as a multiple of growth............. 1.5x 1.5x
Broad Software Companies Mean Median
------------------------ ------ ------
Share price as a percentage of 52-week high share price.... 77.1% 94.4%
Equity market capitalization (in millions)................. NA NA
Levered market capitalization (in millions)................ NA NA
Levered market capitalization as a multiple of revenue for
2001..................................................... 8.4x 8.8x
Levered market capitalization as a multiple of revenue for
2002..................................................... 7.9x 9.3x
Share price as a multiple of earnings per share for 2002... 43.6x 36.4x
Share price as a multiple of earnings per share for 2003... 35.7x 31.4x
IBES 5 year estimated EPS growth rate...................... 19.0% 15.0%
2002 price to earnings as a multiple of growth............. 2.3x 2.3x
2003 price to earnings as a multiple of growth............. 1.9x 1.8x
(v) Contribution Analysis. Goldman Sachs reviewed selected historical and
estimated future operating and financial information including, among other
things, revenues, operating income and net income for the 2002 and 2003
calendar years for Centra, SmartForce and the pro forma combined company based
on the financial forecasts prepared by each company's management and based on
an estimated range for migration of Centra's license revenue to a subscription
based model of 0% and 0% migration in calendar years 2002 and 2003,
respectively, and 100% and 100% migration in calendar years 2002 and 2003,
respectively. Goldman Sachs analyzed the relative contributions of each of
Centra and SmartForce for each of the aforementioned metrics to the combined
company on a pro forma basis before taking into account any of the expected
synergies believed by the managements of Centra and SmartForce to be achievable
following the consummation of the merger. These analyses resulted in a range of
Centra contributions to the combined company's revenues of 9.7% to 15.3% (and
corresponding implied exchange ratio of 0.294 to 0.429) for calendar year 2002
and of 15.5% to 17.5% (and corresponding implied exchange ratio of 0.433 to
0.486) for calendar year 2003, operating income of not meaningful to 4.1% (and
corresponding implied exchange ratio of not meaningful to 0.164) for calendar
year 2002, net income of not meaningful to 7.1% (and corresponding implied
exchange ratio of not meaningful to 0.183) for calendar year 2002 and of 8.4%
to 19.9% (and corresponding implied exchange ratio of .221 to .536) for
calendar year 2003. Finally, the analysis resulted in a contribution by Centra
to the combined company, on the basis of diluted equity market capitalization,
of 14.1% (and corresponding implied exchange ratio of 0.366).
(vi) Give/Get Analysis. Goldman Sachs reviewed selected historical and
estimated future operating and financial information including, among other
things, revenues, operating income and net income for the 2002 and 2003
calendar years for Centra, SmartForce and the pro forma combined company based
on the financial forecasts prepared by each company's management and based on
an estimated range for migration of Centra's license revenue to a subscription
based model of 0% and 0% migration in calendar years 2002 and 2003,
respectively, and 100% and 100% migration in calendar years 2002 and 2003,
respectively. Goldman Sachs analyzed the relative contributions of each of
Centra and SmartForce for each of the aforementioned metrics to the combined
company on a pro forma basis, taking into account the after tax synergies for
calendar years 2002 and 2003, respectively, projected by the management of
SmartForce to result from the merger following the consummation of the merger.
These analyses resulted in a range of net changes attributable to Centra of the
combined company's revenues of $3.5 million to $23.1 million for calendar year
2002 and $(5.2) million to $4.6 million for calendar year 2003,
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operating income of $6.3 million to $23.7 million for calendar year 2002 and
net income of $4.8 million to $22.2 million for calendar year 2002 and $(0.4)
million to $8.3 million for calendar year 2003.
(vii) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses
of the financial impact of the merger using earnings per share forecasts for
Centra and SmartForce prepared by their respective managements (a) excluding
synergies projected by the managements of Centra and SmartForce to result from
the merger for calendar years 2002 and 2003 and (b) including after-tax
synergies projected by the management of SmartForce to result from the merger
for calendar years 2002 and 2003, and based on an estimated range for migration
of Centra's license revenue to a subscription based model of 0% and 0%
migration in calendar years 2002 and 2003, respectively, and 25% and 50%
migration in calendar years 2002 and 2003, respectively. For each of the years
2002 and 2003, Goldman Sachs compared the earnings per share of SmartForce
ADSs, on a standalone basis, to the earnings per share of SmartForce ADSs on a
pro forma basis assuming completion of the transaction. These analyses resulted
in a range of accretion/(dilution) to SmartForce's EPS for calendar year 2002
of (6.5)% to (18.0)% excluding synergies and 7.2% to (4.3)% including synergies
and for calendar year 2003 of 5.9% to (7.4)% excluding synergies and 27.4% to
14.0% including synergies.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses and did not attribute
any particular weight to any factor or analysis considered by it. Rather,
Goldman Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the results of all of
its analyses. No company or transaction used in the above analyses as a
comparison is directly comparable to Centra, SmartForce or the contemplated
transaction.
The analyses were prepared solely for the purpose of Goldman Sachs providing
its opinion to the Centra board of directors as to the fairness from a
financial point of view to the holders of Centra common stock of the exchange
ratio of 0.425 SmartForce ADSs, each of which represents and is exchangeable
for one ordinary share of SmartForce, to be received for each share of Centra
common stock pursuant to the merger agreement. These analyses do not purport to
be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Centra, SmartForce, Goldman Sachs or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the board of directors of
Centra was one of many factors taken into consideration by the Centra board of
directors in making its determination to approve the merger agreement. The
foregoing summary does not purport to be a complete description of the analyses
performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in performing financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities and private placements and for estate, corporate and other
purposes. Goldman Sachs is familiar with Centra having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman Sachs may also provide
investment banking services to SmartForce in the future. Centra selected
Goldman Sachs as its financial advisor because it is an internationally
recognized investment banking firm that has substantial experience in
transactions similar to the merger.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Centra and SmartForce for its own account and for the account of customers.
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Pursuant to a letter agreement, dated September 7, 2001, Centra engaged
Goldman Sachs to act as its financial advisor in connection with the
contemplated transaction. Pursuant to the terms of this engagement letter,
Centra has agreed to pay Goldman Sachs a customary fee, a portion of which
became payable to Goldman Sachs upon the execution of the merger agreement,
with the balance payable upon consummation of the merger. Centra has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the federal securities laws.
Interests of Certain Persons in the Merger
When considering the recommendations of Centra's board of directors, you
should be aware that the directors and officers of Centra have interests in the
merger and have arrangements that are different from, or are in addition to,
those of Centra stockholders generally. These include:
. Executive Officers and Directors. Leon Navickas will be appointed as the
Chief Technology Officer and a member of SmartForce's board of directors
following the effectiveness of the merger.
. Employment. In connection with the merger, Leon Navickas, Steve Lesser
and Joe Gruttadauria have entered into employment agreements, whereby each
has been provided with certain incentives to remain employed by SmartForce
following the effectiveness of the merger. Further, Tony Mark and Steve
Johnson have entered into separation agreements with Centra which
agreements provide for each of their resignations upon the effectiveness
of the closing, the payment of severance and the extension of certain
benefits subsequent to their resignations. These separation agreements
supersede previously existing agreements providing for, among other
things, the partial acceleration of stock options and the partial
termination of Centra's rights to repurchase certain unvested stock upon a
change in control. See "Agreement Related to the Merger--Employment
Agreements" beginning on page 77 for a description of these agreements.
. Stock Options. As of March 18, 2002, officers and directors of Centra
owned options to purchase 2,366,000 shares of Centra common stock, of
which 1,530,096 are unvested.
. Indemnification. Centra directors and executive officers have customary
rights to indemnification against losses incurred as a result of actions
or omissions occurring prior to the effective time of the merger. In
addition, the merger agreement provides that for a period of six years
after the effective time, SmartForce will maintain directors' and
officers' liability insurance covering persons who are covered by Centra's
directors' and officers' insurance policy.
As a result, these directors, executive officers and stockholders could be
more likely to vote in favor of recommending the merger agreement and the
merger than if they did not have these interests.
Completion and Effectiveness of the Merger
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including adoption of the merger agreement and
approval of the merger by the shareholders of SmartForce and Centra and
approval of the issuance of SmartForce ordinary shares, represented by ADSs, in
the merger. The merger will become effective upon the filing of the certificate
of merger with the Secretary of State of the State of Delaware.
Exchange of Centra Stock Certificates for SmartForce ADRs
When the merger is completed, SmartForce's exchange agent will mail to
Centra stockholders a letter of transmittal and instructions for use in
surrendering Centra stock certificates in exchange for SmartForce ADSs. When
former Centra stockholders deliver their Centra stock certificates to the
exchange agent along with an executed letter of transmittal and any other
required documents, the Centra stock certificates will be canceled, and former
Centra stockholders will receive SmartForce ADRs representing the number of
full SmartForce ADSs
63
to which they are entitled under the merger agreement. They will receive
payment in cash, without interest, in lieu of any fractional SmartForce ADSs
which would have been otherwise issuable to them in the merger.
Centra stockholders should not submit their Centra stock certificates for
exchange until they receive the transmittal instructions and a form of letter
of transmittal from the exchange agent.
No Dividends
Centra stockholders are not entitled to receive any dividends or other
distributions on SmartForce ADSs until the merger is completed and they have
surrendered their Centra stock certificates in exchange for SmartForce ADSs.
Subject to the effect of applicable laws, promptly following surrender of
Centra stock certificates and the issuance of the corresponding SmartForce
ADSs, Centra stockholders will be paid the amount, if any, of dividends or
other distributions, without interest, paid to ADS holders with record dates
after the completion of the merger but before such stockholders surrendered
their Centra stock certificates.
SmartForce will only issue Centra stockholders SmartForce ADSs or checks in
lieu of fractional shares in the name in which their surrendered Centra stock
certificates are registered. If Centra stockholders wish to have their
certificates issued in another name they must present the exchange agent with
all documents required to show and effect the unrecorded transfer of ownership
and show that they paid any applicable stock transfer taxes.
Material United States Federal Tax Consequences
For a summary description of the material United States federal tax
consequences of the merger, see "Tax Matters--Material United States Federal
Tax Consequences" on page 81.
Accounting Treatment for the Merger
In accordance with United States generally accepted accounting principles,
SmartForce will account for the merger using the purchase method of accounting.
Under the purchase method of accounting, SmartForce will record the market
value of its ADSs issued in connection with the merger, the fair value of the
options to purchase shares of Centra common stock that become options to
purchase SmartForce ordinary shares, represented by ADSs, and the amount of
direct transaction costs as the cost of acquiring the business of Centra.
SmartForce will allocate that cost to the individual assets acquired and
liabilities assumed, including various identifiable intangible assets (such as
acquired technology and acquired trademarks and trade names) and to in-process
research and development, based on their respective fair values at the date of
the completion of the merger. Any excess of the purchase price over those fair
values will be accounted for as goodwill.
Intangible assets with finite useful lives will generally be amortized over
a specified period, resulting in an estimated accounting charge attributable to
these items. In-process research and development will be expensed during the
fiscal quarter in which the merger is completed. In accordance with the
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," intangible assets with indefinite useful lives, including
goodwill resulting from a business combination completed subsequent to June 30,
2001, will not be amortized but instead will be tested for impairment at least
annually. The results of operations and cash flows of Centra will be included
in SmartForce's financial statements prospectively as of the completion of the
merger.
Regulatory Filings and Approvals Required to Complete the Merger
This merger is subject to review by the U.S. Department of Justice and the
U.S. Federal Trade Commission to determine whether it is in compliance with
applicable antitrust laws. Under the provisions of the Hart-Scott- Rodino
Antitrust Improvements Act of 1976, as amended, the merger may not be
consummated until the specified waiting period requirements of that Act have
been satisfied. SmartForce and Centra filed notification
64
reports, together with requests for early termination of the waiting period,
with the U.S. Department of Justice and the U.S. Federal Trade Commission under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, on
February 13, 2002. On February 26, 2002, the U.S. Federal Trade Commission
notified SmartForce and Centra that it was terminating early the specified
waiting period requirements. At any time before or after the merger, and
notwithstanding that the waiting period has terminated or that the merger may
have been consummated, the U.S. Federal Trade Commission, the U.S. Department
of Justice or any state could take any action under the applicable antitrust or
competition laws as it deems necessary or desirable. This action could include
seeking to enjoin the completion of the merger. Private parties may also
institute legal actions under the antitrust laws under some circumstances.
This merger is also subject to review of the Minister for Enterprise, Trade
and Employment of Ireland under the Mergers and Take-Overs (Control) Acts, 1978
to 1996. The merger may not be consummated until the Minister has approved the
merger or the specified waiting period requirements of that Act have been
satisfied. On February 19, 2002, the Minister's office notified SmartForce and
Centra that the Minister had decided not to make an order prohibiting the
merger.
In addition, the completion of this merger is subject to the effectiveness
of the registration statement of which this joint proxy statement/prospectus is
a part and compliance with applicable corporate laws of the State of Delaware.
Certain Securities Laws Considerations
The issuance of the SmartForce ADSs to be issued in the merger will be
registered under the Securities Act of 1933, as amended. These shares will be
freely transferable under the Securities Act, except for SmartForce ADSs issued
to any person who is deemed to be an affiliate of Centra or SmartForce. Persons
who may be deemed to be affiliates include individuals or entities that
control, are controlled by, or are under common control with Centra or
SmartForce and may include some of Centra's or SmartForce's officers and
directors, as well as its principal stockholders. Neither Centra's nor
SmartForce's affiliates may sell their SmartForce ADSs acquired in the merger
except pursuant to:
. an effective registration statement under the Securities Act covering the
resale of those shares;
. an exemption under paragraph (d) of Rule 145 under the Securities Act; or
. any other applicable exemption under the Securities Act.
No Appraisal or Dissenters' Rights
Under Delaware corporate law, holders of Centra common stock are not
entitled to appraisal or dissenters' rights in connection with the merger
because, on the record date, Centra common stock was designated and quoted for
trading on the Nasdaq National Market and will be converted into SmartForce
ADSs, which at the effective time of the merger will be listed on the Nasdaq
National Market.
Under Irish law, holders of SmartForce ordinary shares are not entitled to
appraisal or dissenters' rights in connection with the merger.
Listing on the Nasdaq National Market of SmartForce ADSs to be Issued in the
Merger
SmartForce has agreed to cause the SmartForce ADSs to be issued and to be
reserved for issuance in connection with the merger to be approved for listing
on the Nasdaq National Market, subject to official notice of issuance.
Delisting and Deregistration of Centra Common Stock after the Merger
If the merger is completed, Centra's common stock will be delisted from the
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934, as amended.
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THE MERGER AGREEMENT
This section of the joint proxy statement/prospectus describes the merger
agreement, which we hereby incorporate by reference into this joint proxy
statement/prospectus. While SmartForce and Centra believe that the description
covers the material terms of the merger agreement, this summary may not contain
all of the information that is important to you. The merger agreement is
attached to this joint proxy statement/prospectus as Annex A, and SmartForce
and Centra urge you to read it carefully.
General
Following the adoption of the merger agreement by Centra stockholders, and
the approval of the merger, the merger agreement and the issuance of SmartForce
ordinary shares, represented by ADSs, in the merger, by SmartForce shareholders
and the satisfaction or waiver of the other conditions to the merger, Atlantic
Acquisition Corp., a wholly-owned subsidiary of SmartForce, will merge with and
into Centra. Centra will survive the merger as a wholly-owned subsidiary of
SmartForce. If all of the conditions to the merger are satisfied or waived, the
merger will become effective at the time of the filing of a certificate of
merger with the Secretary of State of the State of Delaware.
The Exchange Ratio and Treatment of Centra Common Stock
At the effective time of the merger, each issued and outstanding share of
Centra common stock will be converted into the right to receive 0.425
SmartForce ADSs. However, any shares owned by Centra, SmartForce or any of
their direct or indirect wholly-owned subsidiaries will be cancelled without
conversion. SmartForce will adjust the exchange ratio to reflect any
reclassification, stock split, stock dividend, reorganization or other similar
change with respect to SmartForce ADSs or ordinary shares or Centra common
stock occurring before the effective time of the merger.
Based on the exchange ratio of 0.425, and based on the number of shares of
Centra common stock and options to purchase Centra common stock outstanding as
of March 18, 2002, a total of approximately 11.1 million SmartForce ADSs and
options to purchase approximately 2.2 million SmartForce ordinary shares,
represented by ADSs, will be issued or granted in the merger.
Treatment of Restricted Stock of Centra
Any shares of Centra capital stock outstanding at the effective time of the
merger which are subject to a repurchase option, risk of forfeiture or other
condition under any restricted stock purchase agreement or other arrangements
will be converted into SmartForce ADSs based on the exchange ratio and will
remain subject to the same terms, restrictions and vesting schedules as were
applicable prior to the effective time of the merger. SmartForce will assume
any rights Centra held prior to the effective time of the merger to repurchase
these unvested shares. However, the ability of SmartForce to exercise these
rights shall be dependent upon whether the SmartForce shareholders approve the
proposal regarding the terms of contracts under which SmartForce may become
entitled to repurchase rights with respect to SmartForce ordinary shares,
represented by ADSs, issued in exchange for unvested Centra shares.
Treatment of Centra Stock Options
At the effective time of the merger, SmartForce will assume all outstanding
options, whether vested or unvested, to purchase shares of Centra common stock
and convert them into options to purchase SmartForce ordinary shares,
represented by ADSs, subject to the same terms and conditions as were
applicable prior to the effective time of the merger, including, without
limitation, any repurchase rights or vesting provisions. The number of
SmartForce ordinary shares issuable upon the exercise of these stock options
will be adjusted based on the exchange ratio. Any fractional SmartForce shares
resulting from such adjustment will be rounded down to the
66
nearest whole number. The exercise price per SmartForce share issuable under
each Centra option will equal the exercise price per share of the Centra common
stock purchasable under the Centra option divided by the exchange ratio. The
exercise price will be rounded up to the nearest whole cent.
SmartForce will reserve for issuance a sufficient number of its ordinary
shares and ADSs for delivery upon each optionholder's exercise of his or her
option. SmartForce will file promptly after the completion of the merger a
registration statement on Form S-8 for the ordinary shares underlying the
SmartForce ADSs issuable with respect to assumed Centra stock options.
Exchange of Certificates
Exchange Agent; Exchange Procedures; No Further Ownership Rights. After the
effective time of the merger, SmartForce's exchange agent will mail to each
record holder of Centra common stock a letter of transmittal and instructions
for surrendering their certificates. Only those holders who properly surrender
their certificates in accordance with the instructions will receive ADRs
representing SmartForce ADSs, cash in lieu of any fractional SmartForce ADSs
and any dividends or distributions to which they are entitled. The surrendered
certificates representing shares of Centra common stock will be cancelled.
After the effective time of the merger, each certificate representing shares of
Centra common stock that have not been surrendered will only represent (1) the
number of whole SmartForce ADSs into which such shares have been converted, (2)
the right to receive cash in lieu of any fractional SmartForce ADS and (3) any
dividends or distributions that may be applicable. Following the effective time
of the merger, Centra will not register any transfers of Centra common stock on
its stock transfer books.
No Fractional Shares. SmartForce will not issue any fractional ADSs in the
merger. Instead, each holder of shares of Centra common stock exchanged in the
merger who would otherwise be entitled to receive a fraction of a SmartForce
ADS will receive cash, without interest, equal to such fraction multiplied by
the average closing price per SmartForce ADS on the Nasdaq National Market for
the ten trading days immediately preceding the last full trading day prior to
the effective time of the merger.
Distributions with Respect to Unexchanged Shares. After the effective date
of the merger, no dividends or other distributions declared or made after the
closing of the merger with respect to SmartForce ADSs will be paid to the
holder of any unsurrendered Centra certificate until the holder surrenders its
Centra certificate in accordance with the letter of transmittal.
Lost Certificates. If any Centra common stock certificate is lost, stolen
or destroyed, a Centra stockholder must provide an appropriate affidavit
certifying that fact. SmartForce may require a Centra stockholder to deliver a
bond as indemnity against any claim that may be made against SmartForce with
respect to any lost, stolen or destroyed certificate.
Holders of Centra common stock should not send in their certificates until
they receive a letter of transmittal from the exchange agent.
Representations and Warranties
SmartForce and Centra each made a number of representations and warranties
in the merger agreement regarding aspects of their respective businesses,
financial condition, structure and other facts pertinent to the merger.
Each of the companies made representations and warranties as to:
. corporate organization and qualification to do business;
. certificate of incorporation and bylaws or memorandum and articles of
association (as applicable);
67
. capitalization;
. authorization of the merger agreement by the respective companies;
. the effect of the merger on obligations of the respective companies under
applicable laws and third party obligations;
. regulatory approvals required to complete the merger;
. compliance with applicable laws;
. permits required to conduct business and compliance with those permits;
. filings and reports with the Securities and Exchange Commission;
. financial statements;
. liabilities;
. changes in the respective companies' business since September 30, 2001;
. litigation;
. employee benefit plans;
. information supplied by the respective companies in this joint proxy
statement/prospectus and the related registration statement filed by
SmartForce;
. taxes;
. payments, if any, required to be made to brokers and agents on account of
the merger;
. intellectual property;
. the fairness opinion received by each company;
. approval by the board of directors; and
. the vote of shareholders or stockholders (as applicable) required to
approve the merger or the share issuance (as applicable).
In addition, Centra made representations and warranties as to:
. labor relations;
. restrictions on the conduct of business;
. properties it owns and leases;
. applicable environmental laws;
. agreements, contracts and commitments;
. insurance; and
. the inapplicability of state takeover statutes to the merger.
In addition, SmartForce made representations and warranties as to:
. SmartForce ADSs to be issued in the merger.
All representations and warranties of Centra and SmartForce expire at the
effective time of the merger.
The representations and warranties contained in the merger agreement are
complicated and not easily summarized. You are urged to carefully read the
articles of the merger agreement entitled "--Representations
68
and Warranties of Company," relating to Centra and "Representations and
Warranties of Parent and Merger Sub," relating to SmartForce and Atlantic
Acquisition Corp.
Conduct of Business Before Completion of the Merger
Centra agreed that, until the earlier of the completion of the merger or
termination of the merger agreement or unless SmartForce consents in writing,
Centra will use its commercially reasonable efforts consistent with past
practices and policies to:
. preserve intact its present business organization;
. keep available the services of its present officers and employees; and
. preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings.
Centra also agreed that, until the earlier of the completion of the merger
or termination of the merger agreement or unless SmartForce consents in
writing, Centra will conduct its business in compliance with certain specific
restrictions relating to the following:
. restricted stock and stock options;
. employees and employee benefits, including severance and termination
payments;
. the transfer or license of intellectual property rights;
. the issuance of dividends or other distributions;
. the issuance, encumbrance and redemption of securities;
. amendment to its certificate of incorporation and bylaws;
. the acquisition of assets or other entities;
. the sale, lease, license and disposition of assets;
. the incurrence of indebtedness;
. the adoption, amendment or increase of employee benefit plans, policies or
arrangements;
. payment or settlement of liabilities;
. make payments outside of the ordinary course of business in excess of
$150,000;
. modification, amendment or termination of material contracts;
. the material modification of distribution, sales, licensing or marketing
contracts with third parties;
. revaluation of assets or changing of accounting policies and procedures;
. entering into agreements outside of the ordinary course of business in
excess of $150,000;
. actions which could be expected to impact treatment of the merger as a
"reorganization" under the Internal Revenue Code; and
. making of tax elections.
SmartForce agreed that, until the earlier of the completion of the merger or
termination of the merger agreement or unless Centra consents in writing,
SmartForce will continue to engage primarily in the business of providing
e-Learning solutions and will conduct its business in compliance with certain
specific restrictions relating to the following:
. the issuance of dividends or other distributions;
69
. repurchases of shares of capital stock;
. amendment to its memorandum and articles of association;
. revaluation of assets or changing of accounting policies and procedures;
and
. actions which could be expected to impact treatment of the merger as a
"reorganization" under the Internal Revenue Code.
The agreements related to the conduct of Centra's and SmartForce's
businesses in the merger agreement are complicated and not easily summarized.
You are urged to carefully read the sections of the merger agreement entitled
"Conduct of Business by Company," relating to Centra and "Conduct of Business
by Parent," relating to SmartForce.
No Solicitation by Centra
Centra further agreed to cease, as of the date of the merger agreement, any
and all existing activities, discussions or negotiations with any parties
conducted prior to that date with respect to any Acquisition Proposal. An
"Acquisition Proposal" is any offer or proposal relating to any Acquisition
Transaction, other than an offer or proposal by SmartForce.
Until the merger is completed or the merger agreement is terminated, Centra
and its subsidiaries agreed not to, nor will they authorize or permit any of
their officers, directors, affiliates or employees or any investment banker,
attorney or other adviser or representative to directly or indirectly take any
of the following actions:
. solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal;
. participate in any discussions or negotiations with a third party
regarding, or furnish to any person any information with respect to any
Acquisition Proposal;
. take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
Acquisition Proposal;
. engage in discussions with any person with respect to any Acquisition
Proposal;
. approve, endorse or recommend any Acquisition Proposal; or
. enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction.
An "Acquisition Transaction" is any transaction or series of related
transactions, other than the SmartForce/Centra merger, involving any of the
following:
. the acquisition or purchase from Centra of more than a 15% interest in the
total outstanding voting securities of Centra or any of its subsidiaries;
. any tender offer or exchange offer that if consummated would result in any
person or group beneficially owning 15% or more of the total outstanding
voting securities of Centra or any of its subsidiaries;
. any merger, consolidation, business combination or similar transaction
involving Centra pursuant to which the stockholders of Centra immediately
preceding such transaction hold less than 85% of the equity interests in
the surviving or resulting entity;
. any sale, lease (outside the ordinary course of business), exchange,
transfer, license (outside the ordinary course of business), acquisition
or disposition of more than 15% of the assets of Centra; or
. any liquidation, dissolution, recapitalization or other significant
reorganization of Centra.
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Centra's board of directors may, without breaching the merger agreement,
respond to a Superior Offer by discussing the proposal with the party making
the proposal, furnishing information to the party making the proposal,
recommending a Superior Offer, as defined below, to Centra's stockholders or
withdrawing its recommendation of the merger agreement with SmartForce, if all
of the following conditions are met:
. Centra's board determines in good faith, after considering the advice of
its outside legal counsel, that its fiduciary obligations require it to do
so;
. Centra gives prior written notice to SmartForce of discussions or
negotiations with, or furnishing of information to, the party making the
proposal;
. Centra receives from the party making the proposal an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all non public written and oral information furnished to
such party by or on behalf of the Company;
. when furnishing nonpublic information to the party making the proposal,
Centra contemporaneously furnishes the same information to SmartForce, to
the extent it has not already been received by SmartForce; and
. Centra otherwise fully complies with its obligations with respect to
non-solicitation under the merger agreement.
A "Superior Offer" is an unsolicited, bona fide, written Acquisition
Proposal proposing the acquisition of all of the outstanding voting securities
of Centra (i) that if any cash consideration is involved, is not subject to any
financing contingency, and (ii) that Centra's board of directors determines in
good faith (after considering the advice of Centra's independent financial
advisors) (a) the acquiring party is reasonably capable of consummating on the
terms proposed, and (b) provides greater value to the stockholders of Centra
than the merger with SmartForce.
Centra has agreed to as promptly as practicable, and in any event within 24
hours, inform SmartForce of any request for information that Centra reasonably
believes would lead to an Acquisition Proposal, or of any Acquisition Proposal,
or any inquiry with respect to or which Centra reasonably should believe would
lead to any Acquisition Proposal, the material terms and conditions of such
request, Acquisition Proposal or inquiry, and the identity of the person or
group making any such request, Acquisition Proposal or inquiry. Centra further
agreed to keep SmartForce informed in all material respects of the status and
details, including material amendments or proposed amendments, of any such
request, Acquisition Proposal or inquiry, and to provide SmartForce with
advance notice of any meeting of the Centra board of directors at which the
board of directors is reasonably expected to consider a Superior Offer or
recommend a Superior Offer to Centra's stockholders.
Centra Stockholders Meeting
Centra is obligated under the merger agreement to hold and convene the
Centra special meeting of stockholders for purposes of voting for adoption of
the merger agreement and approval of the merger. Subject to the ability of the
Centra board of directors to withdraw its recommendation as described in the
section entitled "No Solicitation by Centra" beginning on page 70, Centra's
board of directors will recommend that Centra's stockholders vote in favor of
adoption of the merger agreement and approval of the merger.
SmartForce Shareholders Meeting
SmartForce is obligated under the merger agreement to hold and convene a
SmartForce meeting of shareholders for purposes of voting on the issuance of
SmartForce ordinary shares, represented by ADSs, in the merger. SmartForce's
board of directors will recommend that SmartForce's shareholders vote in favor
of the issuance of SmartForce's ordinary shares, represented by ADSs, in
connection with the merger.
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Employee Benefits Matters
Each individual who continues to be employed by Centra after the merger is
completed who becomes a participant in or is subject to SmartForce's employee
benefit plans will, subject to certain qualifications, receive benefits that
are substantially similar in the aggregate to those provided to a similarly
situated employee of SmartForce.
Conditions to Completion of the Merger
The obligations of SmartForce and Centra to complete the merger and the
other transactions contemplated by the merger agreement are subject to the
satisfaction of each of the following conditions before completion of the
merger:
. the merger agreement must be adopted and the merger must be approved by
the requisite vote of holders of Centra stock;
. the issuance of SmartForce's ordinary shares, represented by ADSs, to
Centra's stockholders must be approved by the requisite vote of SmartForce
shareholders under applicable Nasdaq rules and applicable law;
. SmartForce's registration statement on Form S-4 must be effective, no stop
order suspending its effectiveness can be in effect and no proceedings for
suspension of its effectiveness can have been initiated or threatened by
the SEC;
. no law, regulation or order has been enacted or issued which has the
effect of making the merger illegal or otherwise prohibiting completion of
the merger;
. all applicable waiting periods under applicable antitrust laws must have
expired or been terminated and all antitrust approvals required to be
obtained shall have been obtained;
. SmartForce and Centra must each receive from their respective tax counsel
an opinion to the effect that the merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code; and
. the SmartForce's ADSs to be issued in the merger will have been authorized
for listing on the Nasdaq National Market.
Centra's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
. SmartForce's representations and warranties:
(i) that are qualified as to Material Adverse Effect must be true and
correct as of January 16, 2002 and as of immediately prior to the
completion of the merger, except for such representations and
warranties that refer to a specific date which must have been true
and correct as of that date;
(ii) related to SmartForce's capitalization, its authorization of the
merger agreement, the fairness opinion it received, its board's
approval of the merger and the vote required by its shareholders to
approve the share issuance must be true and correct in all material
respects as of January 16, 2002 and as of immediately prior to the
completion of the merger; and
(iii) that are not qualified as to Material Adverse Effect or referenced in
clause (ii) must be true and correct as of January 16, 2002 and as of
immediately prior to the completion of the merger, except for
representations and warranties that refer to a specific date, which
must have been true and correct as of that date, except that this
clause (iii) shall be deemed to be satisfied so long as any failures
of these representations and warranties to be true and correct, taken
together, have not had a Material Adverse Effect on SmartForce.
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For purposes of determining the accuracy of the representations and
warranties referred to in clauses (ii) and (iii) all qualifications based
on the word "material" or similar phrases contained in the representations
and warranties are disregarded.
. SmartForce must in all material respects perform or comply with all of its
agreements and covenants required by the merger agreement.
SmartForce's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
. Centra's representations and warranties:
(i) that are qualified as to Material Adverse Effect must be true and
correct as of January 16, 2002 and as of immediately prior to the
completion of the merger, except for representations and warranties
that refer to a specific date which must have been true and correct
as of that date;
(ii) related to Centra's capitalization, its authorization of the merger
agreement, the fairness opinion it received, its board's approval of
the merger, the vote required by its stockholders to approve the
share issuance and applicable state takeover statutes must be true
and correct in all material respects as of January 16, 2002 and as of
immediately prior to the completion of the merger; and
(iii) that are not qualified as to Material Adverse Effect or referenced in
clause (ii) must be true and correct as of January 16, 2002 and as of
immediately prior to the completion of the merger, except for
representations and warranties that refer to a specific date, which
must have been true and correct as of that date, except that this
clause (iii) shall be deemed to be satisfied so long as any failures
of these representations and warranties to be true and correct, taken
together, have not had a Material Adverse Effect on Centra.
For purposes of determining the accuracy of the representations and
warranties referred to in clauses (ii) and (iii) all qualifications based
on the word "material" or similar phrases contained in the representations
and warranties are disregarded.
. Centra must in all material respects perform or comply with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by Centra at or before completion of the merger.
. Irish antitrust or takeover approvals required to be obtained, if any,
shall have been obtained or all applicable waiting periods under Irish
antitrust or takeover laws must have expired.
Definition of Material Adverse Effect
Under the terms of the merger agreement, a Material Adverse Effect on either
SmartForce or Centra is defined to mean any fact, change, event, development,
violation, inaccuracy, circumstance or effect, individually or when taken
together with all other facts, changes, events, developments, violations,
inaccuracies, circumstances or effects that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, that is, or is
reasonably likely to be, materially adverse to the business, assets,
capitalization, financial condition or results of operations of such entity and
its subsidiaries taken as a whole.
However, under the terms of the merger agreement, none of the following,
alone or in combination, will be deemed to constitute, nor will any of the
following be taken into account in determining whether there has been or will
be a Material Adverse Effect on any entity:
1. any fact, change, event, development, violation, inaccuracy,
circumstance or effect that results from the announcement or pendency of the
merger;
2. any change in such entity's stock price or trading volume, in and of
itself;
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3. any fact, change, event, development, violation, inaccuracy,
circumstance or effect that results from changes affecting any of the
industries in which such entity operates generally or the United States
economy generally; or
4. any fact, change, event, development, violation, inaccuracy,
circumstance or effect that results from changes affecting general worldwide
economic or capital market conditions.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to completion of
the merger, whether before or after adoption of the merger agreement and
approval of the merger by Centra stockholders:
. by mutual consent of the board of directors of SmartForce and Centra;
. by SmartForce or Centra, if the merger is not completed before July 16,
2002, except that this right to terminate the merger agreement is not
available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the merger to occur on or before
July 16, 2002 and this action or failure to act constitutes a breach of
the merger agreement;
. by SmartForce or Centra, if there is any final and nonappealable action of
a court or governmental authority having jurisdiction over either
SmartForce or Centra permanently restraining, enjoining or prohibiting the
completion of the merger;
. by SmartForce or Centra, if the stockholders of Centra fail to adopt the
merger agreement and approve the merger at a Centra stockholders' meeting,
or if the shareholders of SmartForce fail to approve the share issuance at
a SmartForce shareholders' meeting, except that this right to terminate
the merger agreement is not available to any party whose action or failure
to act has been a principal cause of or resulted in the failure to obtain
the stockholder or shareholder approval and this action or failure to act
constitutes a breach of the merger agreement;
. by Centra, upon SmartForce's breach of any representation, warranty,
covenant or agreement in the merger agreement, or if any of SmartForce's
representations or warranties become untrue, in either case such that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by SmartForce, Centra may
not terminate the merger agreement for 30 days after it notifies
SmartForce of the breach so long as SmartForce exercises commercially
reasonable efforts to cure the breach;
. by SmartForce, upon Centra's breach of any representation, warranty,
covenant or agreement in the merger agreement, or if any of Centra's
representations or warranties become untrue, in either case such that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by Centra, SmartForce may
not terminate the merger agreement for 30 days after it notifies Centra of
the breach so long as Centra exercises commercially reasonable efforts to
cure the breach;
. by SmartForce if any of the following shall have occurred:
--Centra's board of directors withdraws, modifies or changes its
recommendation of the merger agreement or the merger in a manner adverse
to SmartForce or its shareholders;
--Centra breaches the stockholder meeting and proxy solicitation or the
non-solicitation sections of the merger agreement in any material
respect;
--Centra's board of directors recommends any Acquisition Proposal;
--an Acquisition Proposal is announced or becomes publicly known, and
Centra's board of directors fails to recommend against that proposal or
fails to reconfirm its approval and recommendation of the merger
agreement and the merger within ten business days; or
--the Centra board of directors resolves to take any of the foregoing
actions.
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Payment of Termination Fee by Centra
Centra will pay SmartForce a termination fee of $12.0 million if any of the
following conditions occur:
. SmartForce terminates the merger agreement because of any of the
following, which we refer to as "Trigger Events:"
--Centra's board of directors withdraws, modifies or changes its
recommendation of the merger agreement or the merger in a manner adverse
to SmartForce or its shareholders;
--Centra breaches the stockholder meeting and proxy solicitation or the
non-solicitation sections of the merger agreement in any material
respect;
--Centra's board of directors recommends any Acquisition Proposal;
--an Acquisition Proposal is announced or becomes publicly known, and
Centra's board of directors fails to recommend against that proposal or
fails to reconfirm its approval and recommendation of the merger
agreement and the merger, within ten business days; or
--the Centra board of directors resolves to take any of the foregoing
actions.
. SmartForce or Centra terminates the merger agreement because Centra's
stockholders fail to adopt the merger agreement and approve the merger at
a Centra stockholder meeting and, prior to or concurrent with the Centra
stockholder meeting or an adjournment of the meeting, a Trigger Event
shall have occurred.
. SmartForce or Centra terminates the merger agreement because Centra's
stockholders do not adopt the merger agreement and approve the merger and,
at or prior to that termination, there shall exist or have been proposed
an Acquisition Proposal which has been publicly announced and not
withdrawn prior to the termination of the merger agreement and, within six
months after the termination, Centra enters into an agreement with respect
to a Company Acquisition (as described below) (and that Company
Acquisition is consummated regardless of whether it is consummated within
the six-month period) or a Company Acquisition is consummated.
. SmartForce terminates the merger agreement because a representation,
warranty, covenant or agreement of Centra in the merger agreement is
breached or becomes untrue such that the corresponding condition to
completion of the merger would not be met and, at or prior to that
termination, there shall exist or have been proposed an Acquisition
Proposal which has not been withdrawn prior to the termination of the
merger agreement and, within six months after the termination, Centra
enters into an agreement with respect to a Company Acquisition (and that
Company Acquisition is consummated regardless of whether it is consummated
within the six-month period) or a Company Acquisition is consummated.
. SmartForce or Centra terminates the merger agreement because the merger is
not consummated by July 16, 2002 and, at or prior to that termination,
there shall exist or have been proposed an Acquisition Proposal which has
not been withdrawn prior to the termination of the merger agreement and,
within six months after the termination, Centra enters into an agreement
with respect to a Company Acquisition (and that Company Acquisition is
consummated regardless of whether it is consummated within the six-month
period) or a Company Acquisition is consummated; provided that a
termination fee will not be payable by Centra in this case if:
--as of July 16, 2002:
(1) the closing conditions related to the accuracy of SmartForce's
representations and warranties and its compliance with agreements and
covenants in the merger agreement shall have not been satisfied or
waived;
(2) the ADSs to be issued in the merger shall not have been authorized
for listing on Nasdaq;
(3) SmartForce's shareholders shall have voted against the share
issuance; or
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(4) SmartForce's legal counsel shall not have delivered to SmartForce a
tax opinion with respect to the merger and Centra's legal counsel
shall have delivered its corresponding opinion to Centra; or
--Centra shall have sustained the burden of proving, in a court of
competent jurisdiction, that any of the following resulted from the
material breach by SmartForce of its obligations under specified
sections of the merger agreement related to this joint proxy
statement/prospectus, the related S-4 registration statement, the proxy
solicitation process, the SmartForce shareholder meeting and regulatory
filings:
(1) the S-4 registration statement shall not have been declared effective
as of July 16, 2002;
(2) requisite waiting periods under the HSR Act shall have not expired or
terminated early and requisite foreign antitrust approvals shall not
have been obtained as of July 16, 2002; or
(3) SmartForce's shareholder meeting shall not have been held as of July
16, 2002.
A "Company Acquisition" refers to:
--a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Centra in
which the Centra stockholders prior to the transaction hold less than
55% of the total equity of the surviving, resulting or acquiring entity
in the transaction;
--a sale or other disposition by Centra of assets representing more than
45% of the aggregate fair market value of Centra's business prior to the
sale; or
--the acquisition by any person or group (including by way of tender offer
or an exchange offer or issuance by Centra), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of
shares representing more than 45% of the voting power of the then
outstanding shares of capital stock of Centra.
Operations After the Merger
Following the merger, it is expected that Centra will continue its
operations as a wholly-owned subsidiary of SmartForce. The stockholders of
Centra will become holders of SmartForce ADSs, and their rights as ADS holders
will be governed by the SmartForce memorandum and articles of association and
the deposit agreements, each as currently in effect, and the laws of the
Republic of Ireland. See "Comparison of Shareholder Rights" on page 100 of this
joint proxy statement/prospectus and "Description of SmartForce Share Capital"
on page 88 of this joint proxy statement/ prospectus.
Extension, Waiver and Amendment of the Merger Agreement
SmartForce and Centra may amend the merger agreement before completion of
the merger by mutual written consent. In addition, either SmartForce or Centra
may extend the other's time for the performance of any of the obligations or
other acts under the merger agreement, waive any inaccuracies in the other's
representations and warranties and waive compliance by the other with any of
the agreements or conditions contained in the merger agreement.
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AGREEMENTS RELATED TO THE MERGER
This section of the joint proxy statement/prospectus describes agreements
related to the merger agreement, including the SmartForce Voting Agreements,
the Centra Voting Agreements, the Centra Affiliate Agreements and the
Employment Arrangements. While SmartForce and Centra believe that these
descriptions cover the material terms of these agreements, these summaries may
not contain all of the information that is important to you. Forms of these
agreements are attached as exhibits to the merger agreement that is attached as
Annex A of this joint proxy statement/prospectus.
SmartForce Voting Agreements
The following officers and directors of SmartForce have entered into voting
agreements: Gregory Priest, David Drummond, Thomas McKeagney, Jeffrey Newton,
Ronald Conway, John Grillos, Patrick McDonagh, James Krzywicki and Ferdinand
von Prondzynski. By entering into the voting agreements these SmartForce
shareholders have irrevocably appointed Centra as their lawful attorney and
proxy. These proxies give Centra the limited right to vote the SmartForce ADSs
and the underlying ordinary shares beneficially owned by these SmartForce
shareholders subject to the voting agreements (a) in favor of the approval of
the issuance of SmartForce ADSs under the merger agreement, (b) in favor of any
transaction contemplated by the merger agreement and (c) in favor of any matter
that could reasonably be expected to facilitate the merger of SmartForce and
Centra. These SmartForce shareholders may vote their SmartForce ADSs on all
other matters.
As of March 18, 2002, there were approximately 432,396 SmartForce ordinary
shares, represented by ADSs, subject to voting agreements representing
approximately 1% of all outstanding SmartForce ordinary shares, represented by
ADSs. None of the SmartForce shareholders who are parties to the voting
agreements were paid additional consideration in connection with them.
Each SmartForce shareholder who is a party to a voting agreement agreed,
subject to limited exceptions, not to sell or otherwise transfer the SmartForce
ADSs, the underlying ordinary shares and options owned, controlled or acquired,
either directly or indirectly, by that person until the earlier of the
termination of the merger agreement or the completion of the merger, unless
each person to which any of those securities or any interest in any of those
securities is transferred agrees to be bound by the terms and provisions of the
voting agreement.
The voting agreements will terminate upon the earlier to occur of the
termination of the merger agreement or the completion of the merger. The form
of SmartForce voting agreement is attached as Exhibit B-2 to the merger
agreement that is attached to this joint proxy statement/prospectus as Annex A,
and you are urged to read it in its entirety.
Centra Voting Agreements
The following officers and directors of Centra have entered into voting
agreements: Leon Navickas, David Barrett, Richard D'Amore, Robert Hult, Anthony
Mark, Stephen Johnson, Steven Lesser and Joseph Gruttadauria. By entering into
the voting agreements, these Centra stockholders have irrevocably appointed
SmartForce as their lawful attorney and proxy. These proxies give SmartForce
the limited right to vote the shares of Centra common stock beneficially owned
by these Centra stockholders, subject to the voting agreements (a) in favor of
the adoption of the merger agreement and approval of the merger of SmartForce
and Centra, (b) in favor of any transaction contemplated by the merger
agreement and (c) in favor of any matter that could reasonably be expected to
facilitate the merger and against any matter that is inconsistent with the
consummation of the merger and the other transactions contemplated by the
merger agreement. These Centra stockholders may vote their shares of Centra
common stock on all other matters.
As of March 18, 2002, there were approximately 3,126,029 shares of Centra
common stock subject to these voting agreements which represented approximately
12.3% of the outstanding Centra common stock. None of the
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Centra stockholders who are parties to the voting agreements were paid
additional consideration in connection with them.
Each Centra stockholder who is a party to a voting agreement agreed, subject
to limited exceptions, not to sell or otherwise transfer the Centra stock and
options owned, controlled or acquired, either directly or indirectly, by that
person until the earlier of the termination of the merger agreement or the
completion of the merger, unless each person to which any of those securities
or any interest in any of those securities is transferred agrees to be bound by
the terms and provisions of the voting agreement.
The Centra voting agreements will terminate upon the earlier to occur of the
termination of the merger agreement and the completion of the merger. The form
of Centra voting agreement is attached as Exhibit A-2 to the merger agreement
that is attached to this joint proxy statement/prospectus as Annex A, and you
are urged to read it in its entirety.
Centra Affiliate Agreements
Each member of the Centra board of directors and each executive officer of
Centra has executed an affiliate agreement. Under the affiliate agreements,
these Centra officers and directors acknowledged the resale restrictions on the
SmartForce ADSs to be received by them in the merger imposed by Rule 145 and,
to the extent required by the deposit agreements under which their SmartForce
ADSs will be issued, Rule 144(h) under the Securities Act. In accordance with
the affiliate agreements, SmartForce will be entitled to place appropriate
legends on these Centra stockholders' ADRs evidencing any SmartForce ADSs to be
received by them and to issue stop transfer instructions to the transfer agent
for the SmartForce ADSs held by them. The form of affiliate agreement is
attached as Exhibit C to the merger agreement that is attached to this joint
proxy statement/prospectus as Annex A, and you are urged to read it in its
entirety.
Employment Agreements
In connection with the merger, Leon Navickas, Steve Lesser and Joe
Gruttadauria have entered into employment agreements providing certain
incentives to each to remain employed by SmartForce following the effectiveness
of the merger. These employment agreements supersede previously existing
employment agreements between each of these individuals and Centra. Further,
Tony Mark and Steve Johnson have entered into separation agreements with Centra
which agreements provide for each of their resignations upon the effectiveness
of the closing, the payment of severance and the extension of certain benefits
subsequent to their resignations. These separation agreements supersede
previously existing agreements that provided for, among other things, the
partial acceleration of stock options and the partial termination of Centra's
right to repurchase certain unvested stock upon a change in control. A summary
of the new employment agreements, and the new separation agreements, is as
follows:
Leon Navickas employment agreement. Contingent upon the effectiveness of
the merger, SmartForce has entered into an employment agreement with Leon
Navickas, Centra's chief executive officer, under which SmartForce agrees to
employ Mr. Navickas as its chief technology officer. This employment agreement
will supersede the terms of Mr. Navickas' employment with Centra. Mr. Navickas'
employment agreement with SmartForce provides that he will be paid a base
salary of $200,000 per year and will be entitled to receive an annual
performance bonus of $150,000 upon the attainment of agreed upon performance
objectives. SmartForce has agreed to grant Mr. Navickas an option to purchase
175,000 of its ADSs at the fair market value on the date of grant. One fourth
of such options shall vest on the one year anniversary of the effective date of
the merger and 1/48th of the shares subject to the option shall vest each month
thereafter. Mr. Navickas's employment is at-will, but if Mr. Navickas's
employment is terminated without cause or if he resigns with good reason, as
defined in the agreement, prior to the first anniversary of the closing of the
merger, he will be entitled to receive from SmartForce his base salary, target
bonus and equivalent benefits during the twelve month severance period
following such termination or resignation. If Mr. Navickas' employment is
terminated without cause or if he
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resigns with good reason after the first anniversary of the closing of the
merger, he will be entitled to receive from SmartForce his base salary and
equivalent benefits during a six month severance period following such
termination or resignation. In either case, he will also be entitled to
continued vesting of his then outstanding options during the twelve month or
six month severance period, as the case may be. The agreement also provides (as
does his original employment agreement with Centra) that 50% of Mr. Navickas'
unvested Centra options, consisting of the installments that would have vested
last in time, will accelerate and become fully vested and exercisable upon the
closing of the merger. The employment agreement includes a covenant not to
solicit employees or to accept a position with a competitor of SmartForce or
Centra for a specified time period following either of the merger or
Mr. Navickas' termination of employment.
Steve Lesser employment agreement. Contingent upon the effectiveness of the
merger, SmartForce has entered into an employment agreement with Steve Lesser,
Centra's Senior Vice President, Worldwide Sales, under which SmartForce agrees
to employ Mr. Lesser as its Senior Vice President, Centra Worldwide Sales. Mr.
Lesser's employment agreement also provides that one-half of his unvested
options shall accelerate and be fully vested and immediately exercisable and
that the right to repurchase one-half of the restricted stock then owned by
Mr. Lesser shall terminate. Mr. Lesser's employment agreement with SmartForce
provides that he will be paid a base salary of $160,000 per year and will be
entitled to receive an annual performance bonus of $120,000 upon the attainment
of agreed upon performance objectives. SmartForce has agreed to grant Mr.
Lesser an option to purchase 70,000 of its ADSs at the fair market value on the
date of grant. One fourth of such options shall vest on the one year
anniversary of the effective date of the merger and 1/48th of the shares
subject to the option shall vest each month thereafter. Though his employment
is at-will, under certain circumstances, in the event of a termination of Mr.
Lesser's employment by SmartForce within 12 months of the effective date of the
merger, Mr. Lesser shall receive six months salary and bonus. The employment
agreement includes a covenant not to solicit SmartForce or Centra employees or
to compete with the business of SmartForce or Centra for a specified time
period following either of the merger or Mr. Lesser's termination of employment.
Joe Gruttadauria employment agreement. Contingent upon the effectiveness of
the merger, SmartForce has entered into an employment agreement with Joe
Gruttadauria, Centra's Senior Vice President, Professional Services, under
which SmartForce agrees to employ Mr. Gruttadauria as its Senior Vice
President, Professional Services and General Manager, Centra. Mr.
Gruttadauria's employment agreement also provides that one-half of his unvested
options shall accelerate and be fully vested and immediately exercisable and
that the right to repurchase one-half of the restricted stock then owned by
Mr. Gruttadauria shall terminate. Mr. Gruttadauria's employment agreement with
SmartForce provides that he will be paid a base salary of $180,000 per year and
will be entitled to receive an annual performance bonus of $120,000 upon the
attainment of agreed upon performance objectives, $45,000 of which is
guaranteed. SmartForce has agreed to grant Mr. Gruttadauria an option to
purchase 100,000 of its ADSs at the fair market value on the date of grant. One
fourth of such options shall vest on the one year anniversary of the effective
date of the merger and 1/48th of the shares subject to the option shall vest
each month thereafter. Though his employment is at-will, under certain
circumstances, in the event of a termination of Mr. Gruttadauria's employment
by SmartForce within 12 months of the effective date of the merger,
Mr. Gruttadauria shall receive six months salary and bonus. The employment
agreement includes a covenant not to solicit SmartForce or Centra employees or
to compete with the business of SmartForce or Centra for a specified time
period following either of the merger or Mr. Gruttadauria's termination of
employment.
Steve Johnson and Tony Mark separation agreements. Contingent upon the
effectiveness of the merger, Centra has entered into agreements with Steve
Johnson and Tony Mark, its chief financial officer and its president and chief
operating officer, respectively, superseding their existing agreements with
Centra and providing for their resignations effective upon the closing of the
merger. Each of Mr. Johnson's and Mr. Mark's agreements with Centra provide
that upon a change in control of Centra that half of each of their unvested
options shall accelerate and be fully vested and immediately exercisable and
that Centra's right to repurchase one-half of the unvested stock then owned by
each of them shall terminate. Each of Mr. Johnson and Mr. Mark have agreed to
waive the acceleration of their unvested options to purchase Centra common
stock and to not solicit Centra or SmartForce employees or accept a position
with a competitor of Centra or SmartForce for a
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specified time period following the merger. Centra has agreed to terminate its
right to repurchase each of Mr. Johnson's and Mr. Mark's restricted stock
effective upon closing of the merger, and on March 15, 2002 Centra granted Mr.
Johnson and Mr. Mark options to purchase a total of 110,000 and 177,500 shares,
respectively, of Centra common stock at the fair market value on that date,
each of which option shall be fully vested and exercisable contingent upon and
immediately prior to the closing of the merger. Such options to purchase Centra
common stock shall remain exercisable for 12 months following the merger.
SmartForce has agreed to pay $160,000 to Mr. Johnson and $330,000 to Mr. Mark
and has further agreed to pay each of Mr. Johnson's and Mr. Mark's health
insurance premiums for the 12 months following the merger and to make lump sum
payments to each of Mr. Johnson and Mr. Mark equal to 12 months salary and 12
months salary plus bonus, respectively, upon the closing of the merger.
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TAX MATTERS
Material United States Federal Income Tax Consequences
General
The following is a discussion of the material United States federal income
tax consequences of the merger generally applicable to holders of Centra common
stock who, pursuant to the merger, exchange their Centra common stock for
SmartForce ADSs, assuming that the merger is effected pursuant to applicable
state law and as described in the merger agreement and in this joint proxy
statement/prospectus. This discussion only applies to "U.S. holders," as
defined below, who hold their shares of common stock as a capital asset. The
discussion does not address all the United States federal income tax
consequences that may be relevant to Centra stockholders in light of their
particular circumstances or to Centra stockholders subject to special rules.
For purposes of the discussion below, a "U.S. holder" is a beneficial owner
of Centra common stock or SmartForce ADSs who or which is: (i) an individual
who is a citizen or resident of the United States; (ii) a corporation or other
entity taxable as a corporation, that was created or organized in or under the
laws of the United States or any state thereof; (iii) an estate, the income of
which is subject to U.S. federal income taxation, regardless of its source; or
(iv) a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. citizens
have the authority to control all of the substantial decisions of the trust.
In addition, this discussion does not address any of the tax consequences to
any Centra stockholder that will own 5% or more of either the total voting
power or the total value of the outstanding SmartForce ADSs after the merger
(determined after taking into account ownership under the applicable
attribution rules of the Internal Revenue Code and applicable Treasury
regulations), and that fails to enter into a valid "gain recognition agreement"
under applicable Treasury regulations.
The following discussion is based on and subject to the Code, the
regulations promulgated thereunder, and existing administrative rulings and
court decisions, all as in effect on the date of this joint proxy
statement/prospectus and all of which are subject to change, possibly with
retroactive effect. This discussion also is based upon assumptions,
limitations, representations and covenants, including those contained in
certificates of SmartForce, Atlantic Acquisition Corp., and Centra, and may not
be relied upon if any of such assumptions, limitations, representations or
covenants are, or later become, inaccurate.
The Merger
Completion of the merger is conditioned on the receipt by SmartForce of an
opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation,
SmartForce's tax counsel, and the receipt by Centra of an opinion from Foley,
Hoag & Eliot LLP, Centra's tax counsel, stating that the merger will be a
reorganization within the meaning of Section 368(a) of the Code. These opinions
will be based upon the existing law and the continuing truth and accuracy of
the representations of Centra and SmartForce described above, and will be
subject to certain assumptions and qualifications, including the assumption
that the merger will be effected pursuant to applicable state law and completed
according to the terms of the merger agreement. The tax opinions are not
binding on the IRS or the courts, and there can be no assurance that the IRS or
the courts will not take a contrary view. No ruling from the IRS has been or
will be sought. Future legislative, judicial or administrative changes or
interpretations could alter or modify the statements and conclusions set forth
herein, and any such changes or interpretations could be retroactive and could
affect the tax consequences of the merger to SmartForce, Centra, or the
stockholders of SmartForce and Centra.
Based on the representations contained in the certificates provided by
SmartForce, Atlantic Acquisition Corp., and Centra, and subject to the
assumptions and limitations discussed above, the following are the material
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United States federal income tax consequences that will generally result from
treatment of the merger as a reorganization described in Section 368 of the
Internal Revenue Code:
. no gain or loss will be recognized by SmartForce, Centra or Atlantic
Acquisition Corp. solely as a result of the merger;
. no gain or loss will be recognized by the holders of Centra common stock
upon the receipt of SmartForce ADSs solely in exchange for Centra common
stock in the merger, except to the extent of cash received in lieu of
fractional shares;
. cash payments received by holders of Centra common stock in lieu of a
fractional share will result in capital gain (or loss) measured by the
difference between the cash payment received and the portion of the tax
basis in the shares of Centra common stock surrendered that is allocable
to such fractional share. Such gain (or loss) will be long-term capital
gain (or loss) if the shares of Centra common stock allocable to such
fractional share have been held for more than one year at the effective
time of the merger;
. the aggregate tax basis of the SmartForce ADSs received by Centra
stockholders in the merger will be the same as the aggregate tax basis of
the Centra common stock surrendered in exchange therefor reduced by any
tax basis allocable to a fractional share for which cash is received; and
. the holding period with respect to SmartForce ADSs received by each Centra
stockholder in the merger will include the holding period for the Centra
common stock surrendered in exchange therefor.
Backup Withholding. Federal income tax laws require that, to avoid backup
withholding in an amount equal to 30% of "reportable payments," each Centra
stockholder must (a) provide SmartForce with such stockholder's correct
taxpayer identification number on Form W-9 and certify as to no loss of
exemption from backup withholding or (b) establish a basis for exemption from
backup withholding on a Form W-8 (including a form W-8BEN, W-8ECI, W-8EXP and
W-8IMY) or Form W-9, as applicable. Exempt stockholders (including, among
others, all corporations and certain foreign individuals) are not subject to
backup withholding and reporting requirements. If SmartForce is not provided
with the correct TIN or an adequate basis for exemption, the stockholder may be
subject to a $50 penalty imposed by the IRS. If withholding is made and results
in an overpayment of taxes, a refund may be obtained. Reportable payments made
pursuant to the merger will be reported to the extent required by the Code to
Centra stockholders and the IRS.
Reporting Requirements. Each Centra stockholder that receives SmartForce
ADSs in the merger will be required to file a statement with his, her or its
federal income tax return setting forth his, her or its tax basis in the Centra
common stock surrendered and the fair market value of the SmartForce ADSs and
cash, if any, received in the merger, and to retain permanent records of these
facts relating to the merger.
Ownership of SmartForce ADSs
Distributions. SmartForce does not expect to pay dividends in the
foreseeable future. If SmartForce does pay any dividends, however, the gross
amount of any dividend received by U.S. holders with respect to SmartForce ADSs
generally will be taxed at ordinary income tax rates to the extent such
dividend does not exceed SmartForce's current or accumulated earnings and
profits, as calculated for U.S. federal income tax purposes. To the extent any
dividend exceeds SmartForce's earnings and profits, the dividend will be
treated as a tax-free return of capital to the extent of a U.S. holder's
adjusted tax basis in SmartForce ADSs and will be applied against and reduce
such basis on a dollar-for-dollar basis (thereby increasing the amount of gain
and decreasing the amount of loss recognized on a subsequent disposition of
such stock). To the extent that the distribution exceeds a U.S. holder's
adjusted tax basis, the distribution will be taxed as if it was gain recognized
on a sale or exchange of SmartForce ADSs. See "Sale or Other Disposition of
SmartForce ADSs," below. Because SmartForce is not a U.S. corporation, no
dividends-received deduction will be allowed to corporations with respect to
dividends paid by SmartForce. Dividends paid with respect to SmartForce ADSs
will generally be treated as foreign source "passive income" for U.S. tax
purposes.
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Sale or Other Disposition of SmartForce ADSs. In general, in connection
with the sale or other taxable disposition of SmartForce ADSs:
. gain or loss will be recognized by the seller in an amount equal to the
difference (if any) between the amount realized on such sale or other
taxable disposition and the seller's adjusted tax basis in the SmartForce
ADSs;
. gain or loss recognized on the sale or other taxable disposition will be
capital gain or loss and will be long-term capital gain or loss if the
holding period for SmartForce ADSs is more than one year at the time of
the sale or other disposition;
. any gain or loss recognized on the sale or other taxable disposition will
be treated as having a U.S. source for U.S. foreign tax credit purposes;
and
. the ability to deduct capital losses is subject to limitations.
Passive foreign investment company. U.S. holders generally are subject to a
special, adverse tax regime (that would differ in certain respects from that
described above) if SmartForce is or were to become a passive foreign
investment company for U.S. federal income tax purposes. Although the
determination of whether a corporation is a passive foreign investment company
is made annually, and thus may be subject to change, we do not believe that we
are, nor do we expect to become, a passive foreign investment company.
Notwithstanding the foregoing, we urge you to consult your own U.S. tax advisor
regarding the potential adverse U.S. federal income tax consequences of owning
the shares of a passive foreign investment company and of making certain
elections designed to lessen those adverse consequences.
Information Reporting and Backup Withholding. Any dividends paid, or
proceeds on a sale of, SmartForce ADSs to or by a U.S. holder may be subject to
U.S. information reporting, and a 30% backup withholding tax may apply unless
the holder is an exempt recipient or provides a U.S. taxpayer identification
number, certifies that such holder is not subject to backup withholding and
otherwise complies with any applicable backup withholding requirements. Any
amount withheld under the backup withholding rules will be allowed as a refund
or credit against the holder's U.S. federal income tax, provided that the
required information is furnished to the IRS.
This discussion is not intended to be a complete analysis or description of
all potential U.S. federal income tax consequences or any other consequences of
the merger or the holding of SmartForce ADSs. This discussion does not address
any consequences arising under the laws of any state, locality or foreign
jurisdiction. This discussion also does not address the tax consequences of an
exchange or conversion of options or warrants for Centra common stock into
options or warrants for SmartForce ADSs.
Accordingly, Centra stockholders are encouraged to consult their own tax
advisors regarding the specific tax consequences of the merger, including tax
return reporting requirements, the applicability of federal, state, local and
foreign tax laws and the effect of any proposed change in the tax laws. This
discussion is not intended to be a complete analysis or description of all
potential tax consequences of the merger.
Material Irish Tax Considerations
The following is a general summary of certain of the Irish tax consequences
applicable to Irish and U.S. Holders (as defined below) in respect of the
purchase, ownership and disposition of our ordinary shares or ADSs evidenced by
ADRs.
This summary is based on Irish taxation laws currently in force, regulations
promulgated thereunder, the current provisions of the Convention between the
Government of the United States of America and the Government of Ireland for
the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income and capital gains (the "Treaty"), specific proposals
to amend any of the forgoing publicly announced prior to the date hereof and
the currently published administrative practices of the Irish Revenue
Commissioners, all as of the date hereof. Taxation laws are subject to change,
from time to time, and no
83
representation is or can be made as to whether such laws will change, or what
impact, if any, such changes will have on the statements contained in this
summary. No assurance can be given that proposed amendments will be enacted as
proposed, or that legislative or judicial changes, or changes in administrative
practice, will not modify or change the statements expressed herein.
Holders of ordinary shares or ADSs are advised to consult their own tax
advisors with respect to the application of Irish Taxation Laws to their
particular circumstances in relation to the purchase, ownership or disposition
of ordinary shares or ADSs.
This summary is of a general nature only and does not discuss all aspects of
Irish taxation that may be relevant to a particular Irish or U.S. Holder. The
summary only applies to Irish and U.S. Holders that legally and beneficially
hold their ordinary shares or ADSs evidenced by ADRs as capital assets and does
not address special classes of holders including, but not limited to, dealers
in securities, insurance companies, pension schemes, employee share ownership
trusts, collective investment undertakings, charities, tax-exempt
organizations, financial institutions and close companies, each of which may be
subject to special rules not discussed below.
Irish Tax Considerations Applicable to Irish Holders
For the purposes of this discussion, an "Irish Holder" means a holder of
ordinary shares or ADSs evidenced by ADRs that (i) beneficially owns the
ordinary shares or ADRs registered in their name; (ii) in the case of
individual holders, are resident, ordinarily resident and domiciled in Ireland
under Irish taxation laws; (iii) in the case of holders that are companies, are
resident in Ireland under Irish taxation laws; and (iv) are not also resident
in any other country.
For Irish taxation purposes, Irish Holders of ADSs will be treated as the
owners of the underlying ordinary shares represented by such ADSs.
Taxation of Dividends. We do not expect to pay dividends in the
foreseeable future. Should we begin paying dividends, such dividends will
generally be subject to dividend withholding tax ("DWT") in Ireland at the
standard rate of income tax (currently 20%). Where DWT applies, we will be
responsible for withholding such tax at source.
Corporate Irish Holders will generally be entitled to claim an exemption
from DWT by delivering a declaration to us in the form prescribed by the Irish
Revenue Commissioners. Such corporate Irish Holders will generally not
otherwise be subject to Irish tax in respect of dividends received.
Individual Irish Holders will be subject to income tax on the gross amount
of any dividend (for example, the amount of the dividend received plus any DWT
withheld), at their marginal rate of tax (currently either 20% or 42% depending
on the individual's circumstances). Individual Irish Holders will be able to
claim a credit against their resulting income tax liability in respect of DWT
withheld.
Individual Irish Holders may, depending on their circumstances, also be
subject to the Irish health levy of 2% and pay related social insurance
contribution of up to 3% in respect of their dividend income.
Disposals of Ordinary Shares or ADSs. Irish Holders that acquire ordinary
shares or ADSs will be considered, for Irish tax purposes, to have acquired
their ordinary shares or ADSs at a base cost equal to the amount paid for the
ordinary shares or ADSs. On subsequent dispositions, ordinary shares or ADSs
acquired at an earlier time will be deemed, for Irish tax purposes, to be
disposed of on a "first in first out" basis before ordinary shares or ADSs
acquired at a later time.
Irish Holders that dispose of their ordinary shares or ADSs will be subject
to capital gains tax ("CGT") to the extent that the proceeds realized from such
disposition exceed the indexed base cost of the ordinary shares or ADSs
disposed of and any incidental expenses. The current rate of CGT is 20%.
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Irish Holders that realize a loss on the disposition of ordinary shares or
ADSs will generally be entitled to offset such allowable losses against capital
gains realized from other sources in determining their capital gains tax
liability in a year. Allowable losses which remain unrelieved in a year may
generally be carried forward indefinitely for Irish capital gains tax purposes
and applied against capital gains in future years.
Capital Acquisitions Tax. A gift or inheritance of ordinary shares or ADSs
will fall within the charge to Irish capital acquisitions tax ("CAT"). CAT is
currently chargeable at a rate of 20% on the value of gifts or inheritances
above specified tax free thresholds. Different classes of tax free thresholds
apply depending upon the relationship between the donor and the recipient.
Gifts or inheritances taken on or after 2 December 1988 are aggregated with the
same group threshold for the purposes of arriving at the amount of tax on a
current gift or inheritance. The Minister for Finance announced in his Budget
Speech the proposed amendment of the base date for aggregation from 2 December
1988 to 5 December 1991. As proposed this measure will take effect for all
gifts or inheritances taken on or after 5 December 2001. Gifts or inheritances
between spouses are not subject to Irish CAT.
Stamp Duty. Irish stamp duty, which is a tax imposed on certain documents,
is payable on all transfers of ordinary shares (other than transfers made
between spouses, transfers made between 90% associated companies, or certain
other exempt transfers) regardless of where the document of transfer is
executed. Irish stamp duty is also payable on electronic transfers of ordinary
shares.
A transfer of ordinary shares made as part of a sale will be stampable at
the ad valorem rate of 1% of the value of the consideration received for the
transfer, or, if higher, the market value of the shares transferred.
Where the consideration for a sale is expressed in a currency other than
euro, the duty will be charged on the euro equivalent calculated at the rate of
exchange prevailing at the date of the transfer.
Transfers of ordinary shares where no beneficial interest passes (e.g. a
transfer of shares from a beneficial owner to a nominee), will generally be
exempt from stamp duty if the transfer form contains an appropriate
certification, otherwise a nominal stamp duty rate of (Euro)12.50 will apply.
Transfers of ADSs by Irish Holders are generally exempt from Irish stamp
duty.
Transfers of ordinary shares from the Depositary or the Custodian upon
surrender of ADSs for the purposes of withdrawing the underlying ordinary
shares from the ADS/ADR system, and transfers of ordinary shares to the
depositary or the custodian for the purposes of transferring ordinary shares
onto the ADS/ADR system, will be stampable at the ad valorem rate of 1% of the
value of the shares transferred if the transfer relates to a sale or
contemplated sale or any other change in the beneficial ownership of ordinary
shares. Such transfers will be exempt from Irish Stamp Duty if the transfer
does not relate to or involve any change in the beneficial ownership in the
underlying ordinary shares and the transfer form contains the appropriate
certification. In the absence of an appropriate certification, stamp duty will
be applied at the nominal rate of (Euro)12.50.
The person accountable for the payment of stamp duty is the transferee or,
in the case of a transfer by way of gift or for consideration less than the
market value, both parties to the transfer. Stamp duty is normally payable
within 30 days after the date of execution of the transfer. Late or inadequate
payment of stamp duty will result in liability for interest, penalties and
fines.
Irish Tax Considerations Applicable to U.S. Holders
Solely for the purposes of this summary of certain Irish tax considerations,
a "U.S. Holder" means a holder of ordinary shares that (i) is resident in the
United States for the purposes of the Treaty, (ii) is not also resident of, or
ordinarily resident in, Ireland for Irish tax purposes, (iii) is not engaged in
any trade or business and does not perform independent personal services
through a permanent establishment or fixed base in Ireland, and (iv) where a
holder is a corporation, is not ultimately controlled by persons resident in
Ireland.
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For Irish taxation purposes, and for the purposes of the Treaty, U.S.
Holders of ADSs will be treated as the owners of the underlying ordinary shares
represented by such ADSs.
Taxation of Dividends. We do not expect to pay dividends in the foreseeable
future. Should we begin paying dividends, such dividends will generally be
subject to DWT in Ireland at the standard rate of income tax (currently 20%).
Where DWT applies, we will be responsible for withholding such tax at source.
Dividends paid by us to U.S. Holders of ordinary shares will be exempt from
DWT if, prior to the payment of such dividends, the recipient U.S. Holder
delivers to us a declaration, a certificate of residency and, in the case of
U.S. Holders that are corporations, an auditor's certificate, each in the form
prescribed by the Irish Revenue Commissioners.
Special DWT arrangements may be available to U.S. Holders of ADSs evidenced
by ADRs should the depositary enter into an intermediary agreement with the
Irish Revenue Commissioners prior to the payment of dividends by us. Under such
an agreement, it is possible for the depositary to receive dividends from us
and pass such dividends onto U.S. Holders of ADRs on a gross basis, without
DWT, if either:
. the ADR register maintained by the depositary shows the U.S. Holder as
having a U.S. address on the register; or
. where there is an intermediary between the depositary and the beneficial
owner of ADSs, the depositary receives confirmation from the intermediary
that the beneficial owner's address in the intermediary's records is in
the U.S.
The depositary has not, to date, entered into an intermediary agreement with
the Irish Revenue Commissioners.
Where the above procedures have not been complied with and DWT is withheld
from dividend payments to U.S. Holders of ordinary shares or ADSs evidenced by
ADRs, such U.S. Holders can apply to the Irish Revenue Commissioners claiming a
full refund of DWT paid by filing a declaration, a certificate of residency
and, in the case of U.S. Holders that are corporations, an auditor's
certificate, each in the form prescribed by the Irish Revenue Commissioners.
The DWT rate applicable to U.S. Holders is reduced to 5% under the terms of
the Treaty for corporate U.S. Holders holding 10% or more of our shares, and to
15% for other U.S. Holders. While this will generally entitle U.S. Holders to
claim a partial refund of DWT from the Irish Revenue Commissioners, U.S.
Holders will, in most circumstances, likely prefer to seek a full refund of DWT
under Irish domestic legislation.
Capital Gains on Disposals of Ordinary Shares or ADSs. U.S. Holders will
not be subject to Irish capital gains tax ("CGT") on the disposal of ordinary
shares or ADSs provided that such ordinary shares or ADSs are quoted on a stock
exchange at the time of disposition. A stock exchange for this purpose
includes, among others, the Nasdaq National Market ("Nasdaq"). While it is our
intention to continue the quotation of ADSs evidenced by ADRs on Nasdaq, no
assurances can be given in this regard.
If, for any reason, our ADSs cease to be quoted on Nasdaq, U.S. Holders will
not be subject to Irish CGT on the disposal of their ADSs evidenced by ADRs
provided that the ADSs do not, at the time of the disposal, derive the greater
part of their value from land, buildings, minerals, or mineral rights or
exploration rights in Ireland.
Irish Capital Acquisitions Tax. A gift or inheritance of ordinary shares or
ADSs evidenced by ADRs will fall within the charge to Irish capital
acquisitions tax ("CAT") because our ordinary shares are considered to be Irish
property for CAT purposes. CAT is currently chargeable at a rate of 20% on the
value of gifts or inheritances above specified tax free thresholds. Different
classes of tax free thresholds apply depending upon the relationship between
the donor and the recipient. Gifts or inheritances taken on or after 2 December
1988 are
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aggregated with the same group threshold for the purposes of arriving at the
amount of tax on a current gift or inheritance. The Minister for Finance
announced in his Budget Speech the proposed amendment of the base date for
aggregation from 2 December 1988 to 5 December 1991. As proposed this measure
will take effect for all gifts or inheritances taken on or after 5 December
2001. Gifts or inheritances between spouses are not subject to Irish CAT.
In a case where an inheritance of ordinary shares or ADSs is subject to both
Irish CAT and U.S. federal estate tax, the Convention between the Government of
the United States of America and the Government of Ireland for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
estates of deceased persons should allow for the crediting, in whole or in
part, of the Irish CAT against the U.S. federal estate tax payable. Similar
relief is not available in a case where a gift of ordinary shares or ADSs
evidenced by ADRs is subject both to Irish CAT and U.S. federal gift tax since
the Estate Tax Convention only applies to estate taxes.
Stamp Duty. Irish stamp duty will apply to transfers of ordinary shares or
ADSs by U.S. Holders on the same basis as outlined above for Irish Holders.
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DESCRIPTION OF SMARTFORCE SHARE CAPITAL
General
SmartForce's authorized share capital is (Euro)13,200,000, divided into
120,000,000 ordinary shares, par value (Euro)0.11 per share. SmartForce's
authorized share capital is the number of ordinary shares available for
issuance by SmartForce under its memorandum and articles of association. As of
March 18, 2002, 57,054,141 equivalent ADSs representing 57,054,141 ordinary
shares were issued and outstanding. None of SmartForce's ordinary shares are
currently held in treasury.
The following summarizes rights of holders of SmartForce's ordinary shares
and is based upon the SmartForce memorandum and articles of association, the
deposit agreements entered into with the Bank of New York and applicable Irish
corporate law. The summary does not purport to be complete and is qualified in
its entirety by reference to SmartForce's memorandum and articles of
association and deposit agreements, copies of which have been incorporated by
reference as exhibits to the registration statement of which this joint proxy
statement/prospectus forms a part.
In the following description, a shareholder or a holder of ordinary shares
is the person registered in SmartForce's register of members as the holder of
the relevant ordinary share. AIB Custodial Nominees Limited, registrars, will
be the registered holder for those ordinary shares represented by ADSs for the
benefit of The Bank of New York, as depositary.
Ordinary Shares
All of the outstanding ordinary shares are fully paid and nonassessable. The
holders of ordinary shares are entitled to receive dividends as and when
declared by the SmartForce board out of funds legally available therefor and,
in the event of the dissolution of SmartForce, to share ratably in all assets
remaining after payment of liabilities. Each holder of an ordinary share is
entitled to one vote for each share held of record on all matters presented to
a vote at a shareholders meeting, including the election of directors. Holders
of ordinary shares have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock.
Share Certificates
The holders of ordinary shares are entitled to receive certificates within
two months of the date of issuance of their shares, in a form as may be
prescribed by law and by the board of directors, certifying the number and
class of shares owned by the shareholder. Each certificate shall have
SmartForce's corporate seal affixed to it.
Transfers of Ordinary Shares
Except as otherwise established by rules adopted by the board of directors,
and subject to applicable law, ordinary shares may be transferred on
SmartForce's books by the surrender to SmartForce, or its transfer agent, of a
properly stamped and duly executed stock transfer form, a duly executed
certificate representing the ordinary shares and, if executed under a power of
attorney, a properly executed written power of attorney, together with any
proof of authority or the authenticity of signature as SmartForce or its
transfer agent may otherwise reasonably request.
Irish Stamp Duty
For a discussion of the tax imposed on the transfer of ordinary shares, see
"Tax Matters--Material Irish Tax Considerations" on page 83.
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Subscription Rights
On October 4, 1998 the board of directors of SmartForce adopted a
subscription rights declaration, pursuant to which one subscription right was
granted for each ordinary share of SmartForce. These subscription rights apply
to both ordinary shares of SmartForce that were outstanding at the time the
subscription rights declaration was adopted and to any ordinary shares that are
subsequently issued, including the ordinary shares underlying ADSs to be issued
in the merger. Each right entitles the registered holder to purchase from
SmartForce one ordinary share at a price of $65.00 per ordinary share, subject
to adjustment. The rights are not currently exercisable, but would be
exercisable if certain events occurred related to a person or group acquiring
or attempting to acquire beneficially 15% or more of the outstanding ordinary
shares, or an Acquiring Person. The rights expire on October 4, 2008, unless
cancelled or exchanged earlier by SmartForce.
In the event that any person becomes an Acquiring Person, each holder of a
subscription right will thereafter generally have the right to receive upon
exercise that number of ordinary shares having a market value of two times the
then current purchase price. However, after the occurrence of any such event,
all subscription rights that are, were or subsequently become beneficially
owned by an Acquiring Person, related person or transferee will become null and
void.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire SmartForce
without conditioning the offer on cancellation of the rights or on a
substantial number of the rights being acquired. Accordingly, the existence of
the rights may deter acquirors from making takeover proposals and tender
offers. Takeover proposals and tender offers typically result in an increase in
the trading price of the stock of the target company. However, the rights are
designed to provide additional protection against abusive takeover tactics such
as offers for all shares at less than full value or at an inappropriate time
(in terms of maximizing long-term shareholder value), partial tender offers and
selective open-market purchases. The rights are intended to enhance the power
of the board of directors of SmartForce to protect shareholders and SmartForce
if efforts are made to gain control of SmartForce in a manner that is not in
the best interests of SmartForce and its shareholders. The rights should not
interfere with any merger or other business combination approved by the board
of directors of SmartForce.
The proposed merger will not cause these subscription rights to become
exercisable.
Transfer Agent, Registrar and Paying Agent
The transfer agent and registrar for SmartForce's ordinary shares is
Computershare Services (Ireland) Limited, Heron House, Corring Road, Sandyford
Industrial Estate, Dublin 18, Ireland. The telephone number at this location is
353-1-216-3100. The transfer agent and registrar for the ADSs is The Bank of
New York located at 101 Barclay Street, New York, NY 10286. The telephone
number at this location is 212-495-1784.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
To facilitate ownership of interests in SmartForce's ordinary shares and
trading in the United States, ADSs relating to the ordinary shares are issued
by a depositary in New York to persons who deposit the ordinary shares with the
depositary. The ADSs are represented by ADRs issued by The Bank of New York.
Subject to the terms of the deposit agreements by and among The Bank of New
York, SmartForce and the owners and beneficial owners from time to time of the
ADSs, each holder of an ADS is entitled proportionately to all of the rights
and preferences of one ordinary share represented thereby contained in the
SmartForce memorandum and articles of association.
Each SmartForce ADS represents one ordinary share deposited under the
deposit agreements. The ADR is the receipt which represents the number of ADSs
to which you are entitled. You will not own SmartForce's ordinary shares
directly unless you withdraw the ordinary shares that you deposit. As a holder
of ADRs, your rights will be governed by the deposit agreements.
The following is a summary of the material provisions of the deposit
agreements. For more complete information, you should read the entire
agreements including the form of ADR. The deposit agreements have been
incorporated by reference as an exhibit to this registration statement of which
this joint proxy statement/prospectus is a part. Copies of the deposit
agreements and SmartForce's memorandum and articles of association are also
available for inspection at the corporate trust office of The Bank of New York,
currently located at 101 Barclay Street, New York, New York 10286, and at the
principal office of AIB Custodial Nominees Limited, as the custodian, currently
located at AIB Trade Centre, P.O. Box 518, International Financial Services
Centre, Dublin 1, Ireland. The Bank of New York's principal executive office is
located at 101 Barclay Street, New York, NY 10286.
American Depositary Receipts
ADRs evidencing the SmartForce ADSs are issuable by The Bank of New York
under the deposit agreements. Each ADR represents ownership of one ordinary
share which SmartForce will deposit with AIB Custodial Nominees Limited, as the
custodian, in Ireland. Each ADR also represents securities, cash or other
property deposited with the depositary, as a result of a distribution
SmartForce may from time to time make on the ordinary shares, but which are not
distributed to ADR holders. The circumstances in which the depositary will
deliver to a holder of SmartForce ADSs distributions on the ordinary shares are
described below.
You may hold ADRs either directly or indirectly through your broker or other
financial institution. If you hold ADRs directly, you are an ADR holder. The
ADR will be in physical form if held by you directly, and may be in book-entry
or electronic form if held by a broker or other financial institution on your
behalf. This description assumes you hold your ADRs directly. If you hold your
ADRs indirectly, you must rely on the procedures of your broker or other
financial institution to assert your rights described in this section. You
should consult with your broker or financial institution to find out what those
procedures are.
Because the depositary will actually own the ordinary shares, you must rely
on it to exercise the rights of a shareholder. The obligations of the
depositary are described in the deposit agreement.
New York law generally governs the deposit agreements and the ADRs.
Dividends and Other Distributions
The depositary has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on shares or other deposited
securities, after deducting its fees and expenses. You will receive these
distributions in proportion to the number of shares your ADRs represent. You
must hold the ADRs on the date established by SmartForce to be eligible for
dividends and other distributions. If SmartForce does not establish the date,
the depositary may establish it to determine who is eligible.
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For a discussion of the cash dividends or other distributions SmartForce may
make on the ordinary shares, including distributions as a result of
SmartForce's liquidation, dissolution or winding-up, see "Comparison of
Shareholder Rights--Issuance of Shares; Dividends; Repurchase of Shares" and
"--Liquidation; Dissolution; Winding-Up."
Cash
If SmartForce does not pay any cash dividend or other cash distributions it
declares in U.S. dollars, the depositary will convert any cash dividend or
other cash distribution that SmartForce pays on its shares into U.S. dollars if
it can do so on a reasonable basis and can transfer the U.S. dollars to the
United States. If that is not possible or if any approval from the government
of Ireland is needed and cannot be obtained, the agreement allows the
depositary to distribute U.S. dollars only to those ADS holders to whom it is
possible to do so. It will hold the currency it cannot convert into U.S.
dollars for the account of the ADS holders who have not been paid. It will not
invest the currency it cannot convert and it will not be liable for any
interest.
Before making a distribution, the depositary will deduct any withholding
taxes that must be paid under Irish law. For U.S. holders, it will distribute
only whole U.S. dollars and cents and will round fractional cents down to the
nearest whole cent. If the exchange rates fluctuate during a time when the
depositary cannot convert the currency in which the dividend has been paid into
U.S. dollars, you may lose some or all of the value of the distribution.
Ordinary Shares
The depositary may distribute new ADSs representing any ordinary shares
which SmartForce distributes as a dividend or free distribution, if SmartForce
furnishes it promptly with satisfactory evidence that it is legal to do so. The
depositary will distribute new ADSs in proportion to the number of ADSs you
already own. The depositary will only distribute whole ADSs. It will sell
ordinary shares which would require it to issue a fractional ADS and distribute
the net proceeds in the same way as it does with cash. If the depositary does
not distribute additional ADSs, each ADS will also represent the new ordinary
shares.
Rights to receive additional shares. If SmartForce offers holders of its
securities any rights to subscribe for additional ordinary shares or any other
rights, the depositary has discretion to determine how these rights become
available to you as a holder of ADSs. SmartForce must first instruct the
depositary to do so and furnish it with satisfactory evidence that it is legal
to do so. The depositary could decide it is not legal or practical to make the
rights available to you, or it could decide that it is only legal or practical
to make the rights available to some but not all holders of the ADSs. The
depositary may decide to sell the rights. If the depositary decides it is
practical to sell the rights, the depositary will sell the rights and
distribute the proceeds in the same way as it does with cash. If the depositary
decides that it is not legal or practical to make the rights available to you
or to sell the rights, the rights that are not distributed or sold could lapse.
In that case, you will receive no value for them. The depositary is not
responsible for a failure in determining whether or not it is legal or
practical to distribute the rights. However, the depositary is liable for
damages if it acts negligently or in bad faith.
If the depositary makes rights available to you, it will exercise the rights
and purchase the ordinary shares on your behalf. The depositary will then
deposit the ordinary shares and issue ADSs to you. It will only exercise rights
if you pay it the exercise price and any other charges the rights require you
to pay.
U.S. securities laws may restrict the sale, deposit, cancellation, and
transfer of the ADSs issued after exercise of rights. For example, if you are
an affiliate of SmartForce or Centra, you may not be able to trade the new ADSs
issued in the merger freely in the United States. In this case, the depositary
may issue the new ADSs under a separate restricted deposit agreement which will
contain the same provisions as the deposit agreements, except for changes
needed to put the restrictions in place.
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Other Distributions
The depositary will send to you anything else SmartForce distributes on
deposited securities by any means it thinks is legal, fair and practical. If it
cannot make the distribution in that way, the depositary has a choice. It may
decide to sell what SmartForce distributed and distribute the net proceeds, in
the same way as it does with cash. Or, it may decide to hold what SmartForce
distributed, in which case ADSs will also represent the newly distributed
property.
The depositary is not responsible if it decides that it is unlawful or
impractical to make a distribution available to any ADS holders. SmartForce has
no obligation to register ADSs, ordinary shares, rights or other securities
under the U.S. Securities Act of 1933, as amended. SmartForce also has no
obligation to take any other action to permit the distribution of ADSs,
ordinary shares, rights or anything else to ADS holders. This means you may not
receive the distributions SmartForce makes on its ordinary shares or any value
for them if it is illegal or impractical to make them available to you.
Deposit, Withdrawal and Cancellation
Method for the depositary to issue ADRs. The depositary will issue ADRs if
you or your broker deposit ordinary shares or evidence of rights to receive
ordinary shares with the custodian. Upon payment of its fees and expenses and
of any taxes or charges, such as stamp taxes or stock transfer taxes or fees,
the depositary will register the appropriate number of ADRs in the names you
request and will deliver the ADRs at its office to the persons you request.
Method for an ADR Holder to cancel ADRs and obtain ordinary shares. You may
turn in your ADRs at the depositary's office. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer
taxes or fees, the depositary will deliver (1) the underlying ordinary shares
to an account designated by you to the extent legally permissible and (2) any
other deposited securities underlying the ADR at the office of the custodian.
Or, at your request, risk and expense, the depositary will deliver the ordinary
shares at its office.
Voting Rights
You do not have the right as an ADS holder to attend SmartForce's
shareholder meetings. You may instruct the depositary to vote the shares
underlying your ADSs. You could exercise your right to vote directly if you
withdraw the ordinary shares. However, you may not know about the meeting far
enough in advance to withdraw the ordinary shares.
When SmartForce notifies the depositary of an upcoming vote, the depositary
will notify you of the upcoming vote and arrange to deliver SmartForce's voting
materials to you. The materials will describe the matters to be voted on,
explain how you, if you hold the ADSs on a date specified by the depositary,
may instruct the depositary to vote the ordinary shares or other deposited
securities underlying your ADSs as you direct and to request a poll for each
matter for which you gave directions. The materials will also include a
statement that, if you do not give the depositary instructions, the depositary
may give a discretionary proxy to a person that SmartForce designates. For your
instructions to be valid, the depositary must receive them in writing on or
before a date specified by the depositary. The depositary will try, as far as
practical, subject to Irish law and the provisions of SmartForce's articles of
association, to vote or to have its agents vote the ordinary shares or other
deposited securities as you instruct. The depositary will only vote or attempt
to vote as you instruct.
If you do not give the depositary instructions, you will be considered to
have instructed the depositary to give a discretionary proxy to a person
designated by SmartForce. However, no instruction will be deemed to have been
given, and the depositary will not give a discretionary proxy, if the matter to
be voted upon:
. is a matter not submitted to shareholders by means of a proxy statement
comparable to that specified in the U.S. proxy rules;
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. is the subject of a counter-solicitation, or is part of a proposal made by
a shareholder which is being opposed by SmartForce's management;
. is related to a merger or consolidation, except in limited circumstances
involving a merger between SmartForce and a wholly-owned subsidiary;
. authorizes mortgaging of property;
. authorizes or creates indebtedness or increases the authorized amount of
indebtedness;
. authorizes or creates preference shares or increases the authorized amount
of existing preference shares;
. alters the terms or conditions of any shares then outstanding or existing
indebtedness;
. involves waiver or modification of preemptive rights, except when
SmartForce's proposal is to waive these rights for shares being offered
under share option or purchase plans involving the additional issuance of
not more than 5% of SmartForce's outstanding ordinary shares;
. alters voting provisions or the proportionate voting power of a class of
shares, or the number of its votes per share, except where cumulative
voting provisions govern the number of votes per share for election of
directors and SmartForce's proposal involves a change in the number of its
directors by not more than 10% or not more than one;
. changes existing quorum requirements for shareholder meetings;
. authorizes issuance of ordinary shares, or options to purchase ordinary
shares, to SmartForce's directors, officers, or employees in an amount
which exceeds 5% of the total amount of the class outstanding. However,
when no plan is amended to extend its duration, SmartForce's shall factor
into the calculation the number of ordinary shares that remain available
for issuance, the number of ordinary shares subject to outstanding options
and any ordinary shares being added. Should there be more than one plan
being considered at the same meeting, all ordinary shares will be
aggregated;
. authorizes (a) a new profit-sharing or special remuneration plan, or a new
retirement plan, the annual cost of which will amount to more than 10% of
average annual income before taxes for the preceding five years, or (b)
the amendment of an existing plan which would bring its costs above 10% of
the five-year average annual income before taxes. Should there be more
than one plan being considered at the same meeting, all costs are
aggregated; exceptions may be made in cases of: (a) retirement plans based
on agreement or negotiations with labor unions or which have been or are
to be approved by labor unions, and (b) any related retirement plan for
benefit of non-union employees having terms substantially equivalent to
the terms of a union-negotiated plan, which is submitted for action of
shareholders concurrently with a union-negotiated plan;
. changes SmartForce's purposes or powers to an extent which would permit
SmartForce to change to a materially different line of business and it is
SmartForce's stated intention to make such a change;
. authorizes the acquisition of property, assets, or a company, where the
consideration to be given has a fair value of 20% or more of the market
value of SmartForce's previously outstanding ADSs and ordinary shares;
. authorizes the sale or other disposition of assets or earning power of 20%
or more as measured before the transaction;
. authorizes a transaction not in the ordinary course of business in which
an officer, director or substantial security holder has a direct or
indirect interest; or
. reduces earned surplus by 51% or more, or reduces earned surplus to an
amount less than the aggregate of three years' ordinary share dividends
computed at the current dividend rate.
SmartForce cannot assure you that you will receive the voting materials in
time to ensure that you can instruct the depositary to vote your shares. In
addition, the depositary and its agents are not responsible for failing
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to carry out voting instructions or for the manner of carrying out voting
instructions. This means that you may not be able to exercise your right to
vote and there may be nothing you can do if your ordinary shares are not voted
as you requested.
Fees and Expenses
ADS holders must pay: For:
$ 5.00 or less per 100 ADSs Each issuance of an ADS, including as a
result of a distribution of ordinary
shares or rights or other property
Each cancellation of an ADS, including if
the deposit agreements terminate
$ 0.02 or less per ADS Any cash payment
Registration or transfer Transfer and registration of ordinary
fees shares on the share register of the
foreign registrar from your name to the
name of the depositary or its agent when
you deposit or withdraw ordinary shares
Expenses of the depositary Conversion of euros to U.S. dollars
Cable, telex and facsimile transmission
expenses, if expressly provided in the
deposit agreements
Distribution fees Distribution of securities equal to fee
charged for deposit of securities
Up to $1.50 per certificate Transfers made pursuant to the terms of
the deposit agreements
Taxes and other governmental Any necessary charges the depositary or
custodian have to pay on any ADS or
ordinary share underlying an ADS, for
example, stock transfer taxes, stamp duty
or withholding taxes
Payment of Taxes
The depositary may deduct the amounts of taxes owed from any payments to
you. It may also sell deposited securities, by public or private sale, to pay
any taxes owed. You will remain liable if the proceeds of the sale are not
enough to pay the taxes. If the depositary sells deposited securities, it will,
if appropriate, reduce the number of ADSs to reflect the sale and pay to you
any proceeds, or send to you any property remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
If SmartForce: Then:
Changes the nominal or par The cash, shares or other securities
value of its ordinary shares received by the depositary will become
deposited securities.
Reclassifies, splits up or Each ADS will automatically represent its
consolidates any of the equal share of the newly deposited
deposited securities securities.
Distributes securities on The depositary will, when SmartForce asks
the ordinary shares that them to, distribute some or all of the
are not distributed to you securities it received, or cash, or other
consideration in lieu of the securities.
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Amendment and Termination
Amendment of the Deposit Agreements. SmartForce may agree with the
depositary to amend the deposit agreements and the ADSs without your consent
for any reason. If the amendment adds or increases fees or charges, except for
taxes and other governmental charges or expenses of the depositary, or
prejudices an important right of ADS holders, it will only become effective 30
days after the depositary notifies you of the amendment. At the time an
amendment becomes effective, you are considered, by continuing to hold your
ADSs, to agree to the amendment and to be bound by the ADSs and the amended
deposit agreements.
Termination of the Deposit Agreements. The depositary will terminate the
deposit agreements if SmartForce asks it to do so. The depositary may also
terminate the deposit agreements if it has told SmartForce that it would like
to resign and SmartForce has not appointed a new depositary bank within 90
days. In both cases, the depositary must notify you at least 30 days before
termination.
After termination, the depositary and its agents will be required to do only
the following under the deposit agreements:
. advise you that the deposit agreements are terminated;
. collect distributions on the deposited securities; and
. deliver ordinary shares and other deposited securities upon cancellation
of ADRs.
One year after termination, the depositary will, if practical, sell any
remaining deposited securities by public or private sale. After that, the
depositary will hold the money it received on the sale, as well as any other
cash it is holding under the deposit agreements for the pro rata benefit of the
ADR holders that have not surrendered their ADRs. It will not invest the money
and has no liability for interest.
Limitations on Obligations and Liability to ADS Holders
Limitations on SmartForce's Obligations and the Obligations of the
Depositary; Limitations on Liability to Holders of ADSs. The deposit
agreements expressly limit SmartForce's obligations and the obligations of the
depositary. They also limit SmartForce's liability and the liability of the
depositary. SmartForce and the depositary:
. are only obligated to take the actions specifically described in the
deposit agreements without negligence or bad faith;
. are not liable if either party is prevented or delayed by law or
circumstances beyond its control from performing their obligations under
the deposit agreements;
. are not liable if either party exercises discretion permitted under the
deposit agreements;
. have no obligation to become involved in a lawsuit or other proceeding
related to the ADSs or the deposit agreements on your behalf or on behalf
of any other party; and
. may rely upon any documents they believe in good faith to be genuine and
to have been signed or presented by the proper party.
In the depositary agreements, SmartForce agrees to indemnify the depositary
from any liability which may arise out of acts performed or omitted by the
depositary other than those arising out of the depositary's bad faith or
negligence.
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Requirements for Depositary Actions
Before the depositary will issue or register a transfer of an ADS, make a
distribution on an ADS, or permit withdrawal of ordinary shares, the depositary
may require:
. payment of stock transfer or other taxes or other governmental charges and
transfer or registration fees charged by third parties for the transfer of
any ordinary shares or other deposited securities;
. production of satisfactory proof of the identity and genuineness of any
signature or other information it considers necessary; and
. compliance with regulations it may establish, from time to time,
consistent with the deposit agreements, including presentation of transfer
documents.
The depositary may refuse to deliver, transfer or register transfers of ADRs
generally when the transfer books of the depositary, SmartForce's transfer
books or those of The Depositary Trust Company, are closed or at any time if
the depositary or SmartForce thinks it is advisable to do so.
Your Right to Receive the Shares Underlying your ADSs
You have the right to cancel your ADSs and withdraw the underlying ordinary
shares at any time except:
. When temporary delays arise because:
--the transfer books are closed by SmartForce or the depositary;
--the transfer of ordinary shares is blocked to permit voting at a
shareholders' meeting; or
--SmartForce is paying a dividend on the ordinary shares;
. When you or other ADS holders seeking to withdraw ordinary shares owe
money to pay fees, taxes and similar charges; or
. When it is necessary to prohibit withdrawals to comply with any laws or
governmental regulations that apply to ADSs or to the withdrawal of
ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the
deposit agreements.
Pre-Release of ADSs
In limited circumstances, subject to the provisions of the deposit
agreements, the depositary may issue ADRs before deposit of the underlying
ordinary shares. This is called a pre-release of the ADS. The depositary may
also deliver ordinary shares upon cancellation of pre-released ADSs, even if
the ADSs are cancelled before the pre-release transaction has been closed out.
A pre-release is closed out as soon as the underlying ordinary shares are
delivered to the depositary. The depositary may receive ADSs instead of
ordinary shares to close out a pre-release. The depositary may pre-release ADSs
only under the following conditions:
(1) before or at the time of the pre-release, the person to whom the
pre-release is being made must represent to the depositary in writing that
it or its customer owns the ordinary shares or ADRs to be deposited;
(2) the pre-release must be fully collateralized with cash or other
collateral that the depositary considers appropriate; and
(3) the depositary must be able to close out the pre-release on not more
than five business days' notice. In addition, the depositary will limit the
number of ADSs that may be outstanding at any time as a result of
pre-release, although the depositary may disregard the limit from time to
time, if it thinks it is appropriate to do so.
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Disclosure of Interests
By acquiring ADSs, you agree to comply with SmartForce's memorandum and
articles of association and the laws of Ireland regarding any disclosure
requirements regarding ownership of ordinary shares, all as if the ADSs were,
for this purpose, the ordinary shares they represent. By purchasing ADSs, you
also agree to be bound by provisions of the deposit agreements mandating
compliance with the disclosure requirements of Irish company law.
As a public company, the Irish Companies Act, 1990, and SmartForce's
articles of association will permit SmartForce and its directors to request
information from you related to your ownership of the ADSs issued by
SmartForce. Irish law and SmartForce's articles of association impose penalties
for failing to comply with the disclosure requirements, including the
possibility of having the voting rights of the ordinary shares underlying the
ADSs withdrawn, losing the right to distributions or criminal penalties.
To facilitate compliance with the notification requirements, ADS holders may
deliver any notification to the depositary, and the depositary will, as soon as
practicable, forward the notification to SmartForce and, to the extent
practicable and as permitted by applicable law, any authorities in Ireland as
specified by the ADS holder.
Information Regarding the Depositary
The depositary is The Bank of New York, a New York banking corporation
established in 1784. It does not have a limited life. It does not have a
registration number or a registered office. Its principal executive and
administrative offices are located at 101 Barclay Street, New York, NY 10286.
If the depositary becomes insolvent, the deposited securities which are
represented by ADSs would be distributed to the ADS holders entitled to them
after surrender of the holders' ADSs, payment of the fees of the depositary,
and payment of any applicable taxes or governmental charges, as permitted by
the terms of the ADSs. Under those circumstances, the deposited securities are
not subject to the claims of the depositary's creditors.
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DESCRIPTION OF CENTRA'S CAPITAL STOCK
General
Centra is authorized to issue 100,000,000 shares of common stock, $0.001 par
value, and 10,000,000 shares of undesignated preferred stock, $0.001 par value.
The following contains a summary of all of the material terms of Centra's
capital stock.
Common Stock
As of March 18, 2002, there were 25,444,085 shares of Centra common stock
outstanding. The shares were held of record by 227 stockholders. Holders of
Centra common stock are entitled to one vote per share on all matters to be
voted upon by the Centra stockholders. Holders of Centra common stock are
entitled to receive their proportionate share of dividends, if any, declared
from time to time by the Centra board of directors out of funds legally
available for that purpose. In the event of Centra's liquidation, dissolution
or winding up, holders of Centra common stock are entitled to their
proportionate share of all assets remaining after payment of liabilities, after
taking into consideration the prior distribution rights of any preferred stock
then outstanding. Centra common stock has no preemptive or conversion rights or
other subscription rights. No redemption or sinking fund provisions apply to
the Centra common stock. All outstanding shares of Centra common stock are
fully paid and nonassessable.
Preferred Stock
No shares of Centra preferred stock are outstanding. The Centra board of
directors is authorized, without stockholder approval, from time to time to
issue up to an aggregate of 10,000,000 shares of preferred stock in one or more
series, each of the series to have such rights and preferences, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be determined by the board of directors. The
rights of the holders of common stock will be affected by, and may be adversely
affected by, the rights of holders of any preferred stock that may be issued in
the future. Issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for others to acquire, or of
discouraging others from attempting to acquire, a majority of Centra's
outstanding voting stock.
Registration Rights
Certain holders of shares of Centra common stock are entitled to require
Centra to register their shares under the Securities Act under certain
circumstances. These rights are provided under the terms of an agreement
between Centra and the holders of registrable securities, who are former
holders of Centra preferred stock which automatically converted into Centra
common stock upon completion of Centra's initial public offering. If Centra
registers any of its securities, either for its own account or for the account
of other security holders, the holders of registrable securities will be
entitled to include their shares of Centra common stock in the registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering. The holders of registrable securities may also
require Centra to use its best efforts to register all or a portion of their
registrable securities on Form S-3, provided that the proposed aggregate
offering price, based on the then-current public market price, is at least
$500,000. All registration expenses must be borne by Centra and all selling
expenses relating to registrable securities must be borne by the holders of the
securities being registered. After the merger, these holders will not be
entitled to require SmartForce to register the SmartForce ADSs issued in
respect of their registrable Centra securities.
Anti-Takeover Effects of Delaware Law and Centra's Charter and Bylaws
Delaware law and Centra's certificate of incorporation and bylaws could make
it more difficult to acquire Centra by means of a tender offer, a proxy
contest, open market purchases, removal of incumbent directors and
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otherwise. These provisions, summarized below, could discourage certain types
of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of Centra to first negotiate with Centra.
Centra adopted these provisions because it believes that the benefits of
increased protection of Centra's potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
Centra outweigh the disadvantages of discouraging takeover or acquisition
proposals because negotiation of these proposals could result in an improvement
of their terms.
Centra must comply with Section 203 of the Delaware General Corporation Law,
an anti-takeover law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
an interested stockholder. An "interested stockholder" includes a person who,
together with affiliates and associates, owns, or did own within three years
prior to the determination of interested stockholder status, 15% or more of the
corporation's voting stock. The existence of this provision generally will have
an anti-takeover effect for transactions not approved in advance by Centra's
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders. Section 203 does not apply to the merger and other transactions
described in this joint proxy statement/prospectus because these transactions
were approved by Centra's board of directors.
Centra's certificate of incorporation and bylaws require that any action
required or permitted to be taken by our stockholders must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing. In addition, special meetings of Centra's
stockholders may be called only by the board of directors or certain of
Centra's officers. Centra's bylaws also provide that Centra's board of
directors is divided into three classes, with each class serving staggered
three-year terms. These provisions may have the effect of deterring hostile
takeovers or delaying changes in the control or management of Centra.
Transfer Agent And Registrar
The transfer agent and registrar for the Centra common stock is American
Stock Transfer & Trust Company.
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COMPARISON OF SHAREHOLDER RIGHTS
Centra is a corporation incorporated under the laws of the State of
Delaware. The rights of Centra common stockholders are governed by Delaware law
and by Centra's certificate of incorporation and bylaws.
SmartForce is a public limited company organized under the laws of Ireland.
The rights of the holders of SmartForce ADSs are governed by Irish law,
SmartForce's memorandum and articles of association and the deposit agreements.
If the merger is completed, Centra common stockholders will become holders
of SmartForce ADSs and the rights of such former Centra common stockholders
will be governed by Irish law, the SmartForce memorandum and articles of
association and the deposit agreements.
While SmartForce and Centra believe that the following description covers
the material differences between the two companies' governing laws and
instruments, this summary may not contain all of the information that is
important to you. This summary is not intended to be a complete discussion and
it is qualified in its entirety to applicable Irish and Delaware laws and the
governing instruments of SmartForce and Centra. You should carefully read the
following summary as well as the other documents we refer to for a more
complete understanding of the differences between being a Centra common
stockholder and being a holder of SmartForce ADSs. For a description of the
rights of the holders of SmartForce's ADSs and Centra's common stock see
"Description of SmartForce Share Capital" and "Description of Centra Capital
Stock" on pages 88 and 98, respectively.
SmartForce's and Centra's respective organizational documents are on file
with the SEC and will also be sent to you upon request. See "Where You Can Find
More Information" on page 143. The following summarizes the material
differences between the rights of holders of Centra common stock and SmartForce
ADSs:
Board of Directors
Size of the Board of Directors. Delaware law permits the board of directors
to change the authorized number of directors by amendment to the bylaws or in
the manner provided in the bylaws unless the number of directors is fixed in
the certificate of incorporation, in which case a change in the number of
directors may be made only by amendment to the certificate of incorporation.
The Centra bylaws provide that the number of directors shall be determined by
resolution of the board of directors, but in no event shall be less than three.
Centra currently has four directors.
Under Irish law, companies must have at least two directors. SmartForce's
articles of association provide for a board size up to a maximum of ten
directors, subject to modification by shareholder resolution. SmartForce
currently has six directors.
Cumulative Voting. Delaware law only permits cumulative voting in the
election of directors if it is specifically provided for in the certificate of
incorporation. If cumulative voting for directors is permitted, each share of
stock normally having one vote may have a number of votes equal to the number
of directors to be elected. A stockholder may then cast all such votes for a
single candidate or allocate them among as many candidates as the stockholder
chooses. Centra's certificate of incorporation does allow cumulative voting for
the election of directors.
Cumulative voting is essentially unknown under Irish law. As a result,
holders of a majority of the ordinary shares entitled to vote may elect all of
the directors standing for election.
Classified Board of Directors. Delaware law permits, but does not require,
a classified board of directors. Centra's bylaws provide for a classified board
of directors that is divided into three classes, with each class serving a
three year term and only one class standing for election in any given year.
Having a classified board
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such as Centra's under which one-third of the directors of a corporation are
elected for terms of three years makes changes in the composition of the board,
and thus a potential change in control of a corporation, a lengthier and more
difficult process.
SmartForce's articles of association do not provide for a classified board
but instead provide for retirement by rotation. SmartForce's articles of
association provide that at each annual general meeting of shareholders, one
third of the directors, rounded down to the next whole number if it is a
fractional number, are required to retire from office. The retiring directors
are those who have been in office for the longest period of time since they
were last elected. Retirement for persons who became directors or were
reappointed on the same day is determined by lot, unless otherwise agreed.
Shareholders may reappoint any director who retires at an annual general
meeting. In contrast to a classified board, retirement by rotation is not based
upon the actual year or class of such director's appointment but such person's
length of tenure as a director for the company since such director's last
election.
Removal of Directors. Under Delaware law, a director of a corporation that
has a classified board of directors or cumulative voting may be removed only
with cause unless otherwise provided in the corporation's certificate of
incorporation. Centra's bylaws require the vote of the holders of at least
two-thirds of the stock issued, outstanding and entitled to vote at an election
of directors, to remove a director for cause.
Under the Irish Companies Acts, the shareholders of a company may, by
ordinary resolution, remove a director provided that shareholders have been
given no less than 28 days prior notice of such proposed resolution.
Filling Vacancies on the Board of Directors. Delaware law permits vacancies
and newly created directorships to be filled by a majority of the remaining
directors unless otherwise provided in the certificate of incorporation or
bylaws. Each director elected in this manner holds office until his or her
successor is elected at the next annual meeting at which the class to which the
directorship belongs is to be elected or at a special meeting called for that
purpose. Centra's bylaws provide that any vacancy on the board may be filled by
a majority of the directors then in office.
Under SmartForce's articles of association, shareholders may appoint a
person as a director to fill a vacancy created by retirement or by increasing
the size of the board. The board of directors may also appoint a person as a
director either to fill a vacancy or as an additional director. As a matter of
practice, any director appointed by the board in this manner will serve until
the company's next annual general meeting of shareholders and will be subject
to re-election at that meeting although this is not required under SmartForce's
articles of association.
Shareholders' Meetings; Voting
Annual Shareholders' Meetings. Delaware law requires an annual meeting of
stockholders. Under Centra's bylaws, an annual meeting of stockholders shall be
held at a place and time designated by the board of directors.
Under Irish law, a general meeting of shareholders must be held each year in
Ireland unless either the shareholders entitled to attend and vote at the
meeting unanimously consent in writing to the meeting being held elsewhere or a
resolution has been passed at the preceding annual general meeting providing
that the meeting be held elsewhere or the articles of association of the
company do not provide that the annual general meeting shall be held in
Ireland. Annual general meetings must be held once every year. However, not
more than fifteen months may elapse between these meetings. The Irish Minister
for Enterprise, Trade and Employment may, on the application of any
shareholder, call or direct the calling of an annual general meeting if the
meeting is not held within the required time period.
Special or Extraordinary Shareholders' Meetings. Under Delaware law, a
special meeting of stockholders may be called by the board of directors or by
any other person authorized to do so in the certificate of
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incorporation or the bylaws. The Centra bylaws and certificate of incorporation
authorize Centra's chief executive officer, president or chairman of the board
of directors to call a special meeting of stockholders and directs such persons
to call such a meeting upon the written request of a majority of Centra's board
of directors.
Extraordinary general meetings of SmartForce shareholders may be held either
within or outside Ireland and may be called by either the board of directors or
at the request of shareholders holding not less than one-tenth of the company's
outstanding voting share capital.
Notice of Shareholders' Meetings. Under Delaware law, written notice of
general and special meetings of Centra stockholders must be given not less than
ten nor more than sixty days before the date of the meeting.
Unless all the shareholders of a company and the company's auditors consent
to shorter notice, Irish company law requires at least 14 days written notice
of a meeting, except that an annual general meeting or a meeting convened for
the passing of a special resolution requires at least 21 days written notice.
Meetings for the passing of a special resolution may also be called on shorter
notice if so agreed by a majority in number of the shareholders who together
hold not less than 90% in nominal value of the shares giving the right to
attend and vote at such meeting. Extended notice of not less than 28 days is
required when resolutions of an annual general meeting relate to the
appointment of an auditor other than the retiring auditor or provide expressly
that a retiring auditor shall not be reappointed or resolutions at a general
meeting relate to the removal of a company's auditors before the expiration of
their term of office or the appointment of an auditor to fill a vacancy or the
removal of a director before the expiration of his term in office or to appoint
someone as a director in place of the removed director at the meeting at which
he is removed.
The terms of any resolution, whether special or otherwise, before a general
meeting may be amended by ordinary resolution moved at the meeting provided
that the terms of the resolution as amended will still be such that adequate
notice of the intention to pass the same can be deemed to have been given.
Quorum. Under Centra's bylaws, the holders of a majority of Centra's stock
that is issued, outstanding and entitled to vote upon the business to be
transacted at the meeting, if present, in person or by proxy, constitutes a
quorum.
Under SmartForce's articles of association, three or more shareholders
present in person or by proxy, being entitled to vote upon the business to be
transacted at the meeting and who together hold not less than one-third of the
issued voting shares of SmartForce, constitute a quorum at shareholders'
meetings.
Voting at Shareholders' Meetings. Under Delaware law, a company's
certificate of incorporation and bylaws govern stockholders' voting rights.
Centra's certificate of incorporation entitles each common stockholder to one
vote for each share held on all matters submitted to a vote of the
stockholders. Delaware law also provides that the right to vote by written
ballot may be restricted if so provided in the certificate of incorporation.
Under Centra's certificate of incorporation, the election of directors need not
be by ballot unless the Centra bylaws so provide. The Centra bylaws provide
that no vote on the election of directors need be by ballot, unless requested
by a stockholder present in person or represented by proxy at the meeting and
entitled to vote in the election. Generally, a plurality of votes cast for the
election of a director, and a majority of votes cast for other matters shall
decide the matter, except for such matters for which a larger vote is required
by law or Centra's certificate of incorporation or bylaws.
Under Irish law, the Companies Acts of Ireland and a company's articles of
association govern shareholders' voting rights. Voting is by a show of hands at
a shareholder meeting unless a demand is duly made for a "poll" which takes
into account all votes cast at that meeting by shareholders attending such
meeting either in person or by proxy. A poll may be demanded by any of the
following:
. the chairman of the meeting;
. at least three shareholders present, in person or by proxy, entitled to
vote at the meeting;
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. any shareholder or shareholders present, in person or by proxy,
representing not less than one-tenth of the total voting rights of all the
shareholders entitled to vote at the meeting; or
. any shareholder or shareholders present, in person or by proxy, holding
shares conferring the right to vote at the meeting being shares on which
there have been paid up sums in the aggregate equal to not less than
one-tenth of the total sum paid up on all the shares conferring that right.
Where there is an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting is entitled to a casting vote in addition to
any other vote he may have.
SmartForce's articles of association provide that votes may be given either
personally or by proxy. Subject to any rights or restrictions for the time
being attaching to any class or classes of shares, on a show of hands, each
shareholder present in person, and every proxy, shall have one vote provided
that no individual shall have more than one vote and, on a poll, each
shareholder present in person and every proxy shall have one vote for each
share of which he or she is the holder.
Under SmartForce's articles of association, holders of ordinary shares are
entitled to one vote per share on all matters to be voted upon by the
shareholders. Under Irish law, a majority of the votes cast is required to pass
ordinary resolutions; however, a 75% majority of the votes cast is required to
pass special resolutions. Examples of special resolutions are resolutions:
. to approve any amendment to a company's memorandum or articles of
association;
. to change a company's name;
. to alter the company's capital structure in certain respects;
. to change or amend the rights of shareholders; and
. to permit the company to issue new shares for cash without applying
shareholders' preemptive rights.
For a discussion of voting rights in mergers and other fundamental
transactions, see "--Mergers and Other Fundamental Transactions" on page 104.
Inspection of Shareholders Lists and Other Records. Delaware law allows any
stockholder to inspect and copy the stockholders list for a purpose reasonably
related to such person's interest as a stockholder.
Except when closed in accordance with the provisions of the Companies Acts
of Ireland, the register and index of the names of the shareholders in an Irish
company may be inspected during business hours by its shareholders, without
charge and by any other person upon payment of a nominal charge. Copies may
also be obtained on payment of a charge.
The shareholders of an Irish company may also, without charge, during
business hours, inspect the minutes of proceedings of any general meeting of
the company and obtain copies of any such minutes upon payment of a charge.
The board of directors of an Irish company is required to present to its
shareholders at each annual general meeting the company's statutory financial
statements and a report by the directors on the company's state of affairs.
Unless otherwise determined by the directors of SmartForce, the shareholders of
SmartForce, including the holders of SmartForce ADSs, have no rights to inspect
the accounting records of SmartForce or minutes of meetings of its directors.
Certain registers required to be kept by an Irish company are open to public
inspection, and service contracts of directors of the company, which have at
least three years unexpired or require at least three years notice to
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terminate without compensation, must be available for inspection by
shareholders during business hours, without charge.
Actions by Written Consent of Shareholders. Under Delaware law, any action
required to be taken or which may be taken at an annual or special meeting of
stockholders may be taken without a meeting and without prior notice if a
consent in writing is signed by the holders of outstanding stock having not
less than the minimum number of votes necessary to authorize such action at a
meeting at which all shares entitled to vote were present and voted. Delaware
law allows a corporation to eliminate the ability of stockholders to act by
written consent. Elimination of written consents of stockholders could lengthen
the amount of time required to take stockholder actions because certain actions
by written consent are not subject to the minimum notice requirements of a
stockholders' meeting, and could deter hostile takeover attempts. Without a
stockholders' written consent provision, a holder or group of holders
controlling a majority in interest of a corporation's capital stock would not
be able to amend such corporation's bylaws or remove its directors pursuant to
a stockholders' written consent. The Centra certificate of incorporation and
the Centra bylaws eliminate the ability of stockholders to act by written
consent.
Under Irish law, a company's articles of association may provide that a
resolution in writing executed by or on behalf of each shareholder who would
have been entitled to vote upon it if it had been proposed at a general meeting
will be as valid and effective as if it had been passed at a general meeting
properly convened and held. SmartForce's articles of association contain such a
provision.
Mergers and Other Fundamental Transactions
Business Combinations and Share Acquisitions. Section 203 of the Delaware
General Corporation Law provides that certain "business combinations" by
Delaware corporations with "interested stockholders" are subject to a
three-year moratorium unless specified conditions are met or unless the
corporation elects in its certificate of incorporation or bylaws to opt out of
Section 203. Centra has not elected to opt out of Section 203.
Takeovers of certain Irish public companies are regulated by the Irish
Takeover Panel Act, 1997, (the "Takeover Act"). The Takeover Act provides a
framework within which takeovers must be conducted. It also provides that,
unless otherwise agreed by the Irish Takeover Panel, a mandatory offer must be
made in circumstances where:
. any person, or any persons acting in concert, acquire control of a
relevant company; or
. any person, or any persons acting in concert, who control a relevant
company but do not hold securities conferring in the aggregate more than
50% of the voting rights in that company acquire in any 12 month period
additional securities conferring in the aggregate more than 1% of the
voting rights in that company.
"Control" in relation to a relevant company means the holding, whether directly
or indirectly, of securities of the company that confers, in aggregate, not
less than 30% of the voting rights in that company. SmartForce is a "relevant
company" for the purposes of the Takeover Act.
Irish law requires prospective purchasers of a company's voting securities
to provide advance notice of an acquisition of its shares to the Irish Minister
for Enterprise, Trade and Employment if, after such acquisition, that person or
entity or group of persons can control 25% or more of the voting rights in such
company and specific financial thresholds are exceeded. Subject to several
exceptions, such person or entity or group of persons must also notify the
Minister of any subsequent acquisition of ordinary shares in SmartForce or
SmartForce ADSs. Under Irish law, title to the ordinary shares or ADSs acquired
will not pass unless either clearance for such acquisition is obtained from the
Minister or the prescribed statutory period following notification of such
acquisition lapses without the Minister having made an order.
Disclosure Requirements. Under Irish law, where a person either acquires an
interest in or ceases to be interested in or becomes aware that he has acquired
an interest in or has ceased to be interested in 5% or more of
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the issued voting share capital of any class of a public limited company, such
as SmartForce, then such person is obliged to notify the company, in the
prescribed manner and normally within five business days, of the interest which
he has or had in its shares and of certain circumstances and events affecting
that interest. Any interest of a person in a SmartForce ADS would be regarded
as an interest in the ordinary shares for this purpose. Failure by any person
to notify punctually and properly is an offense under Irish law.
Additionally, no right or interest whatsoever in respect of any of the
relevant shares will be enforceable, whether directly or indirectly, by action
or legal proceeding by the person having such an interest should they fail to
notify the company of such interest. Application may be made to the Irish
courts to remove this restriction, but this would not be successful unless the
court was satisfied that the failure to notify was not due to any deliberate
act or omission on the part of the applicant or that on other grounds it is
just and equitable to grant relief.
United States federal securities laws contain similar disclosure
requirements, and failure to comply with such disclosure requirements may
result in a United States court restricting the rights of the shares acquired,
including the right to vote such shares, until the acquiring person provides
the required disclosure.
In addition, Section 81 of the Irish Companies Act, 1990, provides that a
public limited company, such as SmartForce, may by notice in writing require a
person whom the company knows or has reasonable cause to believe to be, or to
have been at any time during the three years immediately preceding the date on
which the notice is issued, interested in shares comprised in the company's
"relevant share capital" to confirm that fact or to indicate whether or not
that is the case, and where he holds or has during the relevant time held an
interest in such shares, to give such further information as may be required
relating to his interest and any other interest in the shares of which he is
aware. The disclosure must be made within such reasonable period as may be
specified in the relevant notice which may, depending on the circumstances, be
as short as one or two days.
A party's obligation to notify a company of his, her or its interest in the
company's shares arises, subject to certain exceptions, in connection with
shares in which:
. his or her spouse, or minor child is interested;
. a corporate body is interested and either:
--that corporate body is or its directors are accustomed to act in
accordance with that person's directions or instructions; or
--that person exercises or controls the exercise of one-third or more of
the voting power of that corporate body; or
. another party is interested and the person and that other party are
parties to an agreement being an agreement which provides for the
acquisition by one or more of the parties to it of interests in shares of
the company, which imposes obligations or restrictions on any one or more
of the parties with respect to the use, retention or disposal of such
interests acquired pursuant to such agreement and pursuant to which any
interest in the company's shares is in fact acquired by any of the parties.
The holding of a SmartForce ADS evidencing a SmartForce ADR would generally
constitute an interest in the underlying ordinary share.
Where a company serves a notice pursuant to Section 81 of the Irish
Companies Act, 1990 on a person who is or was interested in shares of the
company and that person fails to give the company any information required by
the notice within the time specified in the notice, the company may apply to
the court for an order directing that any transfer of those shares will be
void, no voting rights in respect of such shares may be exercised, no further
shares shall be issued in respect of such shares or otherwise to such person
and, other than in a liquidation, no payment, including dividends, shall be
made in respect of such shares. Such restrictions may also void any agreement
to transfer such shares. In addition, a person who fails to comply with such a
request is guilty of an offense under Irish law.
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Shareholder Voting on Mergers and Similar Transactions. Delaware law
generally requires that the holders of a majority of the outstanding voting
shares of the acquiring and target corporations approve statutory mergers.
Delaware law does not require a stockholder vote of the surviving corporation
in a merger (unless the corporation provides otherwise in its certificate of
incorporation) if (i) the merger agreement does not amend the existing
certificate of incorporation; (ii) each share of the surviving corporation
outstanding before the merger is equal to an identical outstanding or treasury
share after the merger; and (iii) the number of shares to be issued by the
surviving corporation in the merger does not exceed 20% of the shares
outstanding immediately prior to the merger. Irish law contains a similar
exception to its voting requirements for reorganizations where stockholders or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity. Delaware law also requires that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the voting shares of the corporation transferring such assets.
The Companies Acts of Ireland provide for schemes of arrangement, which are
arrangements or compromises between a company and its shareholders, or any
class of them, or its creditors, or any class of them, and are used for certain
types of reconstructions and amalgamations. They require the approval, at a
meeting convened by the court, of a majority in number representing 75% in
value of the shareholders, or class of shareholders, or creditors, or class of
creditors, as the case may be, present and voting, either in person or by proxy
at the meeting, and the sanction of the courts. Once approved and sanctioned,
the compromise or arrangement is binding on all shareholders, or the relevant
class of shareholders, or on all creditors, or the relevant class of creditors,
as the case may be, and also on the company. A dissenting shareholder would
have no dissenters' rights.
The Companies Acts of Ireland also provide that when a takeover offer is
made for the shares of certain classes (except those already owned by the
offeror) of a company incorporated in Ireland and, within four months of the
date of the offer the offeror has, by virtue of acceptances of the offer,
acquired or contracted to acquire not less than 80% in value of the shares to
which the offer relates, the offeror may before the expiration of six months
after the date of the offer by notice compulsorily require shareholders of the
relevant class who do not accept the offer to transfer their shares on the
terms of the offer. A dissenting shareholder may apply to the court within one
month of the date on which such notice was given objecting to the compulsory
transfer or its terms. The court in unlikely (in the absence of fraud or
oppression) to exercise its discretion to order that the compulsory transfer
not take effect, but it may vary the terms of the transfer as it thinks fit.
Where in consequence of such an offer 80% in value of the shares of the
relevant company have become beneficially owned by the offeror then the offeror
must, within 1 month of the date of acquiring such shares, give notice of that
fact to all outstanding shareholders and any such shareholder may, within three
months of the giving of such notice, require the offeror to acquire his or her
shares on the terms of the offer or such other terms as may be agreed or as the
court, on the application of either party, may order.
Appraisal or dissenters' rights. Under Delaware law, holders of shares of
any class or series have the right, in certain circumstances, to dissent from a
merger or consolidation by demanding payment in cash for their shares equal to
the fair value of such shares, exclusive of any element of value arising from
the accomplishment or expectation of the merger or consolidation, as determined
by a court in an action timely brought by the corporation or the dissenters.
Delaware law grants dissenters appraisal rights only in the case of mergers or
consolidations and not in the case of a sale or transfer of assets or a
purchase of assets for stock, regardless of the number of shares being issued.
Furthermore, no appraisal rights are available for shares of any class or
series that are listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 shareholders, unless the agreement of merger or consolidation requires
the holders thereof to accept for such shares anything other than:
. shares of stock of the surviving corporation;
. shares of stock of another corporation which shares of stock are either
listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 shareholders;
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. cash in lieu of fractional shares of the stock described in the first two
points above; or
. some combination of the above.
In addition, appraisal rights are not available for any shares of the
surviving corporation if the merger did not require the vote of the
stockholders of the surviving corporation.
While Irish law does not generally provide for dissenters' or appraisal
rights, if a shareholder applies to a court as described under "--Shareholder
Voting on Mergers and Similar Transactions" above, the court may specify such
terms for the acquisition as it considers appropriate.
Interested Transactions
Interested Director Transactions. Under Delaware law, certain contracts or
transactions in which one or more of a corporation's directors has an interest
are not void or voidable because of such interest, provided that certain
conditions, such as obtaining the required approval and fulfilling the
requirements of good faith and full disclosure, are met. Under Delaware law,
either (i) the stockholders or the board of directors must approve any such
contract or transaction after full disclosure of the material facts, or (ii)
the contract or transaction must have been just and reasonable or fair as to
the corporation at the time it was approved. Under Delaware law, if board
approval is sought, the contract or transaction must be approved by a majority
of the disinterested directors even if less than a majority of a quorum.
Irish law requires each director of a company to declare the nature of any
direct or indirect interest which the director may have in a proposed contract
with the company at a meeting of the directors before the board votes to
approve the contract. Any interested director must generally abstain from a
vote on any contract or arrangement or any other proposal in which he or she
has any material interest and which conflicts or may conflict with the
interests of the company.
The articles of association of SmartForce provide that if any question
arises at any directors' meeting regarding the materiality of a director's
interest in a proposed transaction or the right of a director to vote on the
proposal and the question is not resolved by the director voluntarily agreeing
to abstain from voting, such question may, before the conclusion of the
meeting, be referred to the meeting of directors without participation of the
director concerned.
The articles of association of SmartForce provide that the shareholders of
SmartForce may, by ordinary resolution, suspend or relax these provisions to
any extent, or ratify any transaction not duly authorized by reason of a
contravention of SmartForce's articles of association.
Irish law also regulates various types of transactions between SmartForce
and its directors or any persons connected with its directors. These provisions
require shareholder approval for long-term employment contracts with directors
and for SmartForce's purchase or sale of assets from or to a director or any
person connected with any of its directors.
Loans to Officers and Employees. Under Delaware law, a corporation may make
loans to, guarantee the obligations of or otherwise assist its officers or
other employees and those of its subsidiaries including directors who are also
officers or employees, when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation.
Under Irish law, a company may not, except in certain specified
circumstances, make a loan or a quasi loan to, or enter into a credit
transaction as creditor for, or enter into a guarantee or provide any security
in connection with a loan, quasi-loan or credit transaction made by another
person for any of its directors or any of the directors of its holding company
or a person connected with such a director. This prohibition does not prevent a
company,
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however, from entering into an arrangement with a director or a person
connected with a director if the value of the arrangement and the total amount
outstanding under any other arrangements by the company with any director or
any person connected with a director is together less than 10% of the company's
relevant assets.
Amendments to Organizational Documents
Amendments to Organizational Documents. Under Delaware law, the board of
directors of a Delaware corporation may propose amendments to a corporation's
certificate of incorporation. Proposed amendments must be approved by the
affirmative vote of the holders of a majority of the voting power of the shares
entitled to vote. In addition, Delaware law requires that certain amendments
must be approved by a separate vote of a class or series of stock if, among
other things, the amendment would adversely affect the rights or preferences of
such shares. The power to adopt, amend or repeal the bylaws is vested in the
stockholders entitled to vote, unless the certificate of incorporation confers
the power to adopt, amend or repeal the bylaws upon the directors. The Centra
certificate of incorporation and bylaws confers the power to adopt, amend or
repeal the Centra bylaws on the Centra board of directors. Furthermore, except
for certain specified exceptions, Centra's bylaws also confer the power to
alter, amend or repeal its bylaws, or to adopt new bylaws, on the holders of a
majority of Centra's issued and outstanding stock entitled to vote thereon.
Under Irish law, the shareholders of a company have the authority to alter
most provisions of that company's memorandum and all of the provisions of its
articles of association by a special resolution, subject, in the case of
certain amendments to the memorandum of association, to the rights of
dissenting shareholders to apply to the courts to cancel the amendments. The
board of directors is not authorized to change the memorandum or the articles
of association. Amendments affecting the rights of the holders of any class of
shares may, depending on the rights attaching to such class and the nature of
the amendments, also require approval of the class affected at a separate class
meeting, although an amendment so approved will be subject to cancellation by
the court if the holders of at least 10% of the shares of that class apply to
the court for the cancellation of the amendment.
Exculpation and Indemnification
Indemnification and Limitation of Liability. Delaware law permits
corporations to adopt a provision in their charters eliminating the liability
of a director to the corporation or its stockholders for monetary damages for
breach of the director's fiduciary duty of care. It also provides that
statutory indemnification shall not be deemed exclusive of any other rights
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise. Under Delaware law, such provision may not eliminate or limit
director monetary liability for:
. breaches of the director's duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law;
. the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or
. transactions in which the director received an improper personal benefit.
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve Centra or its directors from
the necessity of complying with, United States federal or state securities
laws, or affect the availability of non-monetary remedies such as injunctive
relief or rescission. The Centra certificate of incorporation and bylaws
eliminate the liability of directors to the fullest extent permissible under
Delaware law, as such law exists currently or as it may be amended in the
future.
Irish law prohibits a company from exempting any of its directors, officers
or auditors from, or indemnifying any of them against, any liability arising
from any negligence, default, breach of duty or breach of trust of which he or
she may be guilty in relation to the company. However, Irish law does permit a
company to indemnify any of its directors, officers or auditors against any
liability incurred by him in defending any
108
proceedings, whether civil or criminal, if judgment is given in his favor or in
which he is acquitted. Furthermore, in certain limited circumstances, a company
may indemnify such persons where the court determines that, although that
person is, or may be liable, he or she acted honestly and reasonably and that,
having regard to all the circumstances, that person ought fairly to be excused.
SmartForce's articles of association contain such an indemnity.
Centra has agreed to indemnify its directors against certain liabilities and
expenses incurred by such persons in connection with claims made by reason of
their being such a director for Centra. Centra has obtained directors and
officers insurance providing indemnification for certain of its directors,
officers, affiliates, partners or employees for certain liabilities.
SmartForce (USA), a subsidiary of SmartForce, has agreed to indemnify
SmartForce's officers and directors serving at the request of SmartForce USA as
directors of SmartForce against certain liabilities and expenses incurred by
such persons in connection with claims made by reason of their being such a
director or officer. SmartForce has obtained directors and officers insurance
providing indemnification for certain of its directors, officers, affiliates,
partners or employees for certain liabilities.
Issuance of Shares; Dividends; Repurchase of Shares
Issuance of Shares. Irish company law restricts the power of the directors
of a company, other than under certain employee share plans, to issue ordinary
shares unless either the articles of association of such company or a
resolution of the shareholders authorizes the board of directors to do so. No
such authority may be given for a period in excess of five years. By virtue of
a special resolution passed at an extraordinary general meeting on January 26,
2000, the board has the necessary authority for a five year period from the
date of such meeting.
Delaware law does not contain such a restriction.
Dividends and Repurchases of Shares. Delaware law permits a corporation to
declare and pay dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year as long as the amount of capital of the corporation
following the declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets. In
addition, Delaware law generally provides that a corporation may redeem or
repurchase its shares only if such redemption or repurchase would not impair
the capital of the corporation. Centra has not paid any dividends on its common
stock since the date of its incorporation.
Under Irish law, a company may only pay dividends out of profits legally
available for that purpose. Available profits are defined as a company's
accumulated, realized profits, to the extent not previously distributed or
capitalized, less its accumulated, realized losses, to the extent not
previously written off in a reduction or reorganization of capital. A public
limited company may make a distribution only if and to the extent that, at the
time of the distribution, the amount of its net assets is not less than the
aggregate of its paid up share capital and undistributable reserves.
Under Irish law, the shareholders of a company are entitled to receive such
dividends as may be recommended by its board of directors and approved by the
shareholders and/or such interim dividends as its board of directors may
decide. Any dividend recommended by the SmartForce board may be in such
currency or currencies as the SmartForce board decides. SmartForce has not paid
any dividends on its ordinary shares since the date of its incorporation.
SmartForce intends that any dividends, if and when declared, will be paid in
United States dollars.
Under Irish law, a company may, if authorized by its articles of
association, issue redeemable shares and purchase its own shares, including any
redeemable shares, and SmartForce has such authority in its articles of
association.
109
SmartForce may only redeem or purchase its shares if either such redemption
or purchase is made out of distributable profits or the shares are to be
canceled on redemption or purchase in which case such redemption or purchase
may be made out of the proceeds of a new issue of shares made for the purpose
of the redemption or purchase. In the case of a purchase other than on a stock
exchange recognized under Irish company law, the terms of the contract relating
to such purchase must first be authorized by a special resolution of its
shareholders and, in the case of a purchase on a recognized stock exchange, the
purchase must first be authorized by an ordinary resolution of the shareholders.
Preemptive Rights. Delaware law does not provide stockholders with
preemptive rights unless such rights are granted in the corporation's
certificate of incorporation. The Centra certificate of incorporation does not
grant preemptive rights.
In general, Irish company law prohibits companies from issuing any shares,
or rights to subscribe for or to convert any securities into shares, for cash
without first offering those shares, on a pro rata basis, to the existing
shareholders. These requirements may be disapplied for a period of up to five
years under a company's articles of association or by a special resolution
passed by the company's shareholders. These preemptive rights were disapplied
by a special resolution of the shareholders of SmartForce in respect of all of
its authorized but unissued shares for the five year period from January 26,
2000. This disapplication may be renewed, varied or revoked at any time by a
special resolution of its shareholders.
Prohibition on Financial Assistance to Purchase Shares. Irish company law
prohibits SmartForce from giving any direct or indirect financial assistance to
any person, whether by means of a loan, guarantee, the provision of security or
other form of financial assistance, for the purpose of purchasing or
subscribing for any of its shares.
Delaware law has no such requirement.
Right to Sue
Shareholder Derivative Suits. Under Delaware law, a stockholder may only
bring a derivative action on behalf of the corporation if the stockholder was a
stockholder of the corporation at the time of the transaction in question or
his or her stock thereafter devolved upon him or her by operation of law.
Under Irish company law, shareholders do not generally have standing to
maintain proceedings arising from wrongs suffered by the company. There are,
however, exceptions available under equitable principles on a case-by-case
basis. For example, the controlling shareholders cannot perpetuate a fraud on
the minority shareholders or commit an act that is illegal or beyond the scope
of corporate authority. Additionally, if a company attempts to act on the
strength of a decision by a simple majority of votes where decisions call for
more than a simple majority, an individual shareholder may bring suit against
the company. In cases where controlling shareholders do not institute
proceedings in the name of the company, one or more of the aggrieved minority
shareholders may apply to the court to bring a derivative action. A minority
shareholder may also initiate proceedings in the company's name in limited
circumstances.
Class Action Suits. In contrast to a derivative action, Irish law permits
an action by a shareholder in his own right on the basis of the infringement of
his personal rights. A shareholder may commence a suit in a representative
capacity for himself and other similarly affected consenting shareholders.
Additionally, Irish law permits any shareholder to apply to the Irish courts
for appropriate relief for claims that the affairs of the company are being
conducted, or that the powers of the directors of the company are being
exercised, in a manner oppressive to shareholder interests.
Delaware and United States Federal law contain similar provisions.
110
Liquidation; Dissolution; Winding-Up
Dissolution. Under Delaware law, unless the board of directors approves a
proposal to dissolve, a dissolution must be approved by stockholders holding
100% of the total voting power of the corporation. If a dissolution is
initially approved by the board of directors, it may be approved by a simple
majority of the corporation's stockholders. Delaware law allows a corporation
to include in its certificate of incorporation a supermajority voting
requirement in connection with dissolutions initiated by the board. The Centra
certificate of incorporation contains no such supermajority voting requirement.
Irish law and SmartForce's articles of association provide that in the event
of a liquidation, dissolution or winding up of SmartForce, the assets remaining
for distribution to the holders of ordinary shares after payment of liabilities
and after provision has been made for each class of shares, if any, having
preference over the ordinary shares would be divided equally among the holders
of ordinary shares in proportion to the amounts paid up on the shares held by
them. A liquidator may, with the sanction of a special resolution of
SmartForce's shareholders and any other sanction required by the Irish
Companies Acts, 1963 to 2001, divide among the shareholders in cash or property
the whole or any part of SmartForce's assets and may vest any assets in
trustees upon trusts for the benefit of contributories. However, no
shareholders may be compelled to accept any assets upon which there is a
liability.
111
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined consolidated financial
information of SmartForce is based on the historical consolidated financial
statements of SmartForce and Centra at and for the twelve months ended December
31, 2001 and has been prepared to illustrate the effects of the acquisition of
Centra, as though such acquisition had occurred on January 1, 2001 for the
purposes of presenting the pro forma statements of operations and on December
31, 2001 for the purposes of presenting the pro forma balance sheet. This pro
forma information should be read in conjunction with the respective historical
financial statements and related notes thereto of SmartForce and Centra
incorporated by reference in this joint proxy statement/prospectus. See "Where
You Can Find More Information" on page 143.
For financial accounting purposes, the acquisition of Centra will be
accounted for using the purchase method of accounting. Accordingly, Centra's
assets and liabilities have been adjusted to reflect their fair values in the
pro forma condensed combined consolidated balance sheet as of December 31,
2001. The effects resulting from these adjustments have been reflected in the
pro forma condensed combined consolidated statements of operations. The pro
forma adjustments include, in the opinion of management, all adjustments
necessary to give pro forma effect to the acquisition as though such
transaction had occurred on January 1, 2001 for the purpose of presenting the
pro forma statements of operations and on December 31, 2001 for the purposes of
presenting the pro forma balance sheet.
The unaudited pro forma condensed combined consolidated financial
information is not necessarily indicative of how SmartForce's balance sheet and
results of operations would have been presented had the transaction referenced
above actually been consummated at the assumed dates, nor is it necessarily
indicative of presentation of SmartForce's balance sheet and results of
operations for any future period.
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SMARTFORCE PLC
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
December 31, 2001
--------------------------------------------
Historical
-------------------
Pro Forma
SmartForce Centra Adjustments Pro Forma
---------- -------- ----------- ---------
ASSETS
Current assets
Cash and cash equivalents................................ $ 65,134 $ 25,424 $ -- $ 90,558
Short term investments................................... 44,142 22,759 -- 66,901
Restricted cash.......................................... -- 100 -- 100
Accounts receivable, net................................. 102,373 9,654 -- 112,027
Inventories.............................................. 333 -- -- 333
Recoverable and deferred tax assets, net................. 2,406 -- -- 2,406
Prepaid expenses......................................... 21,079 1,250 -- 22,329
-------- -------- --------- --------
Total current assets.................................. 235,467 59,187 -- 294,654
Intangible assets............................................ 74,957 6,955 206,005 (h) 304,762
23,800 (g)
(6,955)(d)
Property and equipment, net.................................. 40,191 4,182 -- 44,373
Investments.................................................. 17,702 -- -- 17,702
Restricted cash.............................................. -- 549 -- 549
Other assets................................................. 27,877 104 -- 27,981
-------- -------- --------- --------
Total assets....................................... $396,194 $ 70,977 $ 222,850 $690,021
======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt..................... $ -- $ 1,563 $ -- $ 1,563
Accounts payable......................................... 4,502 1,463 -- 5,965
Accrued payroll and related expenses..................... 5,718 -- -- 5,718
Other accrued liabilities................................ 21,368 5,808 17,780 (e) 44,956
Deferred revenues........................................ 44,539 8,165 -- 52,704
-------- -------- --------- --------
Total current liabilities............................. 76,127 16,999 17,780 110,906
Non-current liabilities
Long-term debt, net of current maturities................ -- 2,631 -- 2,631
Minority equity interest................................. 307 -- -- 307
Other liabilities........................................ 210 -- -- 210
-------- -------- --------- --------
Total non current liabilities......................... 517 2,631 -- 3,148
Shareholders' equity
Ordinary shares.......................................... 7,574 26 1,062 (a) 8,636
(26)(c)
Additional paid-in capital............................... 298,367 110,446 266,526 (a) 564,893
(110,446)(c)
Accumulated profit/(loss)................................ 9,233 (57,725) 57,725 (c) 1,733
(7,500)(b)
Capital conversion reserve fund.......................... 623 -- -- 623
Capital redemption....................................... 296 -- -- 296
Deferred compensation.................................... -- (1,326) (3,671)(f) (3,671)
1,326 (c)
Other comprehensive income/(loss)........................ 3,459 (34) 34 (c) 3,459
Treasury stock........................................... (2) (40) 40 (c) (2)
-------- -------- --------- --------
Total shareholders' equity............................ 319,550 51,347 205,070 575,967
-------- -------- --------- --------
Total liabilities and shareholders' equity......... $396,194 $ 70,977 $ 222,850 $690,021
======== ======== ========= ========
See accompanying notes to the Unaudited Pro Forma Condensed Combined
Consolidated Financial Statements
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SMARTFORCE PLC
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
Year Ended December 31, 2001
-------------------------------------------
Historical
------------------- Pro Forma Pro
SmartForce Centra Adjustments Forma
---------- -------- ----------- --------
Revenues............................................. $260,875 $ 39,117 $ -- $299,992
Cost of revenues..................................... 43,064 7,057 -- 50,121
-------- -------- ------- --------
Gross profit...................................... 217,811 32,060 -- 249,871
Operating expenses:
Research and development.......................... 51,328 12,516 -- 63,844
Sales and marketing............................... 132,793 25,481 -- 158,274
General and administrative........................ 21,727 7,418 -- 29,145
Compensation charge for issuance of stock options. -- 887 1,456 (j) 2,343
Amortization of acquired intangibles.............. 10,158 1,316 5,170 (i) 16,644
Acquired research and development................. -- 2,200 -- 2,200
-------- -------- ------- --------
Total operating expenses...................... 216,006 49,818 (6,626) 272,450
-------- -------- ------- --------
Income/(Loss) from operations........................ 1,805 (17,758) (6,626) (22,579)
Interest income, net................................. 3,834 2,227 -- 6,061
Other expense, net................................... -- (379) -- (379)
Loss on investment................................... -- (772) -- (772)
Net exchange loss.................................... (797) -- -- (797)
-------- -------- ------- --------
Income/(Loss) before provision for income taxes...... 4,842 (16,682) (6,626) (18,466)
Provision for income taxes........................... (1,800) -- -- (k) (1,800)
-------- -------- ------- --------
Net Income/(Loss).................................... $ 3,042 $(16,682) $(6,626) $(20,266)
======== ======== ======= ========
Net Income/(Loss) per share--Basic................... $ 0.06 $ (0.68) $ (0.31)
======== ======== ========
Net Income/(Loss) per share--Diluted................. $ 0.05 $ (0.68) $ (0.31)
======== ======== ========
See accompanying notes to the Unaudited Pro Forma Condensed Combined
Consolidated Financial Statements
114
SMARTFORCE PLC
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
The unaudited pro forma condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles in
the United States after eliminating all material intercompany accounts and
transactions. The acquisition of Centra is being accounted for under the
purchase method of accounting.
The purchase price of Centra is $285.4 million and has been allocated as
follows:
Dollars in
Thousands
----------
Current and tangible assets................................ $ 64,022
Liabilities assumed........................................ 19,630
--------
Net assets.............................................. 44,392
--------
Core developed technology.................................. 6,600
Developed technology....................................... 4,200
In-process technology...................................... 7,500
--------
Technology.............................................. 18,300
--------
Trademark/tradename portfolio.............................. 300
Customer relationships..................................... 12,700
--------
Other identifiable intangible assets.................... 13,000
--------
Deferred compensation cost of unvested options............. 3,671
Implied goodwill........................................... 206,005
--------
Total purchase consideration............................... $285,368
========
Comprised of:
Stock consideration........................................ $267,588
Capitalized transaction costs.............................. 17,780
--------
Total purchase consideration............................... $285,368
========
The stock consideration has been arrived at as follows:
(i) Stock outstanding: shares of Centra common stock issued and outstanding
as of March 1, 2002 multiplied by (i) the merger ratio of 0.425 and (ii)
$21.69, being the five day average share price of our ADSs for 2 days
prior and 2 days post the announcement of the acquisition. This method
of calculating the share price is consistent with APB No. 16 and EITF
95-19 under U.S. GAAP.
(ii) Stock options: calculation of the fair value of the Centra options
outstanding as of March 1, 2002 using the Black-Scholes option valuation
method.
The following pro forma adjustments have been recorded to reflect the
acquisition:
Condensed Combined Consolidated Balance Sheet--adjustments to reflect the
acquisition as if it had occurred on December 31, 2001.
(a) The issuance of 13.3 million SmartForce ordinary shares, represented by
ADSs, and options for the issued and outstanding common stock and
outstanding options of Centra at a total value of $267.6 million. The
ordinary shares of SmartForce, represented by ADSs, will increase by
approximately $1.1 million and additional paid in capital will increase
by approximately $266.5 million.
115
(b) The $7.5 million of acquired in-process research and development will be
written off to expense in the period in which the closing of the
acquisition occurs. This write off of in-process research and
development is not reflected in the Unaudited Pro Forma Condensed
Consolidated Combined Statements of Operations because pro forma
adjustments are limited to those events that are expected to have a
continuing impact. The $7.5 million of acquired in-process research and
development represents SmartForce's management's estimate of the current
fair value of those specifically identified Centra's research and
development projects for which technological feasibility has not been
established and for which alternative future uses do not exist. In
estimating such current fair value, management considered the estimated
future after-tax cash flows attributable to these projects, which were
then discounted to present value utilizing appropriate discount rates
commensurate with the risks of reaching technological feasibility,
completing the in-process projects, and achieving the estimated cash
flows (the discount rate was 15%).
(c) Elimination of Centra's pre-acquisition shareholders' equity, as follows:
Dollars in
Thousands
----------
Ordinary shares........................................ $ 26
Additional paid-in capital............................. 110,446
Accumulated deficit.................................... (57,725)
Deferred compensation.................................. (1,326)
Other comprehensive income............................. (34)
Treasury stock......................................... (40)
--------
Total Centra shareholders' equity................... $ 51,347
========
(d) Elimination of Centra's pre-acquisition goodwill.
(e) Estimated transaction costs of $17.8 million consisting primarily of
reorganization costs, Irish capital duty costs, and financial advisor,
legal and other professional fees.
(f) Deferred compensation of $3.7 million arising from the intrinsic value
of the unvested options as of June 10, 2002, being the estimated date of
acquisition close. The intrinsic value of the unvested options was
calculated using the 5 day average price at date of announcement of
$21.69 and the exercise price of the unvested options. The deferred
compensation amount will change based on the intrinsic value of the
unvested options as at the closing date of the acquisition.
(g) Identifiable intangible assets, as follows:
Dollars in Amortization
Thousands Period Years
---------- ------------
Core developed technology................ $ 6,600 3
Developed technology..................... 4,200 3
Trademark/tradename portfolio............ 300 6 months
Customer relationships................... 12,700 10
-------
$23,800
=======
(h) Excess purchase price of $206.0 million as goodwill. The final figure
for goodwill will be increased by any reduction in net assets at the
date of closure of the acquisition. Centra's net assets at June 10, 2002
are currently estimated to be $43.0 million.
116
Condensed Combined Consolidated Statements of Operations--adjustments to
reflect the acquisition as if it had occurred on January 1, 2001.
(i) Amortization of acquired intangibles:
Dollars in
Thousands
----------
Core and developed technology.............................. $3,600
Trademark/tradename portfolio.............................. 300
Customer relationships..................................... 1,270
------
$5,170
======
The following are the assumptions used in determining the method and
term of amortization of each of the intangibles noted above:
(i) The core and developed technology intangibles will be amortized on a
straight-line basis over a period of 3 years.
(ii) The trademark/tradename portfolio will be amortized on a straight
line basis over a period of six months.
(iii) The customer relationships intangible will be amortized on a
straight-line basis over a period of 10 years.
(j) Compensation expense of $1.5 million for 12 months as a result of the
acquisition of the unvested options of Centra. This figure may change as
a result of a change in the intrinsic value of the options as of the
date of acquisition and any future option cancellations.
(k) No pro forma adjustment for the provision of income taxes is required as
the provision represents tax liabilities due to certain taxing
jurisdictions where income is generated.
The actual allocation of the purchase price will not occur until the closing
and will be based on the respective fair values of the assets and liabilities
of Centra at that time.
The unaudited pro forma condensed combined consolidated information reflects
our best estimates; however the actual financial position and results of
operations may differ from the pro forma amounts reflected herein because of
various factors, including, without limitation, access to additional
information, changes in value and changes in operating results between the date
of preparation of the unaudited pro forma condensed combined consolidated
financial information and the date on which the acquisition closes. However, in
the opinion of management any final adjustments will not be material to the
future financial position and/or results of operations of SmartForce.
117
SMARTFORCE MANAGEMENT
SmartForce Board of Directors
The following table sets forth certain information as of March 18, 2002, for
SmartForce's current directors, including those standing for election or
re-election at the annual general meeting:
Name Age Positions with the Company
---- --- --------------------------
Gregory M. Priest............ 38 President, Chief Executive Officer and Chairman of the
Board of Directors
Ronald C. Conway............. 50 Director
John M. Grillos.............. 60 Director
James S. Krzywicki........... 50 Director
Patrick J. McDonagh.......... 50 Director
Ferdinand von Prondzynski.... 47 Director
Gregory M. Priest was appointed Chairman of the Board of Directors on
November 13, 2000. Mr. Priest was appointed President and Chief Executive
Officer in December 1998. From February 1998 until December 1998, Mr. Priest
was President and Chief Executive Officer of Knowledge Well Group Limited and
of Knowledge Well Limited (collectively, "Knowledge Well"). Mr. Priest served
as SmartForce's Vice President, Finance and Chief Financial Officer from
December 1995 to January 1998. Mr. Priest has been a director since June 1996.
Prior to joining SmartForce, Mr. Priest was an attorney with Wilson Sonsini
Goodrich & Rosati, Professional Corporation, a private law firm representing
technology companies, where he was elected to the partnership in 1995. From
June 1989 to July 1990, Mr. Priest served as a law clerk to Justice Thurgood
Marshall of the United States Supreme Court.
Ronald C. Conway was appointed as a director on November 6, 2000. Mr. Conway
is the founder and managing partner of Angel Investors, LP, a venture capital
fund that invests in Internet, e-Commerce, and other information technology
companies. Since December 1995, Mr. Conway has served the company in a variety
of business development capacities. Mr. Conway has over 20 years of management
experience, including serving as the President and CEO of Altos Computer
Systems, a micro computer company, as well as serving in a variety of marketing
positions with National Semiconductor Corporation, a company which designs and
manufactures semiconductor products.
John M. Grillos has served as a director since February 1994. Mr. Grillos is
currently CEO of meVC Draper Fisher Jurvetson Fund I, a registered and publicly
traded business development company. Mr. Grillos served as our Executive Vice
President and Chief Operating Officer from December 1998 through December 1999.
Since June 1996, Mr. Grillos has been the sole General Partner of ITech
Partners, L.P., a venture capital limited partnership focused on seed stage
information technology companies. Prior to joining ITech Partners, Mr. Grillos
was employed by BancBoston Robertson Stephens, an investment banking firm, in
its venture capital group.
James S. Krzywicki was appointed as a director in October 1998. From 1992 to
1999, Mr. Krzywicki held various positions with Lotus Development Corporation,
which is now owned by International Business Machines Corporation, most
recently as Director, Distributed Learning, IBM Global Services. In October
1999, Mr. Krzywicki joined RoweCom, a provider of knowledge resource management
and acquisition services, as their President of North American Services and was
appointed Chief Operating Officer in February 2001. In November 2001, RoweCom
was acquired by divine, inc., a premier integrated solution provider focused on
the extended enterprise, and Mr. Krzywicki became Senior Vice President and
General Manager, divine information services.
Patrick J. McDonagh was a founding member of SmartForce and has been a
director since September 1989. He has not taken an active role in SmartForce's
management since 1991 and is currently a private investor. Mr. McDonagh served
as Chairman of the Board of Directors of Riverdeep Group PLC, a provider of
118
comprehensive K-12 e-Learning solutions from 1995 to July 2001, at which time
he resigned his position as Chairman of the Board and continued his role as a
non-executive director. Riverdeep Group PLC was listed on Nasdaq in March 2000.
Ferdinand von Prondzynski has served as a director since November 2001. Dr.
von Prondzynski is currently President of Dublin City University, one of
Ireland's leading higher education institutions, and has served in such
capacity since July 2000. From January 1991 to July 2000, Dr. von Prondzynski
served as Professor of Law and Dean of the Faculty of Social Services, the
University of Hull, UK.
There are no family relationships among any of the directors or executive
officers of SmartForce.
Recent SmartForce Executive Officer and Director Changes
Dr. Ferdinand von Prondzynski was appointed as a director in November 2001.
On January 16, 2002, SmartForce announced that David C. Drummond, who has
been our Executive Vice President and Chief Financial Officer since July 1999
and a member of our board of directors since February 1, 2001, would be
stepping down from his position. His resignation from his executive officer
position and his position as a member of the company's Board of Directors has
become effective. SmartForce has begun to transition Mr. Drummond's duties to
other officers of the company, and Mr. Drummond will remain employed by
SmartForce for a transitional period to assist in these efforts. SmartForce has
undertaken an executive search for a new Chief Financial Officer.
SmartForce Officers
In addition to Mr. Priest, the executive officers and other key officers of
SmartForce and their respective ages and positions as of March 18, 2002 are as
follows:
Name Age Positions with the Company
---- --- --------------------------
Executive Officers
Thomas F. McKeagney..... 43 Executive Vice President, Research and Development
Jeffrey N. Newton....... 47 Chief Customer Officer
Other Officers
Patrick Eric Murphy..... 51 Vice President, Global Finance
Jeffrey N. Newton was appointed Chief Customer Officer on January 1, 2002.
From January 1, 2001 to December 31, 2001, Mr. Newton served as Executive Vice
President, Global Sales. Mr. Newton served as Executive Vice President, Global
Channel Sales from December 1998 until January 2001. Mr. Newton served as Vice
President, Business Development from March 1997 until June 1998. From January
1996 until March 1997, Mr. Newton served as Area Vice President of Sales for
the northern region and served as Regional Vice President of Sales for the
northern region from January 1994 to January 1996. Mr. Newton joined as
SmartForce's sales manager for the northern region in April 1992 and served in
that capacity until January 1994.
Thomas F. McKeagney was appointed Executive Vice President, Research and
Development on February 10, 2001. From February 1998 to February 2001, Mr.
McKeagney served as Vice President of Research. From January 1995 until January
1998, Mr. McKeagney served as Director of Research and Development.
Mr. McKeagney joined SmartForce Ireland Limited in 1989 as a design consultant.
Patrick Eric Murphy was appointed Vice President, Global Finance, in
September 2001. From January 1998 to September 2001, Mr. Murphy served as Vice
President, Finance, North America, and from January 1997 to January 1998 he
served as Group Controller. Mr. Murphy joined the company in February 1996 as
Group
119
Accountant. Prior to joining SmartForce, Mr. Murphy held a number of positions
at Ernst and Young, most recently as a Management Consultant.
SmartForce's executive officers are elected by the board of directors on an
annual basis and serve until their successors have been duly elected. There are
no family relationships among SmartForce's executive officers.
Board of Director Meetings and Committees
The board of directors, which has an audit committee, compensation
committee, stock option committee and non-officer stock option committee, held
a total of 4 meetings during the last fiscal year. No incumbent director
attended fewer than seventy-five percent (75%) of the meetings of the board of
directors and committees thereof on which such director served during the last
fiscal year.
In fiscal 2001, the audit committee consisted of Messrs. Conway, Krzywicki
and McDonagh all of whom are "independent" directors as defined in Rule 4200.
During the last fiscal year, the audit committee held four meetings. The audit
committee oversees actions taken by our independent auditors, and recommends
the engagement of auditors. Our audit committee charter sets forth in detail
the duties of and functions performed by the audit committee. Rule 4200 of the
National Association of Securities Dealers' listing standards and our audit
committee charter require that we have three members on the audit committee who
are "independent" directors (as defined in Rule 4200).
In fiscal 2001, the stock option committee consisted of Messrs. McDonagh and
Krzywicki. During the last fiscal year, the stock option committee held no
formal meetings but took several actions by unanimous written consent. The
stock option committee administers SmartForce's employee share option plans,
grants share options to SmartForce's officers and grants share options to any
of SmartForce's non-officers in excess of 10,000 shares per grant.
In January 1996, the board of directors established the non-officer stock
option committee, which currently consists of Mr. Priest. During the last
fiscal year, the non-officer stock option committee held no formal meetings and
took several actions by unanimous written consent. The non-officer stock option
committee grants share options which are less than 10,000 shares per grant to
any of SmartForce's employees who are not officers.
In fiscal 2001, the compensation committee consisted of Messrs. Krzywicki
and McDonagh. During the last fiscal year, the compensation committee held 2
formal meetings. The compensation committee reviews and approves the
compensation of our executives and makes recommendations to the board of
directors with respect to standards for setting compensation levels.
The board of directors does not have a nominating committee or any committee
performing similar functions.
Compensation and Stock Option Committee Interlocks and Insider Participation
During fiscal 2001, the Compensation Committee of SmartForce's board of
directors consisted of Messrs. McDonagh and Krzywicki. During fiscal 2001, the
Stock Option Committee consisted of Messrs. McDonagh and Krzywicki. Mr.
Krzywicki was not one of SmartForce's officers or employees or an officer or
employee of SmartForce's subsidiaries during fiscal 2001 or at any time prior
to fiscal 2001. Mr. McDonagh was not one of SmartForce's officers or employees
or an officer or employee of SmartForce's subsidiaries during fiscal 2001 or at
any time since September 1991. From our inception to September 1991,
Mr. McDonagh was the Chief Executive Officer of SmartForce.
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SmartForce Executive Compensation
The following tables disclose compensation awarded to, earned by or paid to
each of (a) SmartForce's chief executive officer during the fiscal year ended
December 31, 2001, (b) the three other most highly compensated executive
officers of SmartForce during the fiscal year ended December 31, 2001 and (c)
the individuals listed in subparagraphs (a) and (b) during the fiscal years
ended December 31, 2000 and 1999. The following table also shows the
compensation received by an additional employee for whom disclosure would have
been provided if not for the fact that he was not serving as an executive
officer at the end of fiscal year 2001. No stock appreciation rights were
granted to these individuals during the year.
Summary Compensation Table
Annual Compensation Long-Term Compensation
--------------------------------------- ----------------------------
Options to
Other Annual Purchase ADS All Other
Name and Principal Position Year Salary(1) Bonus Compensation(2) Equivalents Compensation(3)
--------------------------- ---- --------- -------- --------------- ------------ ---------------
Gregory M. Priest................. 2001 $250,000 $314,320 $60,000 220,000 $8,803
Chairman of the Board of 2000 250,000 339,320 60,000 -- 8,379
Directors, President and Chief 1999 250,000 250,000 60,000 540,000 8,379
Executive Officer
Jeffrey N. Newton................. 2001 200,000 187,200 60,000 160,000 7,200
Chief Customer Officer 2000 200,000 150,000 -- -- 7,200
1999 200,000 225,000 12,000 400,000 7,200
David C. Drummond(4).............. 2001 200,000 97,500 -- 130,000 --
Executive Vice President 2000 200,000 110,000 -- 50,000 --
Finance, Chief Financial 1999 100,769 70,000 -- 225,000 --
Officer and Director
Thomas F. McKeagney............... 2001 150,000 112,500 -- 130,000 5,416
Executive Vice President 2000 150,000 125,000 -- 70,000 5,454
Research & Development 1999 121,667 68,543 -- 80,000 1,804
William B. Lewis(5)............... 2001 200,000 187,200 60,000 40,000 7,200
Former Executive Vice 2000 200,000 150,000 60,000 -- 7,200
President Strategic 1999 200,000 225,000 60,000 400,000 7,200
Development
--------
(1) Salary includes amount deferred pursuant to our 401(k) plan.
(2) Includes $60,000, $60,000 and $12,000 accommodation allowances paid in 1999
to Messrs. Priest, Lewis and Newton, respectively, $60,000 accommodation
allowances paid in 2000 and 2001 to each of Messrs. Priest and Lewis and
$60,000 paid to Newton in 2001.
(3) Includes car allowances of $8,379, $7,200, $1,804 and $7,200 in 1999 paid
to Messrs. Priest, Newton, McKeagney and Lewis, respectively, car
allowances of $8,379, $7,200, $5,454 and $7,200 in 2000 paid to Messrs.
Priest, Newton, McKeagney and Lewis, car allowances of $8,379, $7,200,
$5,416 and $7,200 in 2001 paid to Messrs. Priest, Newton, McKeagney and
Lewis and $1,602.68 paid on behalf of Mr. Priest for an insurance premium.
(4) On January 16, 2002, SmartForce announced that Mr. Drummond would be
stepping down from his position as Executive Vice President Finance, Chief
Financial Officer of the company. His resignation from his executive
officer position and his position as a member of the company's Board of
Directors has become effective. SmartForce has begun to transition Mr.
Drummond's duties to other officers of the company, and Mr. Drummond will
remain employed by SmartForce for a transitional period to assist in these
efforts. SmartForce has undertaken an executive search for a new Chief
Financial Officer.
(5) On September 30, 2001, Mr. Lewis resigned his position as an executive
officer.
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SmartForce Director Compensation
No director receives any cash compensation for his services as a member of
the board of directors of SmartForce, although each director is reimbursed for
his expenses in attending board of directors and related committee meetings. As
described in the following paragraph, non-employee directors may receive stock
compensation for their services as a member of the board of directors of
SmartForce. Directors who serve on committees of the board of directors receive
no additional compensation.
2001 Director Option Plan
SmartForce's board of directors adopted the 2001 Outside Director Option
Plan, referred to as the "Director Plan", in April 2001 and our shareholders
initially approved the Director Plan in July 2001. The Director Plan provides
for the periodic grant of nonstatutory stock options to SmartForce's
non-employee directors. As of March 18, 2002, a total of 350,000 shares were
reserved for issuance under the Director Plan, of which options to acquire
100,000 shares were issued and outstanding as of this date. All grants of
options to SmartForce's non-employee directors under the Director Plan are
automatic. SmartForce will grant each non-employee director an option to
purchase 25,000 shares upon the later of (i) the effective date of the Director
Plan or (ii) when such person first becomes a non-employee director (except for
those directors who became non-employee directors by ceasing to be employee
directors). All non-employee directors who have been directors for at least 6
months receive an option to purchase 10,000 shares on January 1st of each year.
All options granted under SmartForce's Director Plan have a term of ten years
and an exercise price equal to fair market value on the date of grant. Each
option becomes exercisable as to 25% of the shares subject to the option on
each anniversary of the date of grant, provided the non-employee director
remains a director on such dates. After termination as a non-employee director
with SmartForce, an optionee must exercise an option at the time set forth in
his or her option agreement. If termination is due to death or disability, the
option will remain exercisable for 12 months. In all other cases, the option
will remain exercisable for a period of 3 months. However, an option may never
be exercised later than the expiration of its term. A non-employee director may
not transfer options granted under the Director Plan other than by will or the
laws of descent and distribution. Only the non-employee director may exercise
the option during his or her lifetime. In the event of SmartForce's merger with
or into another corporation or a sale of substantially all of SmartForce's
assets, the successor corporation will assume or substitute each option. If
such assumption or substitution occurs, the options will continue to be
exercisable according to the same terms as before the merger or sale of assets.
Following such assumption or substitution, if a non-employee director is
terminated other than by voluntary resignation, the option will become fully
exercisable and generally will remain exercisable for a period of 3 months. If
the outstanding options are not assumed or substituted for, SmartForce's board
of directors will notify each non-employee director that he or she has the
right to exercise the option as to all shares subject to the option for a
period of 30 days following the date of the notice. The option will terminate
upon the expiration of the 30-day period. Unless terminated sooner, the
Director Plan will automatically terminate in 2011. SmartForce's board of
directors has the authority to amend, alter, suspend, or discontinue the
Director Plan, but no such action may adversely affect any grant made under the
Director Plan.
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SmartForce Option Grants in Last Fiscal Year
The following table provides information with respect to stock options
granted to the executive officers named in the SmartForce Summary Compensation
Table in the last fiscal year. In addition, the table sets forth the
hypothetical gains that would exist for the stock options based on assumed
rates of annual compound stock price appreciation during the option term. No
stock appreciation rights were granted to these individuals during the year.
Number of Percent of Potential Realizable Value
Equivalent Total Options at Assumed Annual Rates
ADSs Granted to Exercise of Stock Price Appreciation
Over Which Employees in Price Per for Option Term(4)
Options Were Last Fiscal Equivalent Expiration ---------------------------
Name Granted(1)(2) Year ADS(3) Date 5% 10%
---- ------------- ------------- ---------- ---------- ------------- -------------
Gregory M. Priest............ 220,000 5.85% $19.0625 05-Apr-11 $2,637,426.84 $6,683,757.44
Jeffrey N. Newton............ 160,000 4.26% $19.0625 05-Apr-11 $1,918,128.61 $4,860,914.50
David C. Drummond(5)......... 130,000 3.46% $19.0625 05-Apr-11 $1,558,479.50 $3,949,493.03
Thomas F. McKeagney.......... 130,000 3.46% $19.0625 05-Apr-11 $1,558,479.50 $3,949,493.03
William B. Lewis(6).......... 40,000 1.06% $19.0625 05-Apr-11 $ 479,532.15 $1,215,228.63
--------
(1) All options in this table were granted under the 1994 Plan. The options
expire ten years from the date of grant, subject to earlier termination in
the event of the optionee's cessation of service with us. The 1994 Plan is
currently administered by the Stock Option Committee of the board of
directors, which has broad discretion and authority to amend outstanding
options and to reprice options, whether through an exchange of options or
an amendment thereto.
(2) Unless otherwise indicated, options generally vest over four years such
that 1/4th of the equivalent ADSs subject to the option vest one year from
the respective date of grant, 1/4th vest on the second anniversary of the
respective date of grant and 1/48th vest each month thereafter. Options
granted to certain employees are exercisable in full at the date of grant,
provided that if the employment of such employee is terminated, we may
present before SmartForce's shareholders at the next annual general meeting
a vote to approve the repurchase of any shares relating to his or her
unvested options that have been exercised. If SmartForce's shareholders
approve the vote, it may repurchase any unvested shares at the original
price for such shares. Additionally, until the vote occurs, the terminated
employee will be restricted from disposing of these shares.
(3) Options were granted at an exercise price equal to the fair market value of
our ADSs, as determined by reference to the closing price of the ADSs as
reported on the Nasdaq National Market on the last trading day prior to the
date of grant.
(4) Potential realizable value assumes that the share price (based on the fair
market value of the ADSs) increases from the date of grant until the end of
the ten-year option term at the annual rate specified (5% and 10%). If the
price of the ADSs were to increase at such rates from $19.0625 per ADS, the
price at the date of grant, over the next ten years, the resulting ADS
price at 5% and 10% appreciation would be approximately $31.05 and $49.44,
respectively. The assumed annual rates of appreciation are specified in SEC
rules and do not represent estimates or projections of future share price.
SmartForce does not necessarily agree that this method can properly
determine the value of an option.
(5) On January 16, 2002, SmartForce announced that Mr. Drummond would be
stepping down from his position as Executive Vice President Finance, Chief
Financial Officer of the company. His resignation from his executive
officer position and his position as a member of the company's Board of
Directors has become effective. SmartForce has begun to transition Mr.
Drummond's duties to other officers of the company, and Mr. Drummond will
remain employed by SmartForce for a transitional period to assist in these
efforts. SmartForce has undertaken an executive search for a new Chief
Financial Officer.
(6) On September 30, 2001, Mr. Lewis resigned his position as an executive
officer.
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SmartForce Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values
The following table provides information with respect to stock options
exercised by the executive officers named in the SmartForce Summary
Compensation Table during the last fiscal year. In addition, the table sets
forth the number of shares covered by stock options as of the last fiscal year
and the value of "in-the-money" stock options, which represents the positive
spread between the exercise price of a stock option and the market price of the
shares subject to the option at the end of the fiscal year.
Number of Equivalent
ADSs Subject to Value of Unexercised
Equivalent Unexercised Options In-the-Money Options
ADSs at Fiscal Year-End(3) at Fiscal Year End(4)
Acquired on Value ------------------------- ----------------------------
Name Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- -------------- -------------
Gregory M. Priest... 240,404 $6,333,879 992,910 220,000 $10,335,974.75 $1,251,250.00
Jeffrey N. Newton... 256,182 $7,250,148 619,308 160,000 6,592,252.75 910,000.00
David C. Drummond(5) 77,200 $1,526,498 184,300 130,000 1,116,368.75 739,375.00
Thomas F. McKeagney. 73,600 $1,953,846 72,328 241,001 565,420.00 1,405,587.00
William B. Lewis(6). 245,489 $6,491,938 628,687 40,000 6,737,017.19 227,500.00
--------
(1) SmartForce's employees, including the named executive officers, have a
choice of acquiring either ordinary shares or ADSs representing such
ordinary shares upon exercise of options. Generally, these employees have
elected to receive ADSs.
(2) Market value of underlying shares based on the closing price of the ADSs on
the Nasdaq National Market on the date of exercise, minus the exercise
price.
(3) Unless otherwise indicated, options generally vest over four years such
that 1/4th of the equivalent ADSs subject to the option vest one year from
the respective date of grant, 1/4th vest on the second anniversary of the
respective date of grant and 1/48th vest each month thereafter. Options
granted to certain employees are exercisable in full at the date of grant,
provided that if the employment of such employee is terminated, SmartForce
may present before its shareholders at its next annual general meeting a
vote to approve the repurchase of any shares relating to his or her
unvested options that have been exercised. If SmartForce's shareholders
approve the vote, it may repurchase any unvested shares at the original
price for such shares. Additionally, until the vote occurs, the terminated
employee will be restricted from disposing of these shares.
(4) Market value of shares underlying in-the-money share options is based on
the closing price of $24.75 per ADS on the Nasdaq National Market on
December 31, 2001, which was the last trading day of fiscal 2001, minus the
exercise price.
(5) On January 16, 2002, SmartForce announced that Mr. Drummond would be
stepping down from his position as Executive Vice President Finance, Chief
Financial Officer of the company. His resignation from his executive
officer position and his position as a member of the company's Board of
Directors has become effective. SmartForce has begun to transition Mr.
Drummond's duties to other officers of the company, and Mr. Drummond will
remain employed by SmartForce for a transitional period to assist in these
efforts. SmartForce has undertaken an executive search for a new Chief
Financial Officer.
(6) On September 30, 2001, Mr. Lewis resigned his position as an executive
officer.
SmartForce Employment Contracts and Arrangements
On June 18, 1999, following the acquisition of Knowledge Well, we entered
into an employment agreement with Gregory M. Priest, under which SmartForce
agreed to employ Mr. Priest as its President and Chief Executive Officer,
effective as of December 10, 1998. Under the terms of the agreement, Mr. Priest
will be paid a minimum base salary of $250,000 per year. In addition, Mr.
Priest will be contractually entitled to receive an annual performance bonus at
100% achievement of at least $200,000 (the "targeted" Bonus) at the discretion
of the board of directors. Mr. Priest's employment is at-will. The employment
agreement includes a covenant not to solicit and a covenant not to compete in
the event of a voluntary termination by Mr. Priest or the termination for cause
(as defined in the agreement) by SmartForce. If Mr. Priest's employment is
involuntarily terminated (as
124
defined in the agreement) or terminated without cause we are required to make a
lump sum payment to Mr. Priest equal to his then base salary plus the then
maximum performance bonus available to Mr. Priest for a period of one (1) year.
Mr. Priest may elect, in the event of an involuntary termination, to be bound
by the covenants not to solicit and not to compete in exchange for continued
vesting of the stock options granted to him by us for the term of the
covenants. Otherwise, Mr. Priest's stock options will discontinue to vest
immediately upon termination of employment.
On June 18, 1999, following the acquisition of Knowledge Well, SmartForce
entered into an employment agreement with Jeffrey N. Newton, under which
SmartForce agreed to employ Mr. Newton as its Executive Vice President, Global
Channel Sales, effective as of December 10, 1998. Under the terms of the
agreement, Mr. Newton will be paid a minimum base salary of $200,000 per year.
In addition to the base salary, Mr. Newton will be contractually entitled to
receive an annual performance bonus at 100% achievement of at least $150,000
(the "targeted" bonus) at the discretion of the board of directors. Mr.
Newton's employment is at-will. The employment agreement includes covenants not
to solicit and not to compete in the event of a voluntary termination by Mr.
Newton or termination for cause (as defined in the agreement) by SmartForce. If
Mr. Newton's employment is involuntarily terminated (as defined in the
agreement) or terminated without cause SmartForce is required to make a lump
sum payment to Mr. Newton equal to his then base salary plus the then maximum
performance bonus available to Mr. Newton for a period of one (1) year. Mr.
Newton may elect, in the event of an involuntary termination, to be bound by
the covenants not to solicit and not to compete in exchange for continued
vesting of the stock options granted to him by SmartForce for the term of the
covenants. Otherwise, Mr. Newton's stock options will discontinue to vest
immediately upon termination of employment.
125
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF SMARTFORCE
The following table sets forth certain information regarding the beneficial
ownership of SmartForce's ADSs (or their equivalents) as of March 18, 2002
(unless otherwise stated) by:
. each director;
. each executive officer named in the SmartForce Summary Compensation Table;
. each person known by SmartForce to be the beneficial owner of more than
five percent (5%) of SmartForce's ADSs (or underlying ordinary shares); and
. all current directors and executive officers as a group.
The number and percentage of ADSs beneficially owned is determined under the
rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any equivalent ADSs as to which the individual has sole or
shared voting power or investment power and also any equivalent ADSs that the
individual has the right to acquire within sixty (60) days of March 18, 2002
through the exercise of share options or other rights. Unless otherwise
indicated, to our knowledge, each person named in the table has sole voting and
investment power (or shares such powers with his spouse) with respect to the
shares shown as beneficially owned.
Equivalent ADSs Approximate
Name of Person or Identity of Group Beneficially Owned Percentage Owned(1)
----------------------------------- ------------------ -------------------
T. Rowe Price Associates, Inc.(2)...................... 5,243,931 9.2%
100 E. Pratt Street, Baltimore MD 21002
Putnam Investments, LLC(3)............................. 5,954,200 10.4
One Post Office Square, Boston, MA 02109
Invesco Funds Group, Inc.(4)........................... 4,133,150 7.2
4350 South Monaco Street, Denver, CO 80237
Gregory M. Priest(5)................................... 1,117,491 1.9
William B. Lewis(6).................................... 703,389 1.2
Jeffrey N. Newton(7)................................... 675,049 1.2
Patrick J. McDonagh(8)................................. 348,958 *
John M. Grillos(9)..................................... 302,846 *
Thomas F. McKeagney(10)................................ 147,872 *
David C. Drummond(11).................................. 218,491 *
James S. Krzywicki(12)................................. 94,666 *
Ronald C. Conway(13)................................... 63,203 *
Ferdinand von Prondzynski.............................. 10 *
All current directors and executive officers as a group
(9 people)(14)....................................... 3,671,975 6.0
--------
* less than 1%
(1) Based on 57,054,141 of our ADSs (or their equivalents) outstanding as of
March 18, 2002. Unless otherwise specified, all references to "equivalent
ADSs" assumes the conversion of each SmartForce ordinary share outstanding
into one SmartForce ADS based on the number of SmartForce ordinary shares
outstanding as of the date indicated.
(2) Based on information contained in the Schedule 13G filed with the SEC for
the fiscal year ended December 31, 2001.
(3) Based on information contained in the Schedule 13G filed with the SEC for
the fiscal year ended March 18, 2002 by Putnam Investments, LLC. Certain
shares are beneficially owned by non-reporting entities as well as by
Putnam Investments, LLC.
126
(4) Based on information contained in the Schedule 13G/A filed with the SEC
for the fiscal year ended December 31, 2001 by Pilgrim Baxter & Associates
Ltd.
(5) Includes 1,047,910 equivalent ADSs issuable upon the exercise of share
options held by Mr. Priest, which options are exercisable within sixty
(60) days of March 18, 2002.
(6) Includes 668,687 equivalent ADSs issuable upon the exercise of share
options held by Mr. Lewis, which options are exercisable within sixty (60)
days of March 18, 2002. Also includes 30,361 ADSs held in a trust and
2,620 held by his children. Under the rules of the Securities and Exchange
Commission, Mr. Lewis may be deemed to be the beneficial owner of these
shares. Mr. Lewis disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest therein. On September 30,
2001, Mr. Lewis resigned his position as an executive officer.
(7) Includes 659,308 equivalent ADSs issuable upon the exercise of share
options held by Mr. Newton, which options are exercisable within sixty
(60) days of March 18, 2002. Also includes 14,021 ADSs held in a trust.
Under the rules of the Securities and Exchange Commission, Mr. Newton may
be deemed to be the beneficial owner of these shares. Mr. Newton disclaims
beneficial ownership of these securities except to the extent of his
pecuniary interest therein.
(8) Includes 48,958 equivalent ADSs issuable upon the exercise of share
options held by Mr. McDonagh, which options are exercisable within sixty
(60) days of March 18, 2002.
(9) Includes 264,226 equivalent ADSs issuable upon the exercise of share
options held by Mr. Grillos, which options are exercisable within sixty
(60) days of March 18, 2002. Also includes 35,920 ADSs held by Itech
Partners L.P. in which Mr. Grillos is the sole General Partner. Mr.
Grillos disclaims beneficial ownership of these securities except to the
extent of his pecuniary interest therein.
(10) Includes 144,119 equivalent ADSs issuable upon the exercise of share
options held by Mr. McKeagney which options are exercisable within sixty
(60) days of March 18, 2002.
(11) Includes 216,800 equivalent ADSs issuable upon the exercise of share
options held by Mr. Drummond, which options are exercisable within sixty
(60) days of March 18, 2002. On January 16, 2002, SmartForce announced
that Mr. Drummond would be stepping down from his position as Executive
Vice President Finance, Chief Financial Officer of the company. His
resignation from his executive officer position and his position as a
member of the company's Board of Directors has become effective.
SmartForce has begun to transition Mr. Drummond's duties to other officers
of the company, and Mr. Drummond will remain employed by SmartForce for a
transitional period to assist in these efforts. SmartForce has undertaken
an executive search for a new Chief Financial Officer.
(12) Includes 91,666 equivalent ADSs issuable upon the exercise of share
options held by Mr. Krzywicki, which options are exercisable within sixty
(60) days of March 18, 2002.
(13) Represents 63,203 equivalent ADSs issuable upon the exercise of share
options held by Mr. Conway, which options are exercisable within sixty
(60) days of March 18, 2002.
(14) Includes 3,204,877 equivalent ADSs issuable upon the exercise of options
held by current directors and executive officers as a group, which options
are exercisable within sixty (60) days of March 18, 2002.
127
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Approximately 9% of the issued share capital of CBT (Technology) Limited,
one of our Irish subsidiaries, representing a special non-voting class, is
owned by Stargazer Productions ("Stargazer"), an unlimited company which is
wholly-owned by certain of our key employees. All of the voting securities of
CBT (Technology) Limited are owned by us and, except for the securities owned
by Stargazer, there are no other outstanding securities of CBT (Technology)
Limited. CBT (Technology) Limited has in the past and may in the future declare
and pay dividends to Stargazer, and Stargazer may pay dividends to its
shareholders out of such amounts. Stargazer does not have any rights to the
assets of CBT (Technology) Limited, only to receive periodic dividends as and
when declared by CBT (Technology) Limited. Except for the fact that Stargazer
is wholly owned by certain of our key employees, we have no relationship with
Stargazer. These key employees do not include any of SmartForce's directors or
executive officers.
In August 1999, Gregory M. Priest, our President and Chief Executive
Officer, received a loan in the amount of $450,000 which is repayable in four
equal annual installments, commencing in August 2000. Interest accrues on the
principal amount at a rate of 5.96%, to be paid annually. As of December 31,
2001, the balance outstanding under the loan, inclusive of accrued interest,
was $228,800.
128
BOARD COMMITTEE REPORTS
The following are the respective reports of the compensation committee, the
stock option committee and the audit committee of the board of directors of
SmartForce. Neither the compensation committee report, the stock option
committee report, the audit committee report or any other information required
to be disclosed in this joint proxy statement/prospectus pursuant to Item
306(a) or (b) of Regulation S-K or Item 7(e)(3) of Schedule 14A shall be deemed
to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any past or future filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended.
Report of Compensation Committee on Executive Compensation
Portions of the following report are presented by each of the members of
SmartForce's compensation committee and stock option committee of the board of
directors with respect to the compensation of SmartForce's executive management.
Actual compensation earned during the last fiscal year for the named
executive officers is shown in the SmartForce Summary Compensation Table
contained in this joint proxy statement/prospectus.
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee reviews and approves the compensation of our
executives and makes recommendations to the board of directors with respect to
standards for setting compensation levels.
Compensation Philosophy. At the direction of the board of directors and
pursuant to the charter of the compensation committee, the compensation
committee endeavors to ensure that the compensation programs for our executive
officers and our subsidiaries are effective in attracting and retaining key
executives responsible for our success. These programs are administered in a
manner that seeks to meet our long-term interests and those of our shareholders
and are designed to align total compensation for senior management with
corporate performance.
The compensation committee believes that our overall financial performance
should be an important factor in the total compensation of our executive
officers. At the executive officer level, the compensation committee has a
policy that a significant proportion of total compensation should consist of
variable, performance-based components, such as bonuses and share option
grants, which can increase or decrease to reflect changes in corporate and
individual performance. These incentive compensation programs are intended to
reinforce management's commitment to enhancement of profitability and
shareholder value.
The compensation committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for the Chief Executive Officer and
other executive officers. The compensation committee considers such corporate
performance measures as revenues, net income and earnings per share in setting
executive compensation levels. The specific factors used, and the weight given
to various factors, varies between each executive based on his or her
responsibilities. The compensation committee also appreciates the importance of
achievements that may be difficult to quantify, and accordingly recognizes
qualitative factors, such as successful supervision of major corporate projects
and demonstrated leadership ability.
Base salary for the chief executive officer and other executive officers are
established at levels considered appropriate in light of the duties and scope
of responsibilities of each officer's position. Salaries are reviewed
periodically and adjusted as warranted to reflect sustained individual officer
performance. The compensation committee focuses primarily on total annual
compensation, including incentive awards, rather than base salary alone, as the
appropriate measure of executive officer performance and contribution.
129
Chief Executive Officer Compensation. Generally, the criteria used in
determining the compensation of our Chief Executive Officer are the same as
those which are used for executive management. Mr. Priest's compensation was
set to ensure that it was based on increasing shareholder value. Mr. Priest
received a salary of $250,000 and a bonus of $309,320 with respect to 2001. The
bonus was based on both quantitative and qualitative factors, including our
overall financial performance in 2001, his leadership in managing our expanding
operations and the development of our e-Learning infrastructure and solutions
as well as his role in establishing development and marketing alliances.
The compensation committee also approved the compensation of our other
executive officers for 2001, following the principles and procedures in this
report.
Section 162(m). To the extent readily determinable and as one of the
factors in its consideration of compensation matters, the compensation
committee considers the anticipated tax treatment to us and to the executives
of various payments and benefits. Section 162(m) of the Code generally limits
the federal income tax deductibility of compensation paid to certain executive
officers. For this purpose, compensation can include, in addition to cash
compensation, the difference between the exercise price of share options and
the value of the underlying share on the date of exercise. Under this
legislation, we may deduct compensation with respect to any of these
individuals only to the extent that during any fiscal year such compensation
does not exceed $1 million or meets certain other conditions (such as
shareholder approval). Further, interpretations of and changes in the tax laws
and other factors beyond the compensation committee's control also affect the
deductibility of compensation. For these and other reasons, the compensation
committee will not necessarily limit executive compensation to that deductible
under Section 162(m). The compensation committee will consider various
alternatives to preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.
Respectfully Submitted by:
The members of the Compensation
Committee
JAMES S. KRZYWICKI
PATRICK J. MCDONAGH
130
Report of the Stock Option Committee
The stock option committee oversees provision of long-term incentives for
executives and other key employees through share option grants under the 1990
Plan, 1994 Plan and 1996 Plan. Grants under the 1990 Plan or 1994 Plan are made
to executives at the time they commence employment and are made periodically to
executive management for individual performance. Grants under the 1996 Plan may
be made to employees, officers and consultants at the time they commence
employment and are made periodically for individual performance. The purpose of
share option grants is to provide incentives to perform at a level which will
enhance the overall financial performance of our business and maximize
long-term shareholder value and to reward prior performance.
For grants to executives, the stock option committee is responsible for
determining, subject to the terms and conditions of the plans, the timing of
such grants, the exercise price per share, the vesting provisions and the
number of shares subject to each option grant. The stock option committee
grants share options to executive officers primarily under the 1994 Plan.
In 2001, based upon recommendations from executive management, the stock
option committee granted share options to each of our executive officers under
the 1994 plan. In approving grants under the 1990 Plan, 1994 Plan and 1996
Plan, including grants to our non-executive officers, the stock option
committee considers quantitative and qualitative factors.
In addition to the 1990 Plan, 1994 Plan and 1996 Plan, executives are
eligible to participate in our 1995 Employee Share Purchase Plan, which permits
the purchase of shares at a discount through payroll deductions.
Share option grants to the Chief Executive Officer. On April 5, 2001, the
stock option committee granted an option to purchase 220,000 shares to Mr.
Priest.
Respectfully Submitted by:
The members of the Stock Option
Committee
JAMES S. KRZYWICKI
PATRICK J. MCDONAGH
131
Report of the Audit Committee
As more fully described in our charter, the audit committee reviews our
financial reporting process on behalf of the board of directors. Management has
the primary responsibility for the financial statements and the reporting
process. Our independent auditors are responsible for expressing an opinion on
the conformity of our audited financial statements to generally accepted
accounting principles. The audit committee members are not professional
accountants or auditors, and their functions are not intended to duplicate or
to certify the activities of management and the independent auditors, nor can
the audit committee certify that the independent auditor is "independent" under
applicable rules. The audit committee serves a board-level oversight role, in
which it provides advice, counsel and direction to management and the
independent auditors on the basis of the information it receives, discussions
with management and the independent auditors and the experience of the audit
committee's members in business, financial and accounting matters.
In this context, the audit committee has reviewed and discussed our audited
financial statements for the fiscal year ended December 31, 2001 with our
management and our independent auditors, Ernst & Young. The audit committee has
discussed with Ernst & Young, the matters required to be discussed by Statement
of Auditing Standards No. 61 (Communication with Audit Committees). The audit
committee has also received the written disclosures and the letter from Ernst &
Young required by Independence Standards Board Standard No. 1 (Independence
Discussion with Audit Committees) and the audit committee has discussed the
independence of Ernst & Young with that firm.
Based on the audit committee's review and discussions noted above, the audit
committee recommended to the board of directors that our audited financial
statements be included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 for filing with the SEC.
Respectfully Submitted by:
The members of the Audit Committee
RONALD C. CONWAY
JAMES S. KRZYWICKI
PATRICK J. MCDONAGH
132
PERFORMANCE GRAPH
The following graph compares the cumulative total return on a percentage
basis to stockholders of SmartForce ADSs (as adjusted for the two ADS splits in
May 1996 and March 1998) from December 29, 1996 through December 31, 2001 to
the cumulative return of (i) the Nasdaq National Market - U.S.; and (ii) the
JPMorgan H&Q ("H&Q") Technology Index, assuming an investment of $100 in our
ADSs and in each of the other indices, and dividend reinvestment through
December 31, 2000. No dividends have been declared or paid on SmartForce
ordinary shares or ADSs. Shareholder returns over the indicated period should
not be considered indicative of future shareholder returns.
The information contained in the performance graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, or the Securities Exchange Act
of 1934, except to the extent that we specifically incorporate it by reference
into such filing.
[PERFORMANCE GRAPH]
600 .....................................................................
.....................................................................
.....................................................................
.....................................................................
500 .......................................x.............................
.....................................................................
.....................................................................
.....................................................................
400 .....................................................................
.....................................................................
.....................................................................
..................................................x..................
300 .........................................+...........................
.....................................................................
............................x........................................
.............................................................x.......
200 ....................................................+................
..............................+......................................
...............o.x..............................o..............+.....
...................+.................o...............................
100 ....o.x.+..................................................o.........
.....................................................................
..........................o..........................................
.....................................................................
0 .....................................................................
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
o = SmartForce x = H&Q Technology Index + = NASDAQ National Market - U.S.
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
SmartForce........................ $100 $151 $ 55 $124 $138 $ 91
H&Q Technology Index.............. $100 $146 $227 $506 $327 $224
NASDAQ National Market - U.S...... $100 $122 $170 $315 $191 $151
133
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires SmartForce officers (as defined
in the rules under Section 16) and directors, and persons who own more than ten
percent of a registered class of our equity securities, to file certain reports
with the SEC and the NASD regarding ownership of, and transactions in,
SmartForce securities. Such officers, directors and ten percent holders are
also required by the SEC's rules to furnish to us copies of all Section 16(a)
forms that they file.
Based solely on its review of the copies of such forms received by
SmartForce or written representations from certain reporting persons SmartForce
believes that its executive officers, directors and ten percent holders
complied with all applicable Section 16(a) filing requirements during the last
fiscal year except that a Form 3 was filed late for Mr. McKeagney and a Form 4
was not filed by Mr. Conway for three separate transactions on the same date
for a total of 7,000 shares sold by trusts administered for each of Mr.
Conway's children. Such transactions were subsequently reported on Mr. Conway's
Form 5 for the fiscal year ended December 31, 2001.
134
PROPOSALS TO SMARTFORCE SHAREHOLDERS TO BE VOTED ON
AT THE SMARTFORCE ANNUAL GENERAL MEETING
Proposal One--Re-election of Directors
General
The Articles of Association of SmartForce provide that it may have up to a
maximum number of ten (10) directors, which number may be changed by resolution
of its shareholders. SmartForce currently has six (6) directors. As is
customary for many Irish companies, the board of directors of SmartForce
typically consists of fewer than the maximum number of authorized directors.
SmartForce believes that benefits are derived from having vacancies on the
board of directors, particularly in the areas of attracting qualified directors
and responding to shareholder concerns.
Proxies cannot be voted for a greater number of persons than the number of
nominees named in proposal three. At each annual general meeting of
shareholders, approximately one-third (1/3) of the existing directors must
retire by rotation; however, each such director is eligible for re-election
and, if re-elected, shall serve until the next rotation and until his successor
is elected and qualified or until such director's resignation, death or
removal. As a matter of practice, any director appointed by the board of
directors during the year, whether to fill a vacancy (including a vacancy
created by an increase in the board of directors) or otherwise, will serve
until SmartForce's next annual general meeting of shareholders and will be
subject to re-election at that meeting although this is not required under
SmartForce's Articles of Association. In accordance with our Articles of
Association, Mr. James S. Krzywicki is now required to retire by rotation.
Mr. Krzywicki, being eligible, offers himself for re-election.
Proposal One Vote Required
The affirmative vote of the holders of a majority of the ordinary shares
represented, in person or by proxy, at the annual general meeting and voting on
proposal one is required to approve the re-election of Mr. James S. Krzywicki.
Unless otherwise instructed, the proxies will vote FOR proposal one.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL ONE
Proposal Two--Election of Directors
General
As noted above, the Articles provide for a total of ten (10) directors. Dr.
Ferdinand von Prondzynski was appointed as a director on November 26, 2001. Dr.
von Prondzynski was appointed to serve as the sixth director of the Company.
The board of directors is recommending that the shareholders elect Dr. von
Prondzynski to serve as the sixth member of the board of directors of the
Company.
Proposal Two Vote Required
The affirmative vote of the holders of a majority of the ordinary shares
represented, in person or by proxy, at the annual general meeting and voting on
proposal two is required to approve the election of Dr. von Prondzynski. Unless
otherwise instructed, the proxies will vote FOR proposal two.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL TWO
135
Proposal Three--Consideration of SmartForce's Consolidated Financial Statements
and The Reports of the Directors and the Auditors for the Year
Ended December 31, 2001
General
A copy of the report of the directors and our consolidated financial
statements (prepared in accordance with Irish GAAP) for the last fiscal year
and the auditors' report to the Members thereon have been circulated to all of
SmartForce's shareholders. Shareholders are now being requested to consider
SmartForce's consolidated financial statements and the directors' and auditors'
report for the financial year ended December 31, 2001.
Proposal Three Vote Required
The affirmative vote of the holders of a majority of the ordinary shares
represented, in person or by proxy, at the annual general meeting and voting on
proposal three is required to approve the resolution to receive and consider
SmartForce's consolidated financial statements and the report of the directors
and the auditors for the financial year ended December 31, 2001. Unless
otherwise instructed, the proxies will vote FOR proposal three. A vote FOR
proposal three will not constitute an approval or ratification of the report of
the directors or SmartForce's consolidated financial statements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL THREE
Proposal Four--Authorization of Directors to Fix Auditors' Remuneration
General
Ernst & Young have been SmartForce's independent auditors since September
10, 1993. The shareholders are now being requested to authorize the board of
directors to fix the remuneration of SmartForce's auditors for the year ending
December 31, 2002.
Fees Billed for Services Rendered by Principal Auditors
1. Ernst & Young, SmartForce's independent auditors, billed SmartForce the
fees set forth below for services rendered during the fiscal year December 31,
2001. The audit committee of the board of directors has considered whether the
non-audit services provided by Ernst & Young are compatible with maintaining
its independence.
2. Fees Billed For Services Rendered by Principal Auditors During Fiscal
Year 2001:
Audit Fees
Audit fees billed to SmartForce by Ernst & Young for services rendered
during the last fiscal year for the audit of its annual financial statements
and the review of the financial statements included in its quarterly reports on
Form 10-Q totaled $315,774.
Financial Information Systems Design and Implementation Fees
SmartForce did not engage Ernst & Young to provide advice regarding
financial information systems design and implementation during the last fiscal
year.
All Other Fees
Fees billed to SmartForce by Ernst & Young for all other services rendered
to SmartForce during the last fiscal year totaled $139,267. Of this amount,
$33,426 was for audit related services and $105,841 was for non-audit related
services (i.e., tax filings and tax-related consultations).
136
Proposal Four Vote Required
The affirmative vote of the holders of a majority of the ordinary shares
represented, in person or by proxy, at the annual general meeting and voting on
proposal four is required to authorize the board of directors to fix the
remuneration of SmartForce's auditors. Unless otherwise instructed, the proxies
will vote FOR proposal four.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL FOUR
Proposal Five--Merger Proposal
General
The SmartForce board of directors has unanimously determined that the merger
is consistent with and in furtherance of the long-term business strategy of
SmartForce and is fair to, and in the best interests of, SmartForce and the
SmartForce shareholders. Accordingly, the SmartForce board of directors
unanimously adopted a resolution approving the merger agreement, the merger and
the issuance of the SmartForce ordinary shares, represented by SmartForce ADSs,
in the merger.
Proposal Five Vote Required
The affirmative vote of the holders of a majority of the ordinary shares
represented, in person or by proxy, at the annual general meeting and voting on
proposal five is required to approve and adopt the merger agreement and approve
the merger and the issuance of the SmartForce ordinary shares, represented by
SmartForce ADSs, in the merger. Unless otherwise instructed, the proxies will
vote FOR proposal five.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL FIVE
Proposal Six--Assumption of Rights to Repurchase Unvested Centra Common Stock
General
Under Irish law, SmartForce may only purchase its ordinary shares if such
purchase is first authorized by a special resolution of its shareholders. Under
the terms of certain options exercisable for Centra common stock which were
granted by Centra to certain of its employees, upon the exercise of such
options, Centra has the right to repurchase from these employees the shares
underlying these options until such time as such repurchase rights lapse. In
connection with the merger, SmartForce will be issuing 0.425 of a SmartForce
ordinary share, represented by 0.425 of a SmartForce ADS, in exchange for each
share of Centra common stock and will be assuming all stock options exercisable
to purchase Centra common stock outstanding at the time of the merger,
including those shares of Centra common stock and options exercisable for
shares of Centra common stock which are subject to Centra's repurchase rights.
A written memorandum of the terms of the contracts under which SmartForce may
become entitled to purchase certain of its own ordinary shares (or ADSs
representing such ordinary shares) will be produced to the meeting and signed
for the purposes of identification by the chairman. If proposal six is approved
by the SmartForce shareholders, in addition to issuing the SmartForce ordinary
shares represented by ADSs in the merger and assuming all of such stock options
in the merger, SmartForce will assume the rights of Centra to repurchase the
shares underlying these certain options, whether now or subsequently exercised,
until such time as such repurchase rights lapse. The SmartForce board of
directors believes that the assumption of these rights is in the best interests
of SmartForce and SmartForce shareholders.
137
Proposal Six Vote Required
The affirmative vote of the holders of three-fourths of the ordinary shares
cast represented, in person or by proxy, at the annual general meeting and
voting on proposal six is required to approve the terms of certain contracts
under which SmartForce may become entitled to certain rights to repurchase its
ordinary shares held by Centra stockholders in connection with the assumption
of rights to repurchase unvested Centra common stock under the merger
agreement. Unless otherwise instructed, the proxies will vote FOR proposal six.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL SIX
To ensure that your shares are represented at the meeting, please complete,
date and sign the enclosed proxy and mail it promptly in the postage prepaid
envelope provided, whether or not you plan to attend the meeting. You may
revoke your proxy at any time before it is voted.
138
PROPOSALS TO CENTRA STOCKHOLDERS TO BE VOTED ON
AT THE CENTRA SPECIAL MEETING
Proposal One--Merger Proposal
General
Stockholders of Centra are being asked to consider and vote upon a proposal
to approve the Agreement and Plan of Merger and Reorganization dated January
16, 2002 made by and among SmartForce, Atlantic Acquisition Corp. and Centra
relating to the merger of Atlantic (a wholly owned subsidiary of SmartForce)
with and into Centra and the automatic conversion of each share of common stock
of Centra immediately prior to the consummation of the merger into a right to
receive 0.425 American Depositary Shares of SmartForce.
Proposal One Vote Required
The affirmative vote of the holders of a majority of the shares of Centra
common stock outstanding on the record date is required to approve and adopt
the merger agreement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL ONE
Proposal Two--Adjournment of the Centra Special Meeting
General
If at the Centra special meeting on , 2002, the number of shares of
Centra common stock present or represented and voting in favor of proposal to
approval and adopt the merger agreement is insufficient to approve the merger
under Delaware law, Centra management intends to move to adjourn the special
meeting in order to enable the Centra board of directors to solicit additional
proxies in favor of the proposal. In that event, Centra will ask its
stockholders to vote only upon the adjournment proposal, and not upon the
merger proposal.
In the adjournment proposal, Centra is asking its stockholders to authorize
the holder of any proxy solicited by the Centra board of directors to vote in
favor of granting Centra's management the discretionary authority to adjourn
the Centra special meeting, and any later adjournments, to a date or dates not
later than , 2002, in order to enable the Centra board of directors to
solicit additional proxies in favor of the merger proposal. If the stockholders
approve the adjournment proposal, Centra's management could adjourn the special
meeting, and any adjourned session of the special meeting, to a date or dates
not later than , 2002 and use the additional time to solicit additional
proxies in favor of the merger proposal, including the solicitation of proxies
from stockholders that have previously voted against the merger proposal. Among
other things, approval of the adjournment proposal could mean that, even if
Centra had received proxies representing a sufficient number of votes against
the merger proposal to defeat it, Centra's management could adjourn the special
meeting without a vote on the merger proposal for up to 30 days and seek during
that period to convince the holders of those shares to change their votes to
votes in favor of the merger proposal.
Under Centra's bylaws, the affirmative vote of at least a majority of the
shares of Centra common stock present or represented and entitled to vote at
the special meeting is necessary to approve the adjournment proposal. Broker
non-votes will not be counted for purposes of determining whether a majority of
the shares of Centra common stock present or represented and entitled to vote
at the special meeting have been cast in favor of the adjournment proposal.
Abstentions will have the effect of a vote against the adjournment proposal. No
proxy that is specifically marked "against" approval of the merger proposal
agreement will be voted in favor of the adjournment proposal unless it is
specifically marked "for" the adjournment proposal.
The board of directors believes that if the number of shares of Centra
common stock present or represented at the special meeting and voting in favor
of the merger proposal is insufficient to approve the merger proposal it
139
is in the best interests of the stockholders of Centra to enable the board, for
a limited period of time, to continue to seek to obtain a sufficient number of
additional votes in favor of the merger proposal to bring about its approval.
Proposal Two Vote Required
The affirmative vote of the holders of a majority of the shares of Centra's
common stock present or represented and entitled to vote at the special meeting
and voting on the adjournment proposal is required to approve the adjournment
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL TWO
To ensure that your shares are represented at the meeting, please complete,
date and sign the enclosed proxy and mail it promptly in the postage prepaid
envelope provided, whether or not you plan to attend the meeting. You may
revoke your proxy at any time before it is voted.
140
OTHER MATTERS
The report of the directors and SmartForce consolidated financial statements
and auditors' report to the Members for the last fiscal year were approved by
the board of directors on March , 2001. Irish law requires us to provide
The Members of SmartForce for receipt and consideration such report of the
directors and our consolidated financial statements and auditors' report to the
Members for the last fiscal year at the annual general meeting of shareholders.
In this regard, included as part of the proxy materials dispatched to Members
is a copy of the report of the directors and our consolidated financial
statements and auditors' report to the Members for the last fiscal year.
Representatives of Ernst & Young, SmartForce's independent auditors, are
expected to be present at the annual general meeting with the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
LEGAL MATTERS
The validity of the SmartForce ordinary shares represented by the ADSs to be
issued in connection with the merger will be passed upon for SmartForce by
Binchys Solicitors. In addition, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, will pass upon certain United States federal tax consequences of
the merger to SmartForce shareholders. Foley, Hoag & Eliot LLP will pass upon
certain United States federal tax consequences of the merger to Centra
stockholders.
EXPERTS
The consolidated financial statements of SmartForce PLC appearing in
SmartForce PLC's Annual Report (Form 10-K) for the year ended December 31,
2001, have been audited by Ernst & Young, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The financial statements of Centra Software, Inc. as of December 31, 2001,
2000, and 1999, incorporated by reference in this prospectus have been audited
by Arthur Andersen, LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
141
DOCUMENTS INCORPORATED BY REFERENCE
This joint proxy statement/prospectus incorporates documents by reference
that are not included in or delivered with this document. The Securities and
Exchange Commission allows SmartForce and Centra to "incorporate by reference"
the information that each company files with it, which means that SmartForce
and Centra can disclose important information to you by referring you to those
documents. Documents that are incorporated by reference contain important
information about SmartForce and Centra and their respective finances.
All documents filed by SmartForce and Centra under section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, after the date
hereof and before the date of the SmartForce special meeting and the Centra
special meeting are incorporated by reference into and are a part of this joint
proxy statement/prospectus from the date of filing of each such document.
You should rely only on the information contained in this document or that
SmartForce or Centra has referred to you. SmartForce and Centra have not
authorized anyone to provide you with information that is different.
The following documents, which were filed by SmartForce with the Securities
and Exchange Commission, are incorporated by reference into this joint proxy
statement/prospectus:
. SmartForce's annual report on Form 10-K for the fiscal year ended December
31, 2001;
. SmartForce's current report on Form 8-K dated January 17, 2001;
. the description of SmartForce's ordinary shares contained in SmartForce's
registration statement on Form 8-A filed on March 9, 1995 and amended on
April 10, 1995; and
. SmartForce's registration statement on Form 8-A filed on October 5, 1998.
The following documents, which were filed by Centra with the Securities and
Exchange Commission, are incorporated by reference into this joint proxy
statement/prospectus:
. Centra's annual report on Form 10-K for the fiscal year ended December 31,
2001; and
. Centra's current report on Form 8-K dated January 22, 2002.
Any statement contained in a document incorporated or deemed to be
incorporated in this document by reference will be deemed to be modified or
superseded for purposes of this joint proxy statement/prospectus to the extent
that a statement contained in this document or any other subsequently filed
document that is deemed to be incorporated in this document by reference
modifies or supersedes the statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part
of this joint proxy statement/prospectus.
142
WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated by reference into this joint proxy
statement/prospectus are available from SmartForce or Centra upon request. We
will provide to you a copy of any and all of the information that is
incorporated by reference in this joint proxy statement/prospectus (not
including exhibits to the information unless those exhibits are specifically
incorporated by reference into this joint proxy statement/prospectus), without
charge, upon written or oral request. You should make any request for documents
by , 2002 to ensure timely delivery of the documents.
Requests for documents relating to Requests for documents relating to
SmartForce Centra
should be directed to: should be directed to:
SmartForce PLC Centra Software, Inc.
900 Chesapeake Drive 430 Bedford Street
Redwood City, CA 94063 Lexington, Massachusetts 02420
(650) 817-5900 (781) 831-7000
Attention: Investor Relations Attention: Investor Relations
SmartForce and Centra each file reports, proxy statements and other
information with the SEC. Copies of their respective reports, proxy statements
and other information may be inspected and copied at the public reference
facilities maintained by the SEC:
Judiciary Plaza Citicorp Center
Room 1024 500 West Madison Street
450 Fifth Street, N.W. Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding each of us. The address of the SEC website is
http://www.sec.gov.
Reports, proxy statements and other information concerning SmartForce and
Centra may also be inspected at: The National Association of Securities
Dealers, 1735 K Street N.W., Washington, D.C. 20006.
This joint proxy statement/prospectus is dated March 22, 2002. You should
not assume that the information contained in this joint proxy
statement/prospectus is accurate as of any date other than March 22, 2002, and
neither the mailing of the joint proxy statement/prospectus to SmartForce and
Centra stockholders nor the issuance of SmartForce ordinary shares, represented
by ADSs in the merger shall create any implication to the contrary.
SmartForce has filed a registration statement under the Securities Act with
the SEC with respect to the SmartForce ordinary shares represented by the ADSs
to be issued to Centra stockholders in the merger. This joint proxy
statement/prospectus constitutes the prospectus of SmartForce filed as part of
the registration statement. This joint proxy statement/prospectus does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted as permitted by the
rules and regulations of the SEC. You may inspect and copy the registration
statement at any of the addresses listed above or may view a copy on the SEC's
Website.
143
Information on SmartForce's Web Sites
Information on any SmartForce Internet web site or the web site of any
subsidiary of SmartForce is not part of this document and you should not rely
on that information in deciding whether to approve the share issuance, unless
that information is also in this document or in a document that is incorporated
by reference in this document.
Information on Centra's Web Sites
Information on any Centra Internet web site or the web site of any
subsidiary of Centra is not part of this document and you should not rely on
that information in deciding whether to approve the merger, unless that
information is also in this document or in a document that is incorporated by
reference in this document.
This document does not constitute an offer to sell, or a solicitation of an
offer to purchase, the SmartForce ADSs or the solicitation of a proxy, in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
the offer, solicitation of an offer or proxy solicitation in that jurisdiction.
Neither the delivery of this joint proxy statement/prospectus nor any
distribution of securities means, under any circumstances, that there has been
no change in the information set forth in this document or in its affairs since
the date of this joint proxy statement/prospectus. The information contained in
this document with respect to Centra and its subsidiaries was provided by
Centra. The information contained in this document with respect to SmartForce
and its subsidiaries was provided by SmartForce.
144
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION
BY AND AMONG
SMARTFORCE PLC,
ATLANTIC ACQUISITION CORP.
AND
CENTRA SOFTWARE, INC.
Dated as of January 16, 2002
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER............................................ A-1
1.1 The Merger................................................. A-1
1.2 Effective Time; Closing.................................... A-2
1.3 Effect of the Merger....................................... A-2
1.4 Certificate of Incorporation; Bylaws....................... A-2
1.5 Directors and Officers..................................... A-2
1.6 Effect on Capital Stock.................................... A-2
1.7 Surrender of Certificates.................................. A-3
1.8 No Further Ownership Rights in Company Common Stock........ A-4
1.9 Lost, Stolen or Destroyed Certificates..................... A-5
1.10 Tax Consequences........................................... A-5
1.11 Taking of Necessary Action; Further Action................. A-5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY............ A-5
2.1 Organization and Qualification; Subsidiaries............... A-5
2.2 Certificate of Incorporation and Bylaws.................... A-6
2.3 Capitalization............................................. A-6
2.4 Authority Relative to this Agreement....................... A-7
2.5 No Conflict; Required Filings and Consents................. A-8
2.6 Compliance; Permits........................................ A-8
2.7 SEC Filings; Financial Statements.......................... A-9
2.8 No Undisclosed Liabilities................................. A-9
2.9 Absence of Certain Changes or Events....................... A-9
2.10 Absence of Litigation...................................... A-10
2.11 Employee Benefit Plans..................................... A-10
2.12 Labor Matters.............................................. A-12
2.13 Registration Statement/Joint Proxy Statement/Prospectus.... A-12
2.14 Restrictions on Business Activities........................ A-13
2.15 Title to Property.......................................... A-13
2.16 Taxes...................................................... A-13
2.17 Environmental Matters...................................... A-14
2.18 Brokers.................................................... A-15
2.19 Intellectual Property...................................... A-15
2.20 Agreements, Contracts and Commitments...................... A-18
2.21 Insurance.................................................. A-19
2.22 Opinion of Financial Advisor............................... A-19
2.23 Board Approval............................................. A-19
2.24 Vote Required.............................................. A-20
2.25 State Takeover Statutes.................................... A-20
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TABLE OF CONTENTS
(continued)
Page
----
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB... A-20
3.1 Organization and Qualification; Subsidiaries................... A-20
3.2 Certificate of Incorporation and Bylaws........................ A-20
3.3 Capitalization................................................. A-20
3.4 Authority Relative to this Agreement........................... A-21
3.5 No Conflict; Required Filings and Consents..................... A-21
3.6 SEC Filings; Financial Statements.............................. A-22
3.7 No Undisclosed Liabilities..................................... A-22
3.8 Absence of Certain Changes or Events........................... A-23
3.9 Absence of Litigation.......................................... A-23
3.10 Registration Statement; Joint Proxy Statement/Prospectus....... A-23
3.11 Brokers........................................................ A-23
3.12 Opinion of Financial Advisor................................... A-23
3.13 Board Approval................................................. A-23
3.14 Vote Required.................................................. A-24
3.15 Compliance; Permits............................................ A-24
3.16 Intellectual Property.......................................... A-24
3.17 Taxes.......................................................... A-24
3.18 Benefit Plans.................................................. A-25
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................ A-26
4.1 Conduct of Business by Company................................. A-26
4.2 Conduct of Business by Parent.................................. A-28
ARTICLE V ADDITIONAL AGREEMENTS....................................... A-29
5.1 Joint Proxy Statement/Prospectus; Registration Statement....... A-29
5.2 Stockholder Meetings........................................... A-30
5.3 Confidentiality; Access to Information......................... A-30
5.4 No Solicitation................................................ A-30
5.5 Public Disclosure.............................................. A-32
5.6 Reasonable Efforts; Notification............................... A-32
5.7 Third Party Consents........................................... A-33
5.8 Stock Options; Stock Purchase Plan............................. A-33
5.9 Employee Compensation.......................................... A-34
5.10 Form S-8....................................................... A-34
5.11 Indemnification................................................ A-34
5.12 Nasdaq Listing................................................. A-34
5.13 Affiliates..................................................... A-34
5.14 Board of Directors of Parent; Officer Appointment.............. A-35
a-ii
TABLE OF CONTENTS
(continued)
Page
----
5.15 Regulatory Filings; Reasonable Efforts.............................. A-35
5.16 Tax-Free Reorganization............................................. A-35
5.17 Section 16 Matters.................................................. A-35
5.18 Benefit Plans....................................................... A-35
ARTICLE VI CONDITIONS TO THE MERGER...................................... A-36
6.1 Conditions to Obligations of Each Party to Effect the Merger........ A-36
6.2 Additional Conditions to Obligations of Company..................... A-37
6.3 Additional Conditions to the Obligations of Parent and Merger Sub... A-37
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................ A-38
7.1 Termination......................................................... A-38
7.2 Notice of Termination; Effect of Termination........................ A-39
7.3 Fees and Expenses................................................... A-39
7.4 Amendment........................................................... A-40
7.5 Extension; Waiver................................................... A-41
ARTICLE VIII GENERAL PROVISIONS.......................................... A-41
8.1 Survival of Representations and Warranties.......................... A-41
8.2 Notices............................................................. A-41
8.3 Interpretation; Definitions......................................... A-42
8.4 Counterparts........................................................ A-43
8.5 Entire Agreement; Third Party Beneficiaries......................... A-43
8.6 Severability........................................................ A-43
8.7 Other Remedies; Specific Performance................................ A-43
8.8 Governing Law....................................................... A-43
8.9 Rules of Construction............................................... A-43
8.10 Assignment.......................................................... A-43
INDEX OF EXHIBITS
Exhibit A-1 Persons and Entities to Sign Company Voting Agreements
Exhibit A-2 Form of Company Voting Agreement
Exhibit B-1 Persons and Entities to Sign Parent Voting Agreements
Exhibit B-2 Form of Parent Voting Agreement
Exhibit C Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION is made and entered
into as of January 16, 2002, among SmartForce PLC, a public limited liability
company organized under the laws of the Republic of Ireland ("Parent"),
Atlantic Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and Centra Software, Inc., a Delaware
corporation ("Company").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the General Corporation
Law of the State of Delaware ("Delaware Law"), Parent and Company intend to
enter into a business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger (as
defined in Section 1.1) is consistent with and in furtherance of the long-term
business strategy of Company and fair to, and in the best interests of, Company
and its stockholders, (ii) has approved and declared advisable this Agreement,
and has approved the Merger and the other transactions contemplated by this
Agreement and (iii) has determined to recommend that the stockholders of
Company adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders, (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) has determined to recommend that the shareholders
of Parent approve the issuance of Parent ADSs (as defined below) pursuant to
the Merger (the "Share Issuance").
D. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, the persons
and entities listed on Exhibit A-1 are entering into stockholder agreements in
the form attached hereto as Exhibit A-2 (the "Company Voting Agreements"); and
as a condition and inducement to Company's willingness to enter into this
Agreement, the persons listed on Exhibit B-1 are entering into stockholder
agreements in the form attached hereto as Exhibit B-2 (the "Parent Voting
Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation. Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
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1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing (or such later time as may be agreed in
writing by Company and Parent and specified in the Certificate of Merger) being
the "Effective Time") as soon as practicable on the Closing Date (as herein
defined). Unless the context otherwise requires, the term "Agreement" as used
herein refers collectively to this Agreement and Plan of Merger and
Reorganization and the Certificate of Merger. The closing of the Merger (the
"Closing") shall take place at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, California, at a time and date to
be specified by the parties, which shall be no later than the second business
day after the satisfaction or waiver of the conditions set forth in Article VI,
or at such other time, date and location as the parties hereto agree in writing
(the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended
so that the name of the Surviving Corporation shall be as agreed upon by
Parent and Company prior to the Effective Time.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock,
$0.001 par value per share, of Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time, other than any
shares of Company Common Stock to be canceled pursuant to Section 1.6(b),
will be canceled and extinguished and automatically converted (subject to
Sections 1.6(e) and (f)) into the right to receive 0.425 (the "Exchange
Ratio") American Depositary Shares of Parent (the "Parent ADSs") upon
surrender of the certificate representing such share of Company Common Stock
in the manner provided in Section 1.7 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required)
in the manner provided in Section 1.9). If any shares of Company Common
Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition
under any applicable restricted stock purchase agreement or other agreement
with the Company, then the shares of Parent ADSs issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the ADRs (as
defined in Section 1.7) representing such Parent ADSs may accordingly be
marked with appropriate legends. The Company shall take all action that may
be necessary to ensure that,
A-2
from and after the Effective Time, Parent is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
Stock held by Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Plans. At the Effective Time, all options to purchase Company
Common Stock then outstanding under Company's 1995 Stock Plan (the "1995
Stock Plan"), Company's 1999 Stock Incentive Plan (the "1999 Stock Plan"),
Company's 1999 Director Plan (the "Director Plan," together with the 1995
Stock Plan and the 1999 Stock Plan, collectively the "Company Option Plans")
shall be assumed by Parent in accordance with Section 5.8 hereof. At the
Effective Time, all rights outstanding under Company's 1999 Employee Stock
Purchase Plan (the "Company Stock Purchase Plan") shall be treated as set
forth in Section 5.8 hereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.001 par
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of Common Stock,
$0.001 par value per share, of the Surviving Corporation. Each certificate
evidencing ownership of shares of Merger Sub Common Stock shall evidence
ownership of such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect appropriately the effect of any share split, reverse share split,
share dividend (including any dividend or distribution of securities
convertible into Parent ADSs or Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to
Parent Ordinary Shares (as defined in Section 3.3), Parent ADSs or Company
Common Stock occurring on or after the date hereof and prior to the
Effective Time.
(f) Fractional Shares. No fraction of a Parent ADS will be issued by
virtue of the Merger, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a Parent ADS
(after aggregating all fractional Parent ADSs that otherwise would be
received by such holder) shall, upon surrender of such holder's
Certificates(s) (as defined in Section 1.7(c)) receive from Parent an amount
of cash (rounded to the nearest whole cent), without interest, equal to the
product of (i) such fraction, multiplied by (ii) the average closing price
of Parent ADSs for the ten trading days immediately preceding the last full
trading day prior to the Effective Time, as reported on the Nasdaq National
Market System ("Nasdaq").
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select a bank or trust company
reasonably acceptable to Company to act as the exchange agent (the "Exchange
Agent") in the Merger.
(b) Parent to Provide ADSs. As promptly as practicable after the
Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, that number of Parent ADSs as is
issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.6(f) and any dividends or
distributions to which holders of shares of Company Common Stock may be
entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. As soon as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of record
(as of the Effective Time) of a certificate or certificates (the
"Certificates"), which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock whose shares were converted into
the right to receive Parent ADSs pursuant to Section 1.6, cash in lieu of
any fractional shares pursuant to Section 1.6(f) and any dividends or other
A-3
distributions pursuant to Section 1.7(d), (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall contain such other
provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for American
Depositary Receipts ("ADRs") representing Parent ADSs, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor ADRs representing the number of whole Parent ADSs into which their
shares of Company Common Stock were converted at the Effective Time, payment
in lieu of fractional shares which such holders have the right to receive
pursuant to Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d), and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will
be deemed from and after the Effective Time, for all corporate purposes,
subject to Section 1.7(d) as to the payment of dividends, to evidence only
the ownership of the number of full Parent ADSs into which such shares of
Company Common Stock shall have been so converted and the right to receive
an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent ADSs with a record date after the Effective Time will be
paid to the holders of any unsurrendered Certificates with respect to the
Parent ADSs represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall
promptly deliver to the record holders thereof, without interest, ADRs
representing whole Parent ADSs issued in exchange therefor along with
payment in lieu of fractional shares pursuant to Section 1.6(f) hereof and
the amount of any such dividends or other distributions with a record date
after the Effective Time payable with respect to such whole Parent ADSs.
(e) Transfers of Ownership. If ADRs representing Parent ADSs are to be
issued in a name other than that in which the Certificates surrendered in
exchange therefor are registered, it will be a condition of the issuance
thereof that the Certificates so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to Parent or any agent designated by it any transfer
or other taxes required by reason of the issuance of ADRs representing
Parent ADSs in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(f) Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable
legal requirement. To the extent such amounts are so deducted or withheld,
such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have
been paid.
(g) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of Parent ADSs or Company
Common Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All Parent ADSs
issued in accordance with the terms hereof (together with any cash paid in
respect thereof pursuant to Sections 1.6(f) and 1.7(d)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares
A-4
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, ADRs
representing the Parent ADSs into which the shares of Company Common Stock
represented by such Certificates were converted pursuant to Section 1.6, cash
for fractional shares, if any, as may be required pursuant to Section 1.6(f)
and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such ADRs representing Parent ADSs, cash and other
distributions, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. The parties hereto intend that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the Company and Merger Sub will cause
their respective current officers to take all such lawful and necessary action.
Parent shall cause Merger Sub to perform all of its obligations relating to
this Agreement and the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub, subject to such
exceptions as are specifically disclosed in writing in the disclosure schedule
supplied by Company to Parent dated as of the date hereof (the "Company
Schedule") referencing a specific representation, as follows:
2.1 Organization and Qualification; Subsidiaries.
(a) Each of Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority to
own, lease and operate its assets and properties and to carry on its
business as it is now being conducted. Each of Company and its subsidiaries
is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders
("Approvals") necessary to own, lease and operate the properties it purports
to own, operate or lease and to carry on its business as it is now being
conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, be material to the Company and its
subsidiaries, taken as a whole. Each of Company and its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either
individually or in the aggregate, be material to the Company and its
subsidiaries taken as a whole.
(b) Company has no subsidiaries except for the corporations identified in
Section 2.1(b) of the Company Schedule. Neither Company nor any of its
subsidiaries has agreed nor is obligated to make nor be
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bound by any written or oral agreement, contract, subcontract, lease,
binding understanding, instrument, note, option, warranty, purchase order,
license, sublicense, insurance policy, benefit plan, commitment or
undertaking of any nature, as of the date hereof or as may hereafter be in
effect (a "Contract") under which it may become obligated to make, any
future investment in or capital contribution to any entity other than
Company or a direct or indirect wholly-owned subsidiary of Company. Neither
Company nor any of its subsidiaries directly or indirectly owns any equity
or similar interest in or any interest convertible, exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business, association or entity other
than the entities listed in Section 2.1(b) of the Company Schedule, all of
which are direct or indirect wholly-owned subsidiaries of Company.
2.2 Certificate of Incorporation and Bylaws. Company has previously
furnished to Parent a complete and correct copy of its certificate of
incorporation and bylaws and equivalent organizational documents of each of its
subsidiaries, each as amended to date (together, the "Company Charter
Documents"), and such Company Charter Documents are in full force and effect.
Neither Company nor any of its subsidiaries is in violation of any of the
provisions of its respective Company Charter Documents.
2.3 Capitalization.
(a) The authorized capital stock of Company consists of 100,000,000
shares of Company Common Stock and 10,000,000 shares of Preferred Stock
("Company Preferred Stock"), each having par value $0.001 per share. As of
the close of business on January 15, 2002 (i) 25,418,045 shares of Company
Common Stock are issued and outstanding; (ii) no shares of Company Common
Stock are held in treasury by Company or by subsidiaries of Company; (iii)
747,514 shares of Company Common Stock are reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the
1995 Stock Plan; (iv) 4,320,656 shares of Company Common Stock are reserved
for issuance upon the exercise of outstanding options to purchase Company
Common Stock under the 1999 Stock Plan; (v) no shares of Company Common
Stock are reserved for issuance upon the exercise of outstanding options to
purchase Company Common Stock under the Directors Plan; (vi) 1,286,598
shares of Company Common Stock are reserved for future issuance under the
Company Stock Purchase Plan; (vii) not more than 3,489,986 shares of Company
Common Stock are available for future grant under the 1995 Stock Plan;
(viii) 688,934 shares of Company Common Stock are available for future grant
under the 1999 Stock Plan; (ix) 200,000 shares of Company Common Stock are
available for future grant under the Directors Plan; and (x) no shares of
Company Preferred Stock are issued or outstanding. From the close of
business on January 15, 2002 through the date hereof, the Company has not
issued any shares of Company Common Stock (other than shares of Company
Common Stock issued pursuant to the exercise of options purported in this
Section 2.3(a) to be outstanding) or any options, warrants or other rights
to acquire Company Common Stock. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and nonassessable and
are not subject to preemptive rights created by statute, the Company Charter
Documents or any agreement or document to which Company is a party or by
which it is bound. Section 2.3(a) of the Company Schedule sets forth the
following information with respect to each Company Stock Option (as defined
in Section 5.8) outstanding as of the date of this Agreement: (i) the name
and address of the optionee; (ii) the particular plan pursuant to which such
Company Stock Option was granted; (iii) the number of shares of Company
Common Stock subject to such Company Stock Option; (iv) the exercise price
of such Company Stock Option; (v) the date on which such Company Stock
Option was granted; and (vi) the applicable vesting schedule. Company has
made available to Parent accurate and complete copies of all stock option
plans pursuant to which the Company has granted such Company Stock Options
that are currently outstanding and the form of all stock option agreements
evidencing such Company Stock Options. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instrument pursuant to which they are issuable, would be
duly authorized, validly issued, fully paid and nonassessable. Except as set
forth in Section 2.3(a) of the Company Schedule, there are no commitments or
agreements of any character to which the Company is bound obligating the
Company to accelerate the vesting of any Company Stock Option as a result of
the Merger. All outstanding shares of Company Common Stock, all outstanding
Company Stock Options, and all outstanding shares of capital stock of each
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subsidiary of the Company have been issued and granted in compliance with
all applicable securities laws and other applicable Legal Requirements (as
defined below). For the purposes of this Agreement, "Legal Requirements"
means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Entity (as defined below) and (ii) all
requirements set forth in applicable contracts, agreements, and instruments.
(b) Except for securities Company owns free and clear of all liens,
pledges, hypothecations, charges, mortgages, security interests,
encumbrances, claims, infringements, interferences, options, right of first
refusals, preemptive rights, community property interests or restriction of
any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction
on the possession, exercise or transfer of any other attribute of ownership
of any asset but excluding restrictions on transfer under applicable
securities laws) directly or indirectly through one or more subsidiaries,
there are no equity securities, partnership interests or similar ownership
interests of any class of equity security of any subsidiary of the Company,
or any security exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding.
(c) Except as set forth in Section 2.3(a) or Section 2.3(c) of the
Company Schedule, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any
character to which Company or any of its subsidiaries is a party or by which
it is bound obligating Company or any of its subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition of,
any shares of capital stock, partnership interests or similar ownership
interests of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting
of or enter into any such subscription, option, warrant, equity security,
call, right, commitment or agreement. Except as set forth in Section 2.3(c)
of the Company Schedule, there are no registration rights and there is,
except for the Company Voting Agreements, no voting trust, proxy, rights
plan, antitakeover plan or other similar agreement or understanding to which
the Company or any of its subsidiaries is a party or by which they are bound
with respect to any equity security of any class of the Company or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries. Stockholders of the
Company will not be entitled to dissenters' rights under applicable state
law in connection with the Merger. There are no equity-based compensation
awards (whether payable in cash or otherwise) outstanding nor are there any
commitments to issue any such awards.
2.4 Authority Relative to this Agreement. Company has all necessary
corporate power and authority to execute and deliver this Agreement and the
Parent Voting Agreements and to perform its obligations hereunder and
thereunder and, subject to obtaining the approval of the stockholders of
Company of the Merger, to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Parent Voting
Agreements by Company and the consummation by Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of Company and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement or
the Parent Voting Agreements, or to consummate the transactions so contemplated
(other than, with respect to the Merger, the approval and adoption of this
Agreement by holders of a majority of the outstanding shares of Company Common
Stock in accordance with Delaware Law and the Company Charter Documents and the
filing of the Certificate of Merger pursuant to Delaware Law). This Agreement
and the Parent Voting Agreements have been duly and validly executed and
delivered by Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, constitute legal and binding obligations of
Company, enforceable against Company in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights generally and general
principles of equity.
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2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Parent Voting
Agreements by Company do not, and the performance of this Agreement and the
Parent Voting Agreements by Company will not, (i) conflict with or violate
the Company Charter Documents, (ii) subject to obtaining the approval of
Company's stockholders of the Merger and compliance with the requirements
set forth in Section 2.5(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Company or any of its
subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) except as set forth in Section 2.5(a) of the Company
Schedule, result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or
impair Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries or
its or any of their respective properties are bound or affected. Section
2.5(a) of the Company Schedule lists all consents, waivers and approvals
under any of Company's or any of its subsidiaries' agreements, contracts,
licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually
or in the aggregate were not obtained, would result in a material loss of
benefits or any material liability to Company, its subsidiaries, Parent or
the Surviving Corporation.
(b) The execution and delivery of this Agreement and the Parent Voting
Agreements by Company do not, and the performance of this Agreement and the
Parent Voting Agreements by Company shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory
authority, domestic or foreign (a "Governmental Entity"), except (A) for
applicable requirements, if any, of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities laws ("Blue Sky Laws"), the securities
laws of any foreign country ("Foreign Securities Laws"), the pre-merger
notification requirements (the "HSR Approval") of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Mergers
Take-Overs and Monopolies (Control) Act, 1978, of Ireland as amended (the
"Irish Merger Act"), comparable requirements of the anti-competition
authorities of other foreign jurisdictions, the rules and regulations of
Nasdaq, and the filing and recordation of the Certificate of Merger as
required by Delaware Law and (B) where the failure to obtain such other
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not have a material adverse effect on the parties'
ability to consummate the Merger or perform their obligations under this
Agreement.
2.6 Compliance; Permits.
(a) Neither Company nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any material law, rule, regulation, order,
judgment or decree (each, a "Law") applicable to Company or any of its
subsidiaries or by which its or any of their respective properties is bound
or affected, or (ii) any Company Contract (as defined below) or any other
material note, bond, mortgage, indenture, lease, license, permit, franchise
or other instrument or obligation to which Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries or
any of their respective properties is bound or affected. No investigation or
review by any governmental or regulatory body or authority is pending or, to
the knowledge of Company, threatened against Company or any of its
subsidiaries, nor, to the knowledge of Company, has any governmental or
regulatory body or authority indicated an intention to conduct the same,
other than, in each such case, those the outcome of which could not,
individually or in the aggregate, reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of the Company
or any of its subsidiaries, any acquisition of material property by the
Company or any of its subsidiaries or the conduct of business by the Company
or any of its subsidiaries as currently conducted.
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(b) Company and each of its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities
which are material to operation of the business of Company and its
subsidiaries taken as a whole (collectively, the "Company Permits"). Company
and its subsidiaries are in compliance in all material respects with the
terms of the Company Permits.
2.7 SEC Filings; Financial Statements.
(a) Company has made available to Parent a correct and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Company with the Securities and Exchange Commission ("SEC") after
January 1, 2001 (the "Company SEC Reports"), which are all the forms,
reports and documents required to be filed by Company with the SEC after
January 1, 2001. The Company SEC Reports (X) were prepared in accordance in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports and (Y) did not at the
time they were filed (and if amended or superseded by a filing prior to the
date of this Agreement then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. None
of Company's subsidiaries is required to file any reports or other documents
with the SEC.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports,
including any Company SEC Reports filed after the date hereof until the
Closing, (X) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (Y) was prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or, in the case of
unaudited statements, for the absence footnotes as permitted by Form 10-Q of
the Exchange Act) and (Z) fairly presents in all material respects the
consolidated financial position of Company and its subsidiaries at the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount.
(c) Company has previously furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.8 No Undisclosed Liabilities. Neither Company nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Company and its subsidiaries taken as a
whole, except (i) liabilities provided for in Company's balance sheet as of
September 30, 2001 or (ii) liabilities incurred since September 30, 2001 in the
ordinary course of business, none of which is individually or in the aggregate
are material to the business, results of operations or financial condition of
Company and its subsidiaries, taken as a whole.
2.9 Absence of Certain Changes or Events. Since September 30, 2001, there
has not been: (i) any Material Adverse Effect on Company, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Company's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition
by Company of any of Company's capital stock or any other securities of Company
or its subsidiaries or any options, warrants, calls or rights to acquire any
such shares or other securities except for repurchases from employees following
their termination pursuant to the terms of their pre-existing stock option or
purchase agreements, (iii) any split, combination or reclassification of any of
Company's or any of its subsidiaries' capital stock, (iv) any granting by
Company or any of its subsidiaries of any increase in compensation or fringe
benefits, except for normal increases of cash compensation to non-officer
employees in the ordinary course of business consistent with past practice, or
any payment by Company or any of
A-9
its subsidiaries of any bonus, except for bonuses made to non-officer employees
in the ordinary course of business consistent with past practice, or any
granting by Company or any of its subsidiaries of any increase in severance or
termination pay or any entry by Company or any of its subsidiaries into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
Company or any of its subsidiaries of the nature contemplated hereby, (v) entry
by Company or any of its subsidiaries into any licensing or other agreement
with regard to the acquisition or disposition of any Intellectual Property (as
defined in Section 2.19) other than licenses in the ordinary course of business
consistent with past practice or any amendment or consent with respect to any
licensing agreement filed or required to be filed by Company with the SEC, (vi)
any material change by Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or
accounts receivable or any sale of assets of the Company other than in the
ordinary course of business.
2.10 Absence of Litigation. Except as set forth in Section 2.10 of the
Company Schedule, there are no material claims, actions, suits or proceedings
pending or, to the knowledge of Company, threatened (or, to the knowledge of
Company, any governmental or regulatory investigation pending or threatened)
against Company or any of its subsidiaries or any properties or rights of
Company or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign.
2.11 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit plans,
programs, policies, practices, contracts, agreements, commitments or other
arrangements (whether or not set forth in a written document and including,
without limitation, all "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) covering any active or former employee, director or
consultant of Company, any subsidiary of Company or any trade or business
(whether or not incorporated) which is a Benefits Affiliate (as defined
below)("Employee") with respect to which Company or any Benefits Affiliate
has or may in the future have liability are listed in Section 2.11(a) of the
Company Schedule (the "Plans"). Company has provided to Parent correct and
complete copies of (i) all documents embodying each Plan and management,
employment, severance, consulting, relocation, repatriation, expatriation or
other written agreements or contracts between the Company and Employee
including (without limitation) all amendments thereto (the "Employee
Agreements"), all related trust documents, and all written agreements and
contracts relating to each such Plan; (ii) the three (3) most recent annual
reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection
with each Plan; (iii) the most recent summary plan description together with
the summary(ies) of material modifications thereto, if any, required under
ERISA with respect to each Plan; (iv) all IRS or DOL determination, opinion,
notification and advisory letters; (v) all material correspondence to or
from any governmental agency relating to any Plan; (vi) all standard Company
forms of COBRA notice or such similar forms and notices as required under
applicable law; (vii) all discrimination tests for each Plan for the most
recent three (3) plan years; (viii) the most recent annual actuarial
valuations, if any, prepared for each Plan; (ix) if the Plan is funded, the
most recent annual and periodic accounting of Plan assets; (x) all written
agreements and contracts relating to each Plan, including, but not limited
to, administrative service agreements, group annuity contracts and group
insurance contracts; (xi) all material communications to employees or former
employees relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability under
any Plan or proposed Plan; (xii) all policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Plan; and (xiii) all
registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with any Plan. For purposes
of Sections 2.11 and 5.8, a "Benefits Affiliate" means any partnership,
corporation, association, joint stock company, trust, joint venture,
unincorporated organization or other entity that is a member of a controlled
group or which is under common control with Company within the meaning of
Section 414 of the Code and the rules and regulations promulgated thereunder.
A-10
(b) The Company has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and
has no knowledge of any default or violation by any other party to, each
Plan, and each Plan has been established, maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations (foreign
or domestic), including but not limited to ERISA and the Code, which are
applicable to such Plans. No suit, action, claim or other litigation
(excluding claims for benefits incurred in the ordinary course of Plan
activities) has been brought, or to the knowledge of Company or any Benefits
Affiliate is threatened, against or with respect to any such Plan. There are
no audits, inquiries or proceedings pending or, to the knowledge of Company,
threatened by the Internal Revenue Service (the "IRS") or Department of
Labor (the "DOL") with respect to any Plans. All contributions, reserves or
premium payments required to be made or accrued as of the date hereof to the
Plans have been timely made or accrued. Any Plan intended to be qualified
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code (i) has either obtained a favorable
determination, notification, advisory and/or opinion letter, as applicable,
as to its qualified status from the IRS or still has a remaining period of
time under applicable Treasury Regulations or IRS pronouncements in which to
apply for such letter and to make any amendments necessary to obtain a
favorable determination, and (ii) incorporates or has been amended to
incorporate all provisions required to comply with the Tax Reform Act of
1986 and subsequent legislation, or, where any amendment is required in
order to comply with recent legislative changes, is currently within the
permitted remedial amendment period to incorporate legislative changes.
Company does not have any plan or commitment to establish any new Plan, to
modify any Plan (except to the extent required by law or to conform any such
Plan to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to
enter into any new Plan. Each Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent, Company or any of its Benefits Affiliates (other than
ordinary administration expenses). The terms of the Company Option Plans and
Company Stock Options permit the assumption by Parent of the Company Stock
Options as provided in this Agreement and without the consent or approval of
the holders of the Company Stock Options and/or the holders of Company
Common Stock.
(c) Neither Company, any of its subsidiaries, nor any of their Benefits
Affiliates maintains or has at any time ever maintained, established,
sponsored, participated in, or contributed to any plan subject to Title IV
of ERISA or Section 412 of the Code and at no time has Company or any of its
subsidiaries contributed to or been requested to contribute to any
"multiemployer plan," as such term is defined in ERISA Section 3(37) or to
any plan described in Section 413 of the Code. Neither Company, any of its
subsidiaries, nor any officer or director of Company or any of its
subsidiaries is subject to any liability or penalty under Section 4975
through 4980B of the Code or Title I of ERISA. No "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 408 of ERISA or Section 4975
of the Code (or any administrative class exemption issued thereunder), has
occurred with respect to any Plan.
(d) Neither Company, any of its subsidiaries, nor any of their Benefits
Affiliates has, prior to the Effective Time and in any material respect,
violated any of the health continuation requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), the
requirements of the Family Medical Leave Act of 1993, as amended, the
requirements of the Health Insurance Portability and Accountability Act of
1996, as amended, the requirements of the Women's Health and Cancer Rights
Act of 1998, as amended, the requirements of the Newborns' and Mothers'
Health Protection Act of 1996, as amended, or any similar provisions of
state law applicable to Employees of the Company or any of its subsidiaries
or any of their Benefits Affiliates. None of the Plans promises or provides
retiree medical or other retiree welfare benefits to any person except as
required by applicable law, and neither Company nor any of its subsidiaries
has represented, promised or contracted (whether in oral or written form) to
provide such retiree benefits to any employee, former employee, director,
consultant or other person, except to the extent required by statute. Except
as set forth in Section 2.11(d) of the Company Schedule, no Plan or Employee
Agreement provides health benefits that are not fully insured through an
insurance contract.
A-11
(e) Except as set forth in Section 2.11(e) of the Company Schedule,
neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated herein, will (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event
under any Plan, Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee; or (ii) result in
any payment, compensation or benefit which will or may be made by Parent,
Company or its Benefits Affiliates with respect to any Employee or any other
"disqualified individual" being characterized as a "parachute payment"
(within the meaning of Section 280G(b)(2) of the Code). Section 2.11(e) of
the Company Schedule lists all persons who the Company reasonably believes
are, with respect to the Company or any of its subsidiaries, "disqualified
individuals" (within the meaning of Section 280G of the Code and the
regulations promulgated thereunder) as determined as of the date hereof.
Within a reasonable time after the last business day of each month after the
date hereof and on or about the date which is five business days prior to
the expected date of the Closing, Company shall, as and to the extent
necessary, deliver to Parent a revised Section 2.11(e) of the Company
Schedule which sets forth any additional information which Company
reasonably believes would affect the determination of the persons who are,
with respect to the Company or any of its subsidiaries, deemed to be
"disqualified individuals" (within the meaning of Section 280G of the Code
and the regulations promulgated thereunder) as of the date of each such
revised Section 2.11(e) of the Company Schedule.
2.12 Labor Matters. (i) There are no controversies pending or, to the
knowledge of each of Company and its subsidiaries, threatened, between Company
or any of its subsidiaries and any of their respective employees; (ii) as of
the date of this Agreement, neither Company nor any of its subsidiaries is
bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any collective bargaining agreement or other labor
union contract applicable to persons employed by Company or its subsidiaries
nor does Company or its subsidiaries know of any activities or proceedings of
any union to organize any such employees; and (iii) as of the date of this
Agreement, neither Company nor any of its subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or with
respect to any group of employees of Company or any of its subsidiaries. There
is no pending or, to the knowledge of Company, threatened labor dispute
involving Company and any group of its employees nor has Company experienced
any labor interruptions over the past three (3) years, and Company considers
its relationship with its employees to be good. Company and its subsidiaries
are in compliance in all respects with all applicable material foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours.
2.13 Registration Statement/Joint Proxy Statement/Prospectus. None of the
information supplied or to be supplied by Company for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of the Parent ADSs
in or as a result of the Merger (the "S-4") will, at the time the S-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and (ii) the
joint proxy statement/prospectus to be filed with the SEC by Company pursuant
to Section 5.1 hereof (the "Joint Proxy Statement/Prospectus") will, at the
dates mailed to the stockholders of Company, at the times of the stockholders'
meeting of Company (the "Company Stockholders' Meeting") in connection with the
transactions contemplated hereby, at the dates mailed to the shareholders of
Parent, at the times of the shareholders' meeting of Parent (the "Parent
Shareholders' Meeting") in connection with the Share Issuance and as of the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Joint Proxy Statement/Prospectus will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, Company makes no representation or warranty with respect to any
statement made, omitted or incorporated by reference on the basis of
information supplied by Parent or Merger Sub which is contained or incorporated
by reference in, or omitted from, any of the foregoing documents.
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2.14 Restrictions on Business Activities. Except as set forth in Section
2.14 of the Company Schedule, there is no agreement, commitment, judgment,
injunction, order or decree binding upon Company or its subsidiaries or to
which the Company or any of its subsidiaries is a party which has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of Company or any of its subsidiaries, any
acquisition of property by Company or any of its subsidiaries or the conduct of
business by Company or any of its subsidiaries as currently conducted.
2.15 Title to Property. Neither Company nor any of its subsidiaries owns
any real property. Company and each of its subsidiaries have good and
defensible title to all of their material properties and assets, free and clear
of all liens, claims, charges, encumbrances and other third party rights of any
kind except as described in Section 2.15 of the Company Schedule and except
liens for taxes not yet due and payable and such liens or other imperfections
of title, if any, as do not materially detract from the value of or interfere
with the present use of the property affected thereby; and all leases pursuant
to which Company or any of its subsidiaries lease from others material real or
personal property are in full force and effect, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or any event which
with notice or lapse of time, or both, would constitute a material default and
in respect of which Company or any of its subsidiary has not taken adequate
steps to prevent such default from occurring). All the plants, structures and
equipment of Company and its subsidiaries, except such as may be under
construction, are in good operating condition and repair, in all material
respects.
2.16 Taxes.
(a) For the purposes of this Agreement, "Tax" or "Taxes", means any and
all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts.
(b) (i) The Company and each of its subsidiaries have timely filed all
federal, state, local and foreign returns, estimates, information statements
and reports ("Returns") relating to Taxes required to be filed by the
Company and each of its subsidiaries with any Tax authority, except such
Returns which are not material to the Company or any of its subsidiaries.
Such Returns are true and correct in all material respects and have been
completed in accordance with applicable law. The Company and each of its
subsidiaries have paid all Taxes shown to be due on such Returns.
(ii) The Company and each of its subsidiaries as of the Effective
Time will have withheld with respect to its employees (and timely paid
over to the appropriate Taxing authority) all federal and state income
taxes, Taxes pursuant to the Federal Insurance Contribution Act, Taxes
pursuant to the Federal Unemployment Tax Act and other Taxes required to
be withheld, except such Taxes which are not material to the Company or
any of its subsidiaries.
(iii) Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material
Tax deficiency outstanding, proposed or assessed against the Company or
any of its subsidiaries raised by any Tax authority in a writing
received by the Company or such subsidiary, nor has the Company or any
of its subsidiaries executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection
of any Tax.
(iv) Except as set forth in Section 2.16(b)(iv) of the Company
Schedule, no audit or other examination of any Return of the Company or
any of its subsidiaries by any Tax authority is presently in progress,
nor has the Company or any of its subsidiaries been notified in writing
of any request for such an audit or other examination.
(v) Neither the Company nor any of its subsidiaries has any liability
for any material unpaid Taxes which has not been accrued for or reserved
on the Company balance sheet dated September 30, 2001 in accordance with
GAAP, whether asserted or unasserted, contingent or otherwise, which is
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material to the Company, other than any liability for unpaid Taxes that
may have accrued since September 30, 2001 in connection with the
operation of the business of the Company and its subsidiaries in the
ordinary course.
(vi) Except as set forth in Section 2.16(b)(vi) of the Company
Schedule, there is no contract, agreement, plan or arrangement to which
the Company or any of its subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this
Agreement, covering any employee or former employee of the Company or
any of its subsidiaries that, individually or collectively, would
reasonably be expected to give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, 404 or 162(m) of the
Code. There is no contract, agreement, plan or arrangement to which the
Company or any of its subsidiaries is a party or by which it is bound to
compensate any individual for excise taxes paid pursuant to Section 4999
of the Code.
(vii) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company or any of its subsidiaries.
(viii) Neither the Company nor any of its subsidiaries (a) is party
to or has any obligation under any Tax sharing, indemnity or allocation
agreement or arrangement, (b) has ever been a member of an affiliated
group (within the meaning of Code ss.1504(a)) filing a consolidated
federal income Tax Return (other than a group the common parent of which
was the Company), or (c) has any liability for the Taxes of any person
(other than the Company or any of its subsidiaries) under Treas. Reg.
(S)(S) 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
(ix) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock intended to qualify for tax-free treatment under
Section 355 of the Code (x) in the two years prior to the date of this
Agreement or (y) in a distribution which could otherwise constitute part
of a "plan" or "Series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
2.17 Environmental Matters. Company and each of its subsidiaries (i) has
obtained all applicable permits, licenses and other authorizations that are
required under Environmental Laws the absence of which would have a Material
Adverse Effect on Company; (ii) is in compliance in all material respects with
all material terms and conditions of such required permits, licenses and
authorizations, and also is in compliance in all material respects with all
other material limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; and (iii) as
of the date hereof, has no knowledge of and has not received notice of any
event, condition, circumstance, activity, practice, incident, action or plan
that is reasonably likely to interfere with or prevent continued compliance or
that would give rise to any common law or statutory liability, or otherwise
form the basis of any Environmental Claim with respect to Company, any of its
subsidiaries or any person or entity whose liability for any Environmental
Claim Company has retained or assumed either contractually or by operation of
law. To the Company's knowledge, no Hazardous Materials are present in, on or
under any properties owned, leased or used at any time (including both land and
improvements thereon) by Company or any of its subsidiaries, which may
reasonably give rise to any liability on the part of the Company or any of its
subsidiaries or corrective or remedial obligation on the part of the Company or
any of its subsidiaries under any Environmental Laws. For the purposes of this
Section 2.17, "Environmental Claim" means any notice, claim, act, cause of
action or investigation by any person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (i) the presence, or
release into the environment, of any Hazardous Materials or (ii) any violation,
or alleged violation, of any Environmental Laws. "Environmental Laws" means all
Federal, state, local and foreign laws and regulations relating to pollution of
the environment (including ambient air, surface water,
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ground water, land surface or subsurface strata) or the protection of human
health and worker safety, including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials. "Hazardous Materials" means chemicals, pollutants, contaminants,
wastes, toxic substances, radioactive and biological materials,
asbestos-containing materials, hazardous substances, petroleum and petroleum
products or any fraction thereof, excluding, however, Hazardous Materials
contained in products typically used for office and janitorial purposes
properly and safely maintained in accordance with Environmental Laws.
2.18 Brokers. Except for fees payable to Goldman, Sachs & Co. pursuant to
an engagement letter dated September 7, 2001, a copy of which has been provided
to Parent, Company has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.19 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in or, arising out of: (i) all United States and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof ("Patents");
(ii) all inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how, technology,
technical data and customer lists, and all documentation relating to any of
the foregoing; (iii) all works of authorship, copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all trade
names, logos, common law trademarks and service marks; trademark and service
mark registrations and applications therefor and all goodwill associated
therewith throughout the world; (vi) all databases and data collections and
all rights therein throughout the world; (vii) all Web addresses, sites and
domain names; and (viii) any similar, corresponding or equivalent rights to
any of the foregoing.
"Off-the-Shelf Product" shall mean any commercial, off-the-shelf software,
other than Company Products, that is generally available to the public
through retail dealers and that is licensed in object code form subject to a
perpetual, fully-paid license under which no future royalties are payable.
"Company Intellectual Property" shall mean any Intellectual Property that is
owned by or exclusively licensed to the Company or any of its subsidiaries.
Without in any way limiting the generality of the foregoing, Company
Intellectual Property includes all Intellectual Property owned by or
exclusively licensed to the Company or any of its subsidiaries incorporated
in the products of the Company or any of its subsidiaries, including without
limitation all rights in any design code and documentation in connection
with all current products and products in design and development.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents; (ii) registered trademarks or other
registrations related to trademarks; (iii) registered copyrights; and (iv)
any domain name registrations.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or any
of its subsidiaries.
"Intellectual Property Application" shall mean all United States,
international and foreign: (i) patent applications (including provisional
applications); (ii) applications to register trademarks, intent to use
applications, or other applications related to trademarks; (iii)
applications for copyright registration; and (iv) applications to register
or record any other Company Intellectual Property.
"Company Intellectual Property Applications" shall mean all of the
Intellectual Property Applications filed by or in the name of the Company or
any of its subsidiaries.
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(a) Disclosure of Registered Intellectual Property. Section 2.19 (a)
of the Company Schedule is a complete and accurate list of all Company
Registered Intellectual Property and Company Intellectual Property
Applications and specifies, where applicable, the jurisdictions in which
each such item of Company Registered Intellectual Property or such
Company Intellectual Property Application has been issued, registered or
filed and lists any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the
Company Registered Intellectual Property.
(b) Disclosure of Products. Section 2.19(b) of the Company Schedule
is a complete and accurate list (by name and version number) of all
software products or service offerings of the Company or any of it
subsidiaries ("Company Products") that have been distributed or provided
in the five (5)-year period preceding the date hereof or which the
Company or any of its subsidiaries intends to distribute or provide in
the future, including any products or service offerings under
development.
(c) No Orders or Decrees. Except as set forth in Section 2.19(c) of
the Company Schedule, no Company Intellectual Property or Company
Product is subject to any proceeding or outstanding decree, order,
judgment, contract, license, agreement, or stipulation restricting in
any manner the use, transfer, or licensing thereof by Company or any of
its subsidiaries. Except as set forth in Section 2.19(c) of the Company
Schedule, no Company Registered Intellectual Property or Company
Intellectual Property Applications is subject to any proceeding or
outstanding decree, order, judgment, contract, license, agreement or
stipulation which may adversely affect the validity, use or
enforceability of such Company Intellectual Property or Company Product.
(d) Validity and Filings. Except as set forth in Section 2.19(d) of
the Company Schedule, each item of Company Registered Intellectual
Property is, to the Company's knowledge, valid and subsisting, all
necessary registration, maintenance and renewal fees currently due in
connection with any Company Registered Intellectual Property or material
Company Intellectual Property Applications have been made and all
necessary documents, recordations and certificates in connection with
such Company Registered Intellectual Property or material Company
Intellectual Property Applications have been filed with the relevant
patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property or material
Company Intellectual Property Applications.
(e) Ownership. Except as set forth in Section 2.19(e) of the Company
Schedule, Company owns and has good and exclusive title to, or an
exclusive license to each item of Company Intellectual Property free and
clear of any lien, claim, charge, encumbrance or other third party
rights of any description whatsoever (excluding non-exclusive end user
licenses granted in the ordinary course), except for liens for taxes not
yet due and payable. Without limiting the foregoing: (i) Company is the
exclusive owner of all trademarks and trade names used in connection
with the operation or conduct of the business of Company and its
subsidiaries as currently conducted including the sale, distribution or
provision of any Company Products by Company or its subsidiaries; (ii)
Company owns exclusively, and has good title to, all copyrighted works
that are Company Products or which Company or any of its subsidiaries
otherwise purports to own; and (iii) to the Company's knowledge, to the
extent that any Patents would be infringed by the manufacture, use or
sale of any Company Products, Company is the exclusive owner of such
Patents.
(f) Invention Assignments. To the extent that any technology,
software or material Intellectual Property has been developed or created
independently or jointly by a third party for Company or any of its
subsidiaries or is incorporated into any of the Company Products,
Company has a written agreement with such third party with respect
thereto and Company thereby either (i) has obtained ownership of, and is
the exclusive owner of, or (ii) has obtained a license (sufficient for
the conduct of its business as currently conducted and as proposed to be
conducted) to all such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment.
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(g) No Prior Transfers. Except as set forth in Section 2.19(g) of
the Company Schedules, neither Company nor any of its subsidiaries has
transferred ownership of, or granted any exclusive license with respect
to, any Intellectual Property that is Company Intellectual Property, to
any third party, or permitted Company's rights or the rights of any of
its subsidiaries in such Company Intellectual Property to lapse or enter
the public domain.
(h) Intellectual Property Contracts. Section 2.19(h) of the Company
Schedule lists all contracts, licenses and agreements to which Company
or any of its subsidiaries is a party: (i) with respect to Company
Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course); or (ii) pursuant to
which a third party has licensed or transferred any Intellectual
Property to Company or any of its subsidiaries, other than contracts,
licenses and agreements for Off-the-Shelf Products.
(i) No Breach. All contracts, licenses and agreements pursuant to
which (i) any third party is entitled to use or otherwise practice
Company Intellectual Property or (ii) Company or any of its subsidiaries
uses or otherwise practices Intellectual Property of a third party
(other than Off-the-Shelf Products) used in the business of Company or
any of its subsidiaries in the conduct of its business as currently
conducted, are in full force and effect, except for immaterial breaches
of Company end-user licenses that do not, in any event, permit the third
party to terminate such licenses. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the
breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. Each of Company and its subsidiaries
is in compliance with, and has not breached any term of any such
contracts, licenses and agreements and, to the knowledge of Company, all
other parties to such contracts, licenses and agreements are in
compliance with, and have not materially breached any term of, any of
such contracts, licenses and agreements. Following the Closing Date, the
Surviving Corporation will be permitted to exercise all of Company's
rights and the rights of all of its subsidiaries under such contracts,
licenses and agreements to the same extent Company and its subsidiaries
would have been able to had the transactions contemplated by this
Agreement not occurred with such exceptions as do not materially detract
from the value to Company of, or interfere with Company's use of, such
Intellectual Property and without the payment of any additional amounts
or consideration other than ongoing fees, royalties or payments which
Company or any of its subsidiaries would otherwise be required to pay.
Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent or Merger Sub by operation
of law or otherwise of any contracts or agreements to which the Company
or any of its subsidiaries is a party, will result in (i) either
Parent's or the Merger Sub's granting to any third party any right to or
with respect to any Intellectual Property right owned by, or licensed
to, either of them (except to the extent that Parent or Merger Sub
choose to grant such rights after the Effective Time), (ii) either the
Parent's or the Merger Sub's being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) either the Parent's or the Merger Sub's
being obligated to pay any royalties or other material amounts to any
third party with respect to any Intellectual Property at rates in excess
of those payable by Company with respect to such Intellectual Property
prior to the Closing.
(j) Non-Infringement. Except as set forth in Section 2.19(j) of the
Company Schedule, to the Company's knowledge, the operation of the
business of the Company and its subsidiaries as such business currently
is conducted and as proposed to be conducted, including (i) Company's
and its subsidiaries' design, development, manufacture, distribution,
reproduction, marketing or sale of the products or services of Company
and its subsidiaries (including Company Products) and (ii) the Company's
or any of its subsidiaries' use of any product, device or process, has
not, does not and will not infringe or misappropriate the Intellectual
Property of any third party or constitute unfair competition or trade
practices under the laws of any jurisdiction.
(k) No Notice of Infringement. Except as set forth in Section
2.19(k) of the Company Schedule, neither Company nor any of its
subsidiaries has received notice from any third party that the operation
of the business of Company or any of its subsidiaries or any act,
product or service of Company or any
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of its subsidiaries, infringes or misappropriates the Intellectual
Property of any third party or constitutes unfair competition or trade
practices under the laws of any jurisdiction.
(l) No Infringement by Third Parties. To the knowledge of Company,
no person has or is infringing or misappropriating any Company
Intellectual Property.
(m) Protection of Trade Secrets. Company and each of its
subsidiaries has taken commercially reasonable steps to protect
Company's and its subsidiaries' rights in Company's confidential
information and trade secrets that it wishes to protect or any trade
secrets or confidential information of third parties provided to Company
or any of its subsidiaries and that Company is contractually obligated
to protect, and, without limiting the foregoing, each of Company and its
subsidiaries has and enforces a policy requiring each employee and
contractor who has access to material, non-public information of Company
or any of its subsidiaries to execute a proprietary
information/confidentiality agreement substantially in the form provided
to Parent and all current and former employees and contractors of
Company and any of its subsidiaries have executed such an agreement.
(n) Software. The Company has the right to use, pursuant to valid
licenses, all software development tools, library functions, compilers
and all other third-party software that are material to the operation of
the business of the Company or its subsidiaries. No open source or
public library software, including any version of any software licensed
pursuant to any GNU public license, is, in whole or in part, embodied or
incorporated into any Company Product. Section 2.19(n) of the Company
Schedule lists all licenses to third parties of Company Products in
source code format (other than Company Products that are written in
non-compiled programming languages). Company has secured any export
licenses that are necessary or appropriate for the distribution of the
Company Products outside the United States. The Company Products do not
contain any virus, Trojan horse, worm, or, except as disclosed in the
documentation supplied to customers for such Company Products, other
software routines or hardware components designed to permit unauthorized
access, to disable, erase, or otherwise harm software, hardware or data.
2.20 Agreements, Contracts and Commitments. Except as set forth in Section
2.20 of the Company Schedule, neither Company nor any of its subsidiaries is a
party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or vice president or higher level employee or member of
Company's Board of Directors, other than those that are terminable by
Company or any of its subsidiaries on no more than thirty (30) days' notice
without liability or financial obligation to the Company or any of its
subsidiaries;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(c) any agreement of indemnification or any guaranty other than any
product warranty or agreement of indemnification substantially in the
Company's standard form for the applicable standard form of customer
agreement in which the warranty or indemnification agreement is incorporated
entered into in connection with the sale or license of software products in
the ordinary course of business;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Company or any of its
subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than Company's
subsidiaries;
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(f) any dealer, distributor, joint marketing or development agreement
currently in force under which Company or any of its subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of ninety
(90) days or less, or any material agreement pursuant to which Company or
any of its subsidiaries have continuing material obligations to jointly
develop any intellectual property that will not be owned, in whole or in
part, by Company or any of its subsidiaries and which may not be canceled
without penalty upon notice of ninety (90) days or less;
(g) any agreement, contract or commitment currently in force to provide
source code to any third party for any product or technology that is
material to Company and its subsidiaries taken as a whole;
(h) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any product, service or
technology of Company or any of its subsidiaries or any agreement, contract
or commitment currently in force to sell or distribute any products, service
or technology of Company or any of its subsidiaries except agreements with
distributors or sales representative in the normal course of business
cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit;
(j) any settlement agreement entered into within five (5) years prior to
the date of this Agreement; or
(k) any other agreement, contract or commitment currently in force under
which Company will pay, or expects to receive, after the date hereof an
amount in excess of $150,000 or more individually.
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in breach, violation
or default under, and neither Company nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any agreements, contracts or commitments to
which Company or any of its subsidiaries is a party or by which any of them are
bound that are required to be disclosed in Sections 2.19(h) or 2.20 of the
Company Schedule or that are otherwise material to Company or any of its
subsidiaries (any such agreement, contract or commitment, a "Company Contract")
in such a manner as would permit any other party to cancel or terminate any
such Company Contract, or would permit any other party to seek material damages
or other remedies (for any or all of such breaches, violations or defaults, in
the aggregate).
2.21 Insurance. Company maintains insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Company and its subsidiaries (collectively, the
"Insurance Policies") which are of the type and in amounts customarily carried
by persons conducting businesses similar to those of Company and its
subsidiaries. There is no material claim by Company or any of its subsidiaries
pending under any of the material Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds.
2.22 Opinion of Financial Advisor. The Board of Directors of Company has
received the opinion, dated as of the date of this Agreement, of its financial
advisor, Goldman, Sachs & Co., to the effect that, as of the date of this
Agreement, the Exchange Ratio is fair to the holders of shares of Company
Common Stock from a financial point of view. Company will deliver a copy of the
written opinion of Goldman, Sachs & Co. to Parent upon receipt thereof.
2.23 Board Approval. The Board of Directors of Company has, as of the date
of this Agreement, unanimously (i) approved and declared advisable this
Agreement and has approved the Merger and the other transactions contemplated
hereby, (ii) determined that the Merger is consistent with and in furtherance
of the long-term business strategy of Company and fair to, and in the best
interests of, Company and its stockholders and (iii) determined to recommend
that the stockholders of Company adopt and approve this Agreement and approve
the Merger.
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2.24 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock entitled to vote with respect to
the Merger is the only vote of the holders of any class or series of Company's
capital stock necessary to adopt and approve this Agreement and approve the
transactions contemplated hereby.
2.25 State Takeover Statutes. The Board of Directors of the Company has
approved the Merger, this Agreement and the Parent Voting Agreements and the
transactions contemplated hereby and thereby, and such approval is sufficient
to render inapplicable to the Merger, this Agreement and such Parent Voting
Agreements and the transactions contemplated hereby and thereby the provisions
of Section 203 of the Delaware Law to the extent, if any, such Section is
applicable to the Merger, this Agreement and such Parent Voting Agreements and
the transactions contemplated hereby and thereby. To the Company's knowledge,
no other state takeover statute or similar statute or regulation applies to or
purports to apply to the Merger, this Agreement and the Parent Voting
Agreements or the transactions contemplated hereby and thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
the disclosure schedule supplied by Parent to Company dated as of the date
hereof (the "Parent Schedule") referencing a specific representation, as
follows:
3.1 Organization and Qualification; Subsidiaries. Each of Parent and its
subsidiaries is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, except where the failure to
do so would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Each of Parent and its subsidiaries is in possession of all
Approvals necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being
conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Each of Parent and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature
of its activities makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed and in good standing that
would not, either individually or in the aggregate, have a Material Adverse
Effect on Parent.
3.2 Certificate of Incorporation and Bylaws. Parent has previously
furnished to Company complete and correct copies of (i) its Memorandum and
Articles of Association, as amended to date (together, the "Parent Charter
Documents") and (ii) the Certificate of Incorporation and By-laws of Merger
Sub, as amended to date (together, the "Merger Sub Charter Documents"). Such
Parent Charter Documents, Merger Sub Charter Documents and equivalent
organizational documents of each of Parent's other subsidiaries are in full
force and effect. Parent is not in violation of any of the provisions of the
Parent Charter Documents, Merger Sub is not in violation of any of the Merger
Sub Charter Documents, and no other subsidiary of Parent is in violation of any
of its equivalent organizational documents. Neither Parent nor, to Parent's
knowledge, The Bank of New York is in material breach of the Deposit Agreement
or the Affiliate Deposit Agreement.
3.3 Capitalization. The authorized share capital stock of Parent is
13,200,000 euro divided into 120,000,000 Ordinary Shares, par value 0.11 euro
per share ("Parent Ordinary Shares"). At the close of business on January 14,
2002, (i) 56,955,470 Parent Ordinary Shares were issued and outstanding, (ii)
no Parent Ordinary Shares were held in treasury by Parent or by subsidiaries of
Parent, (iii) 15,434,470 Parent Ordinary Shares were reserved for future
issuance upon the exercise of outstanding options ("Parent Options") to
purchase Parent Ordinary Shares or Parent ADSs, and (iv) each Parent ADS
represented one Parent Ordinary Share. The
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authorized capital stock of Merger Sub consists of 1,000 shares of common
stock, par value $0.001 per share, all of which, as of the date hereof, are
issued and outstanding. All of the outstanding shares of Parent's and Merger
Sub's respective capital stock have been duly authorized and validly issued and
are fully paid and, in the case of Merger Sub, nonassessable. Merger Sub was
formed for the purpose of consummating the Merger and has no material assets or
liabilities except as necessary for such purpose. All Parent Ordinary Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall, and
the Parent Ordinary Shares underlying the Parent ADSs to be issued pursuant to
the Merger will be, duly authorized, validly issued and fully paid. Upon the
due issuance by The Bank of New York, as depositary, of ADRs evidencing Parent
ADSs to be issued pursuant to the Merger against the deposit of the Parent
Ordinary Shares underlying such Parent ADSs in accordance with this Agreement
and the provisions of the Deposit Agreement or, with respect to Company
Affiliates (as defined below), the Affiliate Deposit Agreement, such ADRs will
be duly and validly issued, and persons in whose name such ADRs are registered
will be entitled to the rights of registered holders of ADRs specified in such
ADRs and in the Deposit Agreement or Affiliate Deposit Agreement, as
applicable. Except as set forth in the Affiliate Deposit Agreement, the Parent
ADSs to be issued in the Merger, when issued in accordance with the provisions
of this Agreement and the Deposit Agreement or the Affiliate Deposit Agreement,
as applicable, will not be subject to any restrictions on resale under the
Securities Act, other than restrictions imposed by Rule 145 promulgated under
the Securities Act. Except as set forth in the Parent SEC Reports (as defined
below) and except as set forth in Section 3.3 of the Parent Schedule, all of
the outstanding shares of capital stock (other than directors' qualifying
shares) of each of Parent's subsidiaries are duly authorized, validly issued,
fully paid and nonassessable and all such shares (other than directors'
qualifying shares) are owned by Parent or a direct or indirect wholly-owned
subsidiary of Parent free and clear of all security interests, liens, claims,
pledges, agreements, limitations in Parent's voting rights, charges or other
encumbrances of any nature whatsoever.
3.4 Authority Relative to this Agreement. Each of Parent and Merger Sub has
all necessary corporate power and authority to execute and deliver this
Agreement and the Company Voting Agreements to which it is a party and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Company Voting Agreements to which it is a party by
Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or the Company Voting Agreements to which
it is a party, or to consummate the transactions so contemplated, subject only
to the approval of the Share Issuance by Parent's shareholders and the filing
of the Certificate of Merger pursuant to Delaware Law. This Agreement and the
Company Voting Agreements to which it is a party have been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by Company, constitute legal and binding
obligations of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and general principles of equity.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Company Voting
Agreements to which it is a party by Parent and Merger Sub do not, and the
performance of this Agreement and the Company Voting Agreements to which it
is a party by Parent and Merger Sub will not, (i) conflict with or violate
the Parent Charter Documents or equivalent organizational documents of
Parent or any of its subsidiaries, (ii) subject to compliance with the
requirements set forth in Section 3.5(b) below, conflict with or violate any
Law applicable to Parent or any of its subsidiaries or by which it or their
respective properties are bound or affected, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair Parent's or any such
subsidiary's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance on
any of the properties or assets of
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Parent or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Parent or any of its subsidiaries
is a party or by which Parent or any of its subsidiaries or its or any of
their respective properties are bound or affected.
(b) The execution and delivery of this Agreement and the Company Voting
Agreements to which it is a party by Parent and Merger Sub do not, and the
performance of this Agreement and the Company Voting Agreements to which it
is a party by Parent and Merger Sub shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, Foreign Securities Laws,
the pre-merger notification requirements of the HSR Act, the Irish Merger
Act, comparable requirements of the anti-competition authorities of other
foreign jurisdictions, the rules and regulations of Nasdaq, and the filing
and recordation of the Certificate of Merger as required by Delaware Law and
(ii) where the failure to obtain such other consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not have a material adverse effect on the parties' ability to consummate the
Merger or perform their obligations under this Agreement.
3.6 SEC Filings; Financial Statements.
(a) Parent has made available to Company a correct and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Parent with the SEC after January 1, 2001 (the "Parent SEC
Reports"), which are all the forms, reports and documents required to be
filed by Parent with the SEC after January 1, 2001. The Parent SEC Reports
(X) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Reports and (Y) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of Parent's subsidiaries is
required to file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports,
including any Parent SEC Reports filed after the date hereof until the
Closing, (X) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (Y) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, for the absence footnotes as permitted by Form 10-Q of
the Exchange Act) and (Z) fairly presents in all material respects the
consolidated financial position of Parent and its subsidiaries at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
(c) Parent has previously furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act. Except for this
Agreement, as of the date hereof, there are no agreements entered into by
Parent since September 30, 2001 that are required to be filed as exhibits to
Parent's Form 10-K for the year ended December 31, 2001 or Form 10-Q for the
quarter ending March 31, 2002. Except as previously disclosed in the Parent
SEC Reports, as of the date hereof, there are no transactions that are
required to be disclosed in Parent's proxy statement for its 2002 Annual
General Meeting pursuant to Item 404(a) of Regulation S-K promulgated under
the Securities Act.
3.7 No Undisclosed Liabilities. Neither Parent nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
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operations or financial condition of Parent and its subsidiaries taken as a
whole, except (i) liabilities provided for in Parent's balance sheet as of
September 30, 2001 or (ii) liabilities incurred since September 30, 2001 in the
ordinary course of business, none of which is material to the business, results
of operations or financial condition of Parent and its subsidiaries, taken as a
whole.
3.8 Absence of Certain Changes or Events. Since September 30, 2001, there
has not been: (i) any Material Adverse Effect on Parent, (ii) except as set
forth in Section 3.8 of the Parent Schedule, any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Parent's or any of its subsidiaries' share
capital, or any purchase, redemption or other acquisition by Parent of any of
Parent's share capital or any other securities of Parent or its subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Parent's
or any of its subsidiaries' share capital, (iv) any material change by Parent
in its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, or (v) any revaluation by Parent of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets of
the Parent other than in the ordinary course of business.
3.9 Absence of Litigation. Except as disclosed in the Parent SEC Reports,
there are no material claims, actions, suits or proceedings pending or, to the
knowledge of Parent, threatened (or, to the knowledge of Parent, any
governmental or regulatory investigation pending or threatened) against Parent
or any of its subsidiaries or any properties or rights of Parent or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign.
3.10 Registration Statement; Joint Proxy Statement/Prospectus. None of the
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in (i) the S-4 will, at the time the S-4 becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading; and (ii) the Joint Proxy
Statement/Prospectus will, at the dates mailed to the stockholders of Company
and of Parent, at the time of the Company Stockholders' Meeting, the time of
the Parent Shareholders' Meeting and as of the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The S-4
will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations promulgated by the SEC thereunder.
Notwithstanding the foregoing, Parent makes no representation or warranty with
respect to any statement made, omitted or incorporated by reference on the
basis of information supplied by the Company which is contained or incorporated
by reference in, or omitted from, any of the foregoing documents.
3.11 Brokers. Except for fees payable to Credit Suisse First Boston
Corporation pursuant to an engagement letter dated December 18, 2001, Parent
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.12 Opinion of Financial Advisor. Parent's Board of Directors has received
an opinion from Credit Suisse First Boston Corporation, dated as of the date
hereof, to the effect that as of the date hereof, the Exchange Ratio is fair to
Parent from a financial point of view. Parent will deliver a copy of the
written opinion of Credit Suisse First Boston Corporation to Company upon
receipt thereof.
3.13 Board Approval. The Board of Directors of Parent has, as of the date
of this Agreement, unanimously (i) determined that the Merger is consistent
with and in furtherance of the long-term business strategy of Parent and is
fair to, and in the best interests of, Parent and its stockholders, (ii)
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) determined to recommend that the shareholders of
Parent approve the Share Issuance.
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3.14 Vote Required. The affirmative vote of the holders of a majority of
the Parent ADSs that cast votes regarding the Share Issuance in person or by
proxy at the Parent Shareholders' Meeting is the only vote of the holders of
any class or series of Parent's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
3.15 Compliance; Permits. Neither Parent nor any of its subsidiaries is in
conflict with, or in default or violation of, any material Law applicable to
Parent or any of its subsidiaries or by which its or any of their respective
properties is bound or affected, and no investigation or review by any
governmental or regulatory body or authority is pending or, to the knowledge of
Parent, threatened against Parent or any of its subsidiaries, nor, to the
knowledge of Parent, has any governmental or regulatory body or authority
indicated an intention to conduct the same, other than, in each such case,
those the outcome of which could not, individually or in the aggregate,
reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of the Company or any of its subsidiaries, any
acquisition of material property by the Company or any of its subsidiaries or
the conduct of business by the Company or any of its subsidiaries as currently
conducted.
3.16 Intellectual Property. For the purposes of this Agreement, the term
"Parent Products" means all products or service offerings of Parent of any of
its subsidiaries that have been distributed or provided in the five (5)-year
period preceding the date hereof or which Parent or any of its subsidiaries
intends to distribute or provide within the next six (6) months, including any
such products or service offerings under development.
(a) Ownership. Parent (i) owns exclusively, and has good title to, or
has licensed from a third party in a manner consistent with Parent's use
thereof in connection with the business of Parent as currently conducted,
all copyrighted works that are Parent Products; and (ii) to the extent that
any Patents would be infringed by the manufacture, use or sale of any Parent
Products, is the exclusive owner of such Patents, except in each of clause
(i) and (ii) for such failures to own, have good title or license as would
not have a Material Adverse Effect on Parent.
(b) Non-Infringement. To the Parent's knowledge, the operation of the
business of the Parent and its subsidiaries as such business currently is
conducted, including (i) Parent's and its subsidiaries' design, development,
manufacture, distribution, reproduction, marketing or sale of the products
or services of Parent and its subsidiaries (including Parent Products) and
(ii) the Parent's or any of its subsidiaries' use of any product, device or
process, has not and does not infringe or misappropriate the Intellectual
Property of any third party or constitute unfair competition or trade
practices under the laws of any jurisdiction, which infringement or
misappropriation would have a Material Adverse Effect on Parent.
(c) No Notice of Infringement. To the Parent's knowledge, neither Parent
nor any of its subsidiaries has received written notice from any third party
that the operation of the business of Parent or any of its subsidiaries or
any material act, product or service of Parent or any of its subsidiaries,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
3.17 Taxes.
(a) Parent and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information statements and
reports ("Parent Returns") relating to Taxes required to be filed by Parent
and each of its subsidiaries with any Tax authority, except such Parent
Returns which are not material to Parent or any of its subsidiaries. Such
Parent Returns are true and correct in all material respects and have been
completed in accordance with applicable law. Parent and each of its
subsidiaries have paid all Taxes shown to be due on such Parent Returns.
(b) Neither Parent nor any of its subsidiaries has been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Parent or any of its subsidiaries
raised by any Tax authority in a writing received by Parent or any of its
subsidiaries, nor has Parent or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period
for the assessment or collection of any Tax.
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(c) Except as set forth in Section 3.17(c) of the Parent Schedule, no
audit or other examination of any Parent Return by any Tax authority is
presently in progress, nor has Parent or any of its subsidiaries been
notified in writing of any request for such an audit or other examination.
(d) Neither Parent nor any of its subsidiaries has any liability for any
material unpaid Taxes which has not been accrued for or reserved on the
Parent balance sheet dated September 30, 2001 in accordance with GAAP,
whether asserted or unasserted, contingent or otherwise, which is material
to the Parent, other than any liability for unpaid Taxes that may have
accrued since September 30, 2001 in connection with the operation of the
business of the Parent and its subsidiaries in the ordinary course.
(e) Neither Parent nor any of its subsidiaries is party to or has any
obligation under any Tax sharing, indemnity or allocation agreement or
arrangement. None of Parent's U.S. subsidiaries (a) has ever been a member
of an affiliated group (within the meaning of Code ss.1504(a)) filing a
consolidated federal income Tax Return (other than a group the common parent
of which was a U.S. subsidiary of Parent), or (b) has any liability for the
Taxes of any person (other than any U.S. subsidiaries of Parent) under
Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
(f) None of Parent's U.S. subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution
of stock intended to qualify for tax-free treatment under Section 355 of the
Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "Series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
3.18 Benefit Plans.
(a) Parent has performed all obligations required to be performed by it
under, is not in default or violation of, and has no knowledge of any
default or violation by any other party to, each material employee
compensation, incentive, fringe or benefit plans, programs, policies,
practices, contracts, agreements, commitments or other arrangements (whether
or not set forth in a written document and including, without limitation,
all "employee benefit plans" within the meaning of Section 3(3) of ERISA)
covering any active or former employee, director or consultant of Parent,
any subsidiary of Parent or any trade or business (whether or not
incorporated) which is a Parent Affiliate (the "Parent Plans"), except for
such failures to perform, defaults and violations as would not have a
Material Adverse Effect on Parent. Each such Parent Plan has been
established, maintained and administered with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations (foreign or domestic), including but not limited to ERISA and
the Code, which are applicable to such Parent Plans, except for such
violations as would not have a Material Adverse Effect on Parent. No suit,
action, claim or other litigation (excluding claims for benefits incurred in
the ordinary course of Parent Plan activities) has been brought, or to the
knowledge of Parent is threatened, against or with respect to any such
Parent Plan and there are no audits, inquiries or proceedings pending or, to
the knowledge of Parent, threatened by the IRS or DOL with respect to any
Parent Plans that would have a Material Adverse Effect on Parent. All
contributions, reserves or premium payments required to be made or accrued
as of the date hereof to the Parent Plans have been timely made or accrued.
Any Parent Plan intended to be qualified under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code (i) has
either obtained a favorable determination, notification, advisory and/or
opinion letter, as applicable, as to its qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations
or IRS pronouncements in which to apply for such letter and to make any
amendments necessary to obtain a favorable determination. For purposes of
Section 3.16, a "Parent Affiliate" means any partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
organization or other entity that is a member of a controlled group or which
is under common control with Parent within the meaning of Section 414(b),
(c), (m), or (o) of the Code and the rules and regulations promulgated
thereunder.
(b) Neither Parent, any of its subsidiaries, nor any of the Parent
Affiliates maintains or has at any time ever maintained, established,
sponsored, participated in, or contributed to any plan subject to Title IV of
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ERISA or Section 412 of the Code and at no time has Parent or any of its
subsidiaries contributed to or been requested to contribute to any
"multiemployer plan," as such term is defined in ERISA Section 3(37) or to
any plan described in Section 413 of the Code. Neither Parent, any of its
subsidiaries, nor any officer or director of Parent or any of its
subsidiaries is subject to any liability or penalty under Section 4975
through 4980B of the Code or Title I of ERISA. No "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 408 of ERISA or Section 4975
of the Code (or any administrative class exemption issued thereunder), has
occurred with respect to any Plan.
(c) None of the Parent Plans promises or provides retiree medical or
other retiree welfare benefits to any person except as required by
applicable law, and neither Parent nor any of its subsidiaries has
represented, promised or contracted (whether in oral or written form) to
provide such retiree benefits to any employee, former employee, director,
consultant or other person, except to the extent required by statute.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company shall, and shall cause
each of its subsidiaries to, except to the extent that Parent shall otherwise
consent in writing, carry on its business, in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others with which
it has business dealings.
In addition, except as expressly permitted by the terms of this Agreement,
without the prior written consent of Parent, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company shall not do any
of the following and shall not permit its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Grant (whether in cash, stock, equity securities, property or
otherwise) any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on
the date hereof and as previously disclosed in writing or made available to
Parent, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company Intellectual Property, or enter
into grants to transfer or license to any person future patent rights other
than in the ordinary course of business consistent with past practices,
provided that in no event shall Company license on an exclusive basis or
sell any Company Intellectual Property;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
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(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
(f) Issue, grant, deliver, sell, authorize, pledge or otherwise encumber
or propose any of the foregoing with respect to, any shares of capital stock
or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into shares of capital stock, or enter
into other agreements or commitments of any character obligating it to issue
any such shares or convertible securities, other than the issuance, delivery
and/or sale of shares of Company Common Stock pursuant to the exercise of
(i) stock options outstanding as of the date of this Agreement, (ii) up to
an aggregate of 200,000 stock options granted to new hires (who are not
officers or directors) in the ordinary course of business after the date of
this Agreement in reasonable amounts consistent with Company's past
practices, and (iii) options granted or deemed to have been granted in any
offering period under the Company Stock Purchase Plan that is in progress
on, or commences after, the date of this Agreement;
(g) Cause, permit or propose any amendments to the Company Charter
Documents;
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets or enter into any joint ventures, strategic
partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any properties
or assets except sales of inventory or product licenses to end users in the
ordinary course of business consistent with past practice, except for the
sale, lease or disposition (other than through licensing) of property or
assets which are not material, individually or in the aggregate, to the
business of Company or any of its subsidiaries, or lend funds to any third
party (other than intercompany loans in the ordinary course of business or
advances to employees for travel and other reasonable business expenses in
the ordinary course of business);
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than (i) in connection with
the financing of ordinary course trade payables consistent with past
practice, and (ii) pursuant to credit facilities existing as of the date of
this Agreement.
(k) Except as set forth in Section 4.1(k) of the Company Schedule, adopt
or amend any employee benefit plan, policy or arrangement, any employee
stock purchase or employee stock option plan, or enter into any employment
contract or collective bargaining agreement (other than offer letters and
letter agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will"), pay any
special bonus or special remuneration to any director or employee, increase
the salaries, wage rates, fringe benefits (including rights to severance or
indemnification) or other compensation of any of its directors, officers,
employees or consultants or those of any of its subsidiaries, or grant any
equity-based compensation award (whether payable in cash, shares or
otherwise);
(l) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of
this Agreement) other than the payment, discharge, settlement or
satisfaction, (A) in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities recognized or
disclosed in the most recent consolidated financial statements (or the notes
thereto) of Company included in the Company SEC Reports or incurred since
the date of such financial statements, and (B) of such other claims,
liabilities and obligations which do not, in the aggregate, exceed $150,000,
or (ii) waive the benefits of, agree to modify in any manner, terminate,
release any person from or fail to enforce any material
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confidentiality or similar agreement to which Company or any of its
subsidiaries is a party or of which Company or any of its subsidiaries is a
beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $150,000, provided that it is
understood that payment by Company, before or after the Effective Time, of
the reasonable actual fees and expenses of any financial, legal, accounting
or other professional service advisors for services provided prior to the
Effective Time with respect to the transactions contemplated by this
Agreement or otherwise, shall not constitute a payment outside of the
ordinary course of business;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any material contract or agreement to
which Company or any of its subsidiaries thereof is a party if doing so
would be adverse to the Company or any of its subsidiaries or waive, delay
the exercise of, release or assign any material rights or claims thereunder;
(o) Enter into or materially modify in any manner adverse to Company or
any of its subsidiaries contracts, agreements, or obligations relating to
the distribution, sale, license (other than to end users in the ordinary
course of business) or marketing by third parties of the products of Company
or any of its subsidiaries or products licensed by Company or any of its
subsidiaries;
(p) Revalue any of the assets of Company or any of its subsidiaries or,
except as required by GAAP, make any change in accounting methods,
principles or practices;
(q) Incur or enter into any agreement, contract or commitment outside of
the ordinary course of business in excess of $150,000 individually;
(r) Engage in any action that would be reasonably likely to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code whether or not otherwise permitted by the provisions of this Article IV;
(s) Make any tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the tax
liability or tax attributes of Company or any of its subsidiaries or settle
or compromise any material income tax liability; or
(t) Agree in writing or otherwise to take any of the actions described in
Section 4.1 (a) through (s) above.
4.2 Conduct of Business by Parent. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Parent shall, and shall cause each
of its subsidiaries to, except to the extent that Company shall otherwise
consent in writing, continue to engage primarily in the business of providing
e-Learning solutions. In addition, without the prior written consent of
Company, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent shall not do any of the following and shall not permit
its subsidiaries to do any of the following:
(a) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, shares, equity securities or property) in
respect of any share capital or split, combine or reclassify any share
capital or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any capital stock, other than
dividends or distributions by any of Parent's subsidiaries to Parent or any
of Parent's subsidiaries;
(b) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof;
(c) Cause, permit or propose any amendments to the Parent Charter
Documents (or similar governing instruments of any of its subsidiaries);
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(d) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
(e) Engage in any action that could cause the Merger to fail to qualify
as a "reorganization" under Section 368(a) of the Code, whether or not
otherwise permitted by the provisions of this Article IV; or
(f) Agree in writing or otherwise to take any of the actions described in
Section 4.2 (a) through (e) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Joint Proxy Statement/Prospectus; Registration Statement.
(a) Promptly after the execution of this Agreement, Parent and Company
shall jointly prepare and shall file with the SEC a document or documents
that will constitute (i) the prospectus forming part of the registration
statement on the S-4 and (ii) the Joint Proxy Statement/Prospectus. Each of
the parties hereto shall use commercially reasonable efforts to cause the
S-4 to become effective promptly after the date hereof, and, prior to and
after the effective date of the S-4, except as otherwise provided in this
Agreement, the Parent shall take all action reasonably required under any
applicable Laws in connection with the issuance of Parent ADSs pursuant to
the Merger. Parent or Company, as the case may be, shall promptly furnish
all information concerning Parent or Company as the other party may
reasonably request in connection with such actions and the preparation of
the S-4 and the Joint Proxy Statement/Prospectus. Promptly after the
effective date of the S-4, the Joint Proxy Statement/Prospectus shall be
mailed to the stockholders of Company and of Parent. Each of the parties
hereto shall cause the Joint Proxy Statement/Prospectus to comply as to form
and substance with respect to such party in all material respects with the
applicable requirements of (i) the Exchange Act, (ii) the Securities Act,
(iii) the Foreign Securities Laws, (iv) the rules and regulations of the
Nasdaq and (v) the laws of the Republic of Ireland.
(b) The Joint Proxy Statement/Prospectus shall (i) solicit the approval
of this Agreement and the Merger and include the recommendation of the Board
of Directors of Company to Company's stockholders that they vote in favor of
approval of this Agreement and the Merger, subject to the right of the Board
of Directors of the Company to withdraw its recommendation and recommend a
Superior Offer determined to be such in compliance with Section 5.4 of this
Agreement, and (ii) include the opinion of Goldman, Sachs & Co. referred to
in Section 2.22; provided, however, that the Board of Directors of Company
shall submit this Agreement to Company's stockholders whether or not at any
time subsequent to the date hereof such board determines that it can no
longer make such recommendation. The Joint Proxy Statement/Prospectus shall
(A) solicit the approval of the Share Issuance and include the
recommendation of the Board of Directors of Parent to Parent's shareholders
that they vote in favor of approval of the Share Issuance, and (B) include
the opinion of Credit Suisse First Boston Corporation referred to in Section
3.12.
(c) Each of Parent and the Company shall promptly amend or supplement the
Joint Proxy Statement/Prospectus to the extent required by law to do so. No
amendment or supplement to the Joint Proxy Statement/Prospectus or the S-4
shall be made without the approval of Parent and Company, which approval
shall not be unreasonably withheld or delayed. Each of the parties hereto
shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the S-4 has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the
suspension of the qualification of the Parent ADSs issuable in connection
with the Merger for offering or sale in any jurisdiction, or of any request
by the SEC for amendment of the Joint Proxy Statement/Prospectus or the S-4
or comments thereon and responses thereto or requests by the SEC for
additional information.
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5.2 Stockholder Meetings. Company shall call the Company Stockholders'
Meeting and Parent shall call the Parent Shareholders' Meeting as promptly as
practicable after the date hereof for the purpose of voting upon the approval
of this Agreement and the Merger or the Share Issuance, as the case may be,
pursuant to the Joint Proxy Statement/Prospectus, and Company and Parent shall
use reasonable efforts to hold the Parent Shareholders' Meeting and the Company
Stockholders' Meeting promptly, and in no event more than 90 days, after the
date on which the S-4 becomes effective. Nothing herein shall prevent Company
or Parent from adjourning or postponing the Company Stockholders' Meeting or
the Parent Shareholders' Meeting, as the case may be, if there are insufficient
shares of Company Common Stock or Parent ADSs, as the case may be, necessary to
conduct business at their respective meetings of the stockholders or to approve
this Agreement and the Merger or the Share Issuance, as the case may be. Unless
Company's Board of Directors has withdrawn its recommendation of this Agreement
and the Merger in compliance with Section 5.4, Company shall use commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
approval of this Agreement and the Merger pursuant to the Joint Proxy
Statement/Prospectus and shall take all other reasonable action necessary or
advisable to secure the vote or consent of its stockholders required by
Delaware Law or applicable stock exchange requirements to obtain such approval.
Parent shall use commercially reasonable efforts to solicit from its
stockholders proxies in favor of the Share Issuance pursuant to the Joint Proxy
Statement/Prospectus and shall take all other reasonable action necessary or
advisable to secure the vote or consent of its stockholders required by
applicable stock exchange requirements to obtain such approval. Each of the
parties hereto shall take all other action reasonably necessary or advisable to
promptly secure any vote or consent of stockholders required by applicable Law
and such party's certificate of incorporation and bylaws or equivalent
organizational documents to effect the Merger. Company shall call and hold the
Company Stockholders' Meeting for the purpose of voting upon the approval of
this Agreement and the Merger whether or not Company's Board of Directors at
any time subsequent to the date hereof determines that this Agreement is no
longer advisable or recommends that Company's stockholders reject it.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement, dated as of November 30, 2001 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms.
(b) Each of the Company and Parent will afford the other and the other's
accountants, counsel and other representatives reasonable access to its
properties, books, records and personnel during the period prior to the
Effective Time to obtain all information concerning its business as such
other party may reasonably request. No information or knowledge obtained in
any investigation pursuant to this Section 5.3 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.
5.4 No Solicitation.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them
to, directly or indirectly, (i) solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal (as defined
below), (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition
Proposal, (iii) engage in discussions with any person with respect to any
Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction (as defined below); provided, however, that nothing
contained in this Section 5.4 shall prohibit the Board of Directors of
Company in response to a Superior Offer (as defined below) from engaging in
discussions with and furnishing information to the party making such
Acquisition
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Proposal and withdrawing, adversely modifying or withholding its
recommendation of this Agreement and the Merger to the extent (A) the Board
of Directors of the Company determines in good faith after considering the
advice of its outside legal counsel that its fiduciary obligations under
applicable law require it to do so, (B) (x) at least three days prior to
furnishing any such nonpublic information to, or entering into discussions
or negotiations with, such party, Company gives Parent written notice of
Company's intention to furnish nonpublic information to, or enter into
discussions or negotiations with, such party and (y) Company receives from
such party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such party by or on behalf of Company, (C)
contemporaneously with furnishing any such nonpublic information to such
party, Company furnishes such nonpublic information to Parent (to the extent
such nonpublic information has not been previously furnished by the Company
to Parent) and (D) Company has otherwise acted in full compliance with this
Section 5.4. Company and its subsidiaries will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal.
For purposes of this Agreement, (A) "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent) relating to
any Acquisition Transaction. For the purposes of this Agreement,
"Acquisition Transaction" shall mean any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from the Company by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) of more than a 15% interest in the total
outstanding voting securities of the Company or any of its subsidiaries or
any tender offer or exchange offer that if consummated would result in any
person or "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) beneficially owning 15% or more of the
total outstanding voting securities of the Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than 85% of the
equity interests in the surviving or resulting entity of such transaction;
(B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 15% of the assets of the Company; or
(C) any liquidation, dissolution, recapitalization or other significant
corporate reorganization of the Company. For purposes of this Agreement,
"Superior Offer" shall mean an unsolicited, bona fide, written Acquisition
Proposal proposing the acquisition of all of the outstanding voting
securities of the Company (x) that if any cash consideration is involved, is
not subject to any financing contingency, (y) with respect to which
Company's Board of Directors shall have determined in good faith (after
considering the advice of Company's independent financial advisors) that the
acquiring party is reasonably capable of consummating the proposed
Acquisition Transaction on the terms proposed, and (z) that Company's Board
of Directors shall have determined in good faith provides greater value to
the stockholders of Company than the Merger (after considering the advice of
Company's independent financial advisors).
(b) In addition to the obligations of Company set forth in paragraph (a)
of this Section 5.4, Company as promptly as practicable, and in any event
within 24 hours, shall advise Parent orally and in writing of any request
for information which Company reasonably believes would lead to an
Acquisition Proposal or of any Acquisition Proposal, or any inquiry with
respect to or which Company reasonably should believe would lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person or group
making any such request, Acquisition Proposal or inquiry. Company will keep
Parent informed in all material respects of the status and details
(including amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry. In addition to the foregoing, Company shall
(i) provide Parent with at least 48 hours prior notice (or such lesser prior
notice as provided to the members of Company's Board of Directors but in no
event less than eight hours) of any meeting of Company's Board of Directors
at which Company's Board of Directors is reasonably expected to consider a
Superior Offer and (ii) provide Parent with at least three (3) business days
prior written notice of a meeting of Company's Board of Directors at which
Company's Board of Directors is
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reasonably expected to recommend a Superior Offer to its stockholders and
together with such notice a copy of the definitive documentation relating to
such Superior Offer.
(c) Nothing contained in this Agreement shall prohibit Company or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act;
provided that the content of any such disclosure thereunder shall be
governed by the terms of Section 5.4(a) of this Agreement. Without limiting
the foregoing proviso, Company shall not effect any change to, modify or
withdraw its recommendation unless specifically permitted pursuant to the
terms of Section 5.4(a).
5.5 Public Disclosure. Parent and Company will consult with each other and
agree before issuing any press release or otherwise making any public statement
with respect to the Merger, this Agreement or an Acquisition Proposal and will
not issue any such press release or make any such public statement prior to
such agreement, except as may be required by law or any listing agreement with
a national securities exchange, in which case reasonable efforts to consult
with the other party will be made prior to any such release or public
statement; provided that the foregoing obligations shall terminate immediately
following any withdrawal, modification or change by the Board of Directors of
Company of its recommendation of this Agreement or the Merger in a manner
adverse to Parent or Parent's shareholders. The parties have agreed to the text
of the joint press release announcing the signing of this Agreement.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, including using
commercially reasonable efforts to accomplish the following: (i) the
obtaining of all necessary actions or nonactions, waivers, consents,
approvals, orders and authorizations from Governmental Entities and the
making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any)
and the taking of commercially reasonable steps as may be necessary to avoid
any suit, claim, action, investigation or proceeding by any Governmental
Entity, (ii) the defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court
or other Governmental Entity vacated or reversed, and (iii) the execution or
delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In connection with and without limiting the foregoing, Company
and its Board of Directors shall, if any state takeover statute or similar
statute or regulation is or becomes applicable to the Merger, this Agreement
or the Parent Voting Agreements or any of the transactions contemplated
hereby or thereby, use commercially reasonable efforts to ensure that the
Merger and the other transactions contemplated by this Agreement and by the
Parent Voting Agreements may be consummated as promptly as practicable on
the terms contemplated hereby and thereby and otherwise to minimize the
effect of such statute or regulation on the Merger, this Agreement, the
Parent Voting Agreements and the transactions contemplated hereby and
thereby. Notwithstanding anything herein to the contrary, nothing in this
Agreement shall be deemed to require Parent or Company or any subsidiary or
affiliate thereof to agree to any divestiture by itself or any of its
affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any
of them to conduct their business or to own or exercise control of such
assets, properties and stock.
(b) Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate, or any failure of Company to comply with or satisfy in any
respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions
set forth in Section 6.3(a) or 6.3(b) could reasonably be expected to not be
satisfied; provided, however, that no such notification shall affect the
representations,
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warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming
untrue or inaccurate, or any failure of Parent or Merger Sub to comply with
or satisfy in any respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2(a) or 6.2(b) could reasonably
be expected to not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date hereof,
Parent and Company will each use its commercially reasonable efforts to obtain
any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.8 Stock Options; Stock Purchase Plan.
(a) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock (each, a "Company Stock Option") under the Company
Option Plans, whether or not vested, shall by virtue of the Merger be
assumed by Parent. Each Company Stock Option so assumed by Parent under this
Agreement will be (or become) exercisable for that number of whole Parent
ADSs equal to the product (rounded down to the nearest whole number of
Parent ADSs) of the number of shares of Company Common Stock that were
issuable upon exercise of such Company Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio and (ii) the per share
exercise price for the Parent ADSs issuable upon exercise of such assumed
Company Stock Option will be equal to the quotient (rounded up to the
nearest whole cent) determined by dividing the exercise price per share of
Company Common Stock at which such Company Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio. Parent shall
reserve a sufficient number of shares of Parent ADSs for issuance upon
exercise of the assumed Company Stock Options.
(b) Company shall take all actions necessary, including, if appropriate,
amending the terms of the Company Stock Purchase Plan (i) to cause the
rights of participants in the Company Stock Purchase Plan with respect to
any offering period underway as of the Effective Time pursuant to the
Company Stock Purchase Plan to be determined by treating the last business
day prior to the Effective Time (or, for administrative convenience, the
last day of the last full payroll period prior to the Effective Time) as the
last day of such offering period and to prevent any offering period from
commencing or occurring after the termination of such offering period, (ii)
to make such other pro-rata adjustments as may be necessary to reflect the
reduced offering period but otherwise treating such offering period as a
fully effective and completed offering period for all purposes of the
Company Stock Purchase Plan, and (iii) to cause the Company Stock Purchase
Plan and all rights of participants therein and any other employees of the
Company thereunder (except for ordinary and necessary administrative
obligations) to be terminated prior to the Effective Time.
(c) Effective as of the day immediately preceding the Effective Time, the
Company and its Benefits Affiliates, as applicable, shall each terminate any
and all group severance, separation or salary continuation plans, programs
or arrangements and any and all plans intended to include a Code Section
401(k) arrangement (unless Parent provides written notice to the Company
that such 401(k) plans shall not be terminated) (collectively, "Company
Employee Plans"). Unless Parent provides such written notice to the Company,
no later than three business days prior to the Effective Time, the Company
shall provide Parent with evidence that such Company Employee Plan(s) have
been terminated (effective as of the day immediately preceding the Effective
Time) pursuant to resolutions of the Company's Board of Directors. The form
and substance of such resolutions shall be subject to review and approval of
Parent. The Company also shall take such other actions in furtherance of
terminating such Company Employee Plan(s) as Parent
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may reasonably require. In the event that distribution or rollover of assets
from the trust of a 401(k) Plan that is terminated (or to be terminated) is
reasonably anticipated to trigger liquidation, surrender or other fees to be
paid from plan assets or by the Company or any of its subsidiaries, Company
shall take such actions as are necessary to reasonably estimate the amount
of such fees and provide such estimate to Parent at least 30 days prior to
the Effective Time.
5.9 Employee Compensation. Each person who was an employee of the Company
immediately prior to the Effective Time, shall be, at the Effective Time, an
at-will employee of Parent or the Surviving Corporation, to the extent
permitted by applicable law (a "Continuing Employee"); provided that each
employee employed in the United States shall provide proof satisfactory to
Parent of the right to work in the United States. Arrangements with respect to
compensation and retention of specified key employees of Company shall be as
set forth in Section 5.9 of the Parent Schedule.
5.10 Form S-8. Parent agrees to file a registration statement on Form S-8
for the Parent ADSs issuable with respect to assumed Company Stock Options
promptly (but in no event later than five (5) business days) after the
Effective Time and agrees to use commercially reasonable efforts to keep such
registration statement effective for so long as any such options remain
outstanding.
5.11 Indemnification.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and any person
who served as a director or officer at any time prior to the Effective Time
in effect immediately prior to the Effective Time and any indemnification
provisions under the Company Charter Documents as in effect on the date
hereof. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the indemnified parties
thereunder (the "Indemnified Parties") as those contained in the Company
Charter Documents as in effect on the date hereof, which provisions will not
be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of the Indemnified Parties, unless such modification is required
by law.
(b) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to use its commercially reasonable efforts to
maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms (including
coverage) comparable to (and not substantially less advantageous than) those
applicable to the current directors and officers of the Company; provided,
however, that in no event will Parent or the Surviving Corporation be
required to expend an annual premium for such coverage in excess of 150% of
the annual premium currently paid by the Company.
(c) This Section 5.11 shall survive the consummation of the Merger, is
intended to benefit the Surviving Corporation and each Indemnified Party,
shall be binding on all successors and assigns of the Surviving Corporation
and Parent, and shall be enforceable by the Indemnified Parties. Parent
shall cause SmartForce, a Delaware corporation and a wholly-owned subsidiary
of Parent, to guarantee to each person to whom the Surviving Corporation has
obligations under this Section 5.11 that the Surviving Corporation will
fulfill those obligations and agrees that each of those persons is an
intended beneficiary of that guarantee and shall have the right to enforce
it against SmartForce, with regard to himself or herself.
5.12 Nasdaq Listing. Parent agrees to use reasonable efforts to cause the
authorization for listing on Nasdaq of the Parent ADSs issuable, and those
required to be reserved for issuance, in connection with the Merger, upon
official notice of issuance.
5.13 Affiliates. Set forth in Section 5.13 of the Company Schedule is a
list of those persons who may be deemed to be, in Company's reasonable
judgment, affiliates of Company within the meaning of Rule 145
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promulgated under the Securities Act (each, a "Company Affiliate"). Company
will provide Parent with such information and documents as Parent reasonably
requests for purposes of reviewing such list. Company will use its commercially
reasonable efforts to deliver or cause to be delivered to Parent, as promptly
as practicable on or following the date hereof, from each Company Affiliate an
executed affiliate agreement in substantially the form attached hereto as
Exhibit C (the "Affiliate Agreement"), each of which will be in full force and
effect as of the Effective Time. Parent will be entitled to place appropriate
legends on the ADRs evidencing any Parent ADSs to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent ADSs,
consistent with the terms of the Affiliate Agreement.
5.14 Board of Directors of Parent; Officer Appointment. Parent will cause
to be taken all actions necessary to appoint the Company's current chief
executive officer (i) to the position of Chief Technology Officer of Parent
effective as of the Effective Time and (ii) to the Board of Directors of Parent
immediately after the Effective Time.
5.15 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the Irish Merger Act or
any other merger notification or control laws and regulations of any applicable
jurisdiction, as agreed to by the parties. Company and Parent each shall
promptly (a) supply the other with any information which may be required in
order to effectuate such filings and (b) supply any additional information
which reasonably may be required by the FTC, the DOJ or the competition or
merger control authorities of Ireland or any other jurisdiction and which the
parties may reasonably deem appropriate; provided, however, that Parent shall
not be required to agree to any divestiture by Parent or the Company or any of
Parent's or Company's subsidiaries or affiliates of shares of capital stock or
of any business, assets or property of Parent or its subsidiaries or affiliates
or of the Company or its subsidiaries, its affiliates, or the imposition of any
material limitation on the ability of any of them to conduct their businesses
or to own or exercise control of such assets, properties and stock.
5.16 Tax-Free Reorganization. From and after the Effective Time, Parent
will not take any action if such action would cause the Merger to fail to
qualify as a tax-free reorganization described in Section 368(a) of the Code.
Without limiting the generality of the foregoing, after the Merger, (a) Parent
will cause Company to continue its historic business or use a significant
portion of its historic business assets in a business and to comply with the
reporting requirements set forth in Treasury Regulation Section
1.367(a)-3(c)(6); and (b) Parent will not, and will not permit the Company to,
take any position in or with regard to their respective tax returns (or any
amendments thereto) that is inconsistent with the treatment of the Merger as a
tax-free reorganization described in Section 368 of the Code.
5.17 Section 16 Matters. Prior to the Effective Time, the Board of
Directors of each of Parent and Company shall adopt a resolution consistent
with the interpretative guidance of the SEC so that (i) the assumption of
Company Stock Options held by Company Insiders (as defined below) pursuant to
this Agreement, and (ii) the receipt by Company Insiders of Parent ADSs in
exchange for Company Common Stock pursuant to the Merger, shall be exempt
transactions for purposes of Section 16 of the Exchange Act by any officer or
director of Company who may become a covered person for purposes of Section 16
of the Exchange Act (a "Company Insider").
5.18 Benefit Plans.
(a) As soon as administratively practicable after the Effective Time,
Parent shall take commercially reasonable action so that employees of
Company and its subsidiaries shall be entitled to participate in such
employee benefit plans, programs or arrangements of Parent ("Parent Benefits
Plans") so that each
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Company employee who becomes a Parent employee is eligible for benefits that
are substantially similar in the aggregate to those provided to similarly-a
situated employee of Parent and its subsidiaries (it being understood that
inclusion of the employees of the Parent and its subsidiaries in the Parent
Benefit Plans may occur at different times with respect to different plans).
To the extent permitted under the Parent Benefits Plans, Parent shall cause
each Parent Benefit Plan in which employees of the Parent and its
subsidiaries are eligible to participate to take into account for purposes
of eligibility and vesting thereunder the service of such employees with
Company and its subsidiaries to the same extent such service was credited
for such purposes by Company under comparable benefit plans (but in no event
shall such accounting for prior service result in additional benefit
accruals or amounts).
(b) If former or active employees of Company or any of its subsidiaries
become eligible to participate in a medical, dental or vision benefits plan
of Parent, Parent shall use commercially reasonable efforts to cause each
such plan to (i) waive any preexisting condition limitations to the extent
such conditions are covered under the applicable medical, dental or vision
benefits plans of Parent, (ii) honor under such plans any deductible,
co-payment and out-of-pocket expenses incurred by the employees and their
beneficiaries during the portion of the calendar year prior to such
participation and (iii) waive any waiting period limitation or evidence of
insurability requirement which would otherwise be applicable to such
employee on or after the Effective Time to the extent such employee had
satisfied any similar limitation or requirement under an analogous Company
Employee Plan prior to the Effective Time.
(c) If, in accordance with Section 5.8(c) of this Agreement, Company is
required to terminate its plan which is qualified under Section 401(k) of
the Code (the "Company 401k Plan"), the Parent hereby agrees that, subject
to the approval of the plan administrator and in accordance with the terms
of the Parent's tax-qualified 401(k) plan (the "Parent's 401(k) Plan"),
Parent will use commercially reasonable efforts to cause Parent's 401(k)
Plan to accept rollovers or direct rollovers of "eligible rollover
distributions" within the meaning of Section 402(c) of the Code made with
respect to Company's employees pursuant to the Company's 401(k) Plan by
reason of the transactions contemplated by this Agreement. Rollover amounts
contributed to Parent's 401(k) Plan in accordance with this Section 5.18(c)
shall at all times be 100% vested and shall be invested in accordance with
the provisions of Parent's 401(k) Plan.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the stockholders of Company. The Share Issuance
shall have been approved by the requisite vote under applicable Nasdaq rules
and applicable law by the shareholders of Parent.
(b) Registration Statement Effective. The SEC shall have declared the
S-4 effective. No stop order suspending the effectiveness of the S-4 or any
part thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Joint Proxy Statement/Prospectus,
shall have been initiated or threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger. All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby will have expired or terminated early and
all foreign
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antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been
obtained.
(d) Tax Opinions. Parent and Company shall each have received written
opinions from their respective tax counsel (Wilson Sonsini Goodrich &
Rosati, Professional Corporation, and Folely, Hoag & Eliot LLP,
respectively), in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code and such opinions shall not have been
withdrawn. Each of the Company and Parent agrees to make such reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
(e) Nasdaq Listing. The Parent ADSs issuable to the stockholders of
Company pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been
authorized for listing on Nasdaq upon official notice of issuance.
6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement (i) that are qualified
as to Material Adverse Effect shall be true and correct in all respects as
of the date of this Agreement and as of immediately prior to the Effective
Time (except to the extent such representations and warranties shall refer
to a specific date, in which case such representations and warranties shall
have been so true and correct in all respects as of such date) with the same
force and effect as if then made, (ii) contained in Section 3.3, 3.4, 3.12,
3.13 and 3.14 shall be true and correct in all material respects as of the
date of this Agreement and as of immediately prior to the Effective Time,
and (iii) that are not qualified as to Material Adverse Effect or referenced
in clause (ii) shall be true and correct in all respects as of the date of
this Agreement and as of immediately prior to the Effective Time (except to
the extent such representations and warranties shall have been made as of an
earlier date, in which case such representations and warranties shall have
been true and correct in all respects as of such earlier date) with the same
force and effect as if then made, except that this clause (iii) shall be
deemed to be satisfied so long as any failures of such representations and
warranties to be true and correct, taken together, have not had a Material
Adverse Effect on Parent (it being understood that for purposes of
determining the accuracy of the representations and warranties referred to
in clauses (ii) and (iii) all qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded). Company shall have received a certificate with respect to the
foregoing signed on behalf of Parent by the Chief Executive Officer and
Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have in all
material respects performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date, and Company shall have received a certificate to
such effect signed on behalf of Parent by the Chief Executive Officer and
Chief Financial Officer of Parent.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and warranties
of Company contained in this Agreement (i) that are qualified as to Material
Adverse Effect shall be true and correct in all respects as of the date of
this Agreement and as of immediately prior to the Effective Time (except to
the extent such representations and warranties shall refer to a specific
date, in which case such representations and warranties shall have been so
true and correct in all respects as of such date) with the same force and
effect as if then made, (ii) contained in Section 2.3, 2.4, and 2.22 through
2.25 shall be true and correct in all material respects as of the date of
this Agreement and as of immediately prior to the Effective Time, and (iii)
that are not qualified as to Material Adverse Effect or referenced in clause
(ii) shall be true and correct in all respects as of the date of this
Agreement and as of immediately prior to the Effective Time (except to
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the extent such representations and warranties shall have been made as of an
earlier date, in which case such representations and warranties shall have
been true and correct in all respects as of such earlier date) with the same
force and effect as if then made, except that this clause (iii) shall be
deemed to be satisfied so long as any failures of such representations and
warranties to be true and correct, taken together, have not had a Material
Adverse Effect on Company (it being understood that for purposes of
determining the accuracy of the representations and warranties referred to
in clauses (ii) and (iii) all qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded). Parent shall have received a certificate with respect to the
foregoing signed on behalf of Company by the Chief Executive Officer and the
Chief Financial Officer of Company.
(b) Agreements and Covenants. Company shall have in all material
respects performed or complied with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the
Closing Date, and Parent shall have received a certificate to such effect
signed on behalf of Company by the Chief Executive Officer and the Chief
Financial Officer of Company.
(c) Consents. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses
or leases set forth on Section 6.3(c) of the Parent Schedule.
(d) Irish Merger Act. Either (i) the Minister for Enterprise, Trade and
Employment of Ireland (the "Minister") shall state in writing that she does
not intend to make an order under Section 9 of the Irish Merger Act in
relation to the proposed Merger; (ii) if she makes an order subject to
conditions, the Parent shall have accepted the conditions to the proposed
Merger set forth in the order; or (iii) if no such order is made and the
Minister does not state in writing that she does not intend to make such
order, the relevant period within the meaning of Section 6 of the Irish
Merger Act shall have elapsed.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
stockholders of Company:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by July 16, 2002 (the "Outside Date") for any reason; provided,
however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose action or failure to act
has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act constitutes a
breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is final
and nonappealable;
(d) by either Company or Parent if (i) the approval of the stockholders
of Company contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a meeting of Company
stockholders duly convened therefor or at any adjournment thereof or (ii)
the approval by the shareholders of Parent of the Share Issuance required
under applicable Nasdaq rules or applicable law shall not have been obtained
by reason of the failure to obtain the required vote at a meeting of Parent
stockholders duly convened therefor or at any adjournment thereof; provided,
however, that the right to terminate this Agreement under this Section
7.1(d) shall not be available to any party whose action or failure to act
has been a principal cause of or resulted in the failure to obtain such
stockholder approval and such action or failure to act constitutes a breach
of this Agreement;
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(e) by Company, upon a breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue; provided, that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent, then Company may not terminate this Agreement under this
Section 7.1(e) for thirty (30) days after delivery of written notice from
Company to Parent of such breach, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood
that Company may not terminate this Agreement pursuant to this paragraph (e)
if such breach by Parent is cured during such thirty (30)-day period);
(f) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue; provided, that if such
inaccuracy in Company's representations and warranties or breach by Company
is curable by Company, then Parent may not terminate this Agreement under
this Section 7.1(f) for thirty (30) days after delivery of written notice
from Parent to Company of such breach, provided Company continues to
exercise commercially reasonably efforts to cure such breach (it being
understood that Parent may not terminate this Agreement pursuant to this
paragraph (f) such breach by Company is cured during such thirty (30)-day
period); or
(g) by Parent, if (i) the Board of Directors of Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or its shareholders, (ii) the Board of Directors of
Company shall have recommended to the stockholders of Company an Acquisition
Proposal, (iii) the Company fails to comply with Section 5.2 or Section 5.4
in any material respect, (iv) an Acquisition Proposal shall have been
announced or otherwise become publicly known and the Board of Directors of
Company shall have (A) failed to recommend against acceptance of such by
Company's stockholders (including by taking no position, or indicating its
inability to take a position, with respect to the acceptance by its
stockholders of an Acquisition Proposal involving a tender offer or exchange
offer) or (B) failed to reconfirm its approval and recommendation of this
Agreement and the transactions contemplated hereby within ten business days
thereafter, or (v) the Board of Directors of Company resolves to take any of
the actions described above (each of the foregoing, a "Trigger Event").
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto
(or such later time as may be required by Section 7.1). In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Section 5.3(a), Section 7.3 and Article VIII, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for fraud in connection with, or any willful breach of, this
Agreement (it being understood that, for purposes of this Section 7.2, the
representations and warranties of Company and Parent in Sections 2 and 3 of
this Agreement, respectively, are made solely as of the date of this
Agreement). Payment of the fees described in Section 7.3(b) shall not be in
lieu of damages, if any, incurred in the event of breach of this Agreement.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated; provided, however, that Parent and
Company shall share equally all fees and expenses, other than attorneys' and
accountants fees and expenses, incurred in relation to the printing and
filing of the Joint Proxy Statement/Prospectus (including any preliminary
materials related thereto) and the S-4 (including financial statements and
exhibits) and any amendments or supplements thereto.
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(b) Termination Fee.
(i) In the event that (A) Parent shall terminate this Agreement
pursuant to Section 7.1(g), (B) this Agreement shall be terminated
pursuant to Section 7.1(b), Section 7.1(d)(i) or Section 7.1(f) and (1)
at or prior to such termination, there shall exist or have been proposed
an Acquisition Proposal which has not been withdrawn prior to such
termination and, solely with respect to a termination pursuant to
Section 7.1(d))(i), such Acquisition Proposal shall have been publicly
announced, and (2) within six months after such termination, Company
shall enter into a definitive agreement with respect to any Company
Acquisition (and such Company Acquisition is consummated regardless of
whether such consummation occurs during such six month period) or any
Company Acquisition shall be consummated, or (C) this Agreement shall be
terminated pursuant to Section 7.1(d)(i) and prior to or concurrent with
the Company Stockholders' Meeting or an adjournment thereof there shall
have occurred a Trigger Event, then, in the case of (A) or (C), promptly
after such termination, or in the case of (B), immediately prior to the
consummation of such Company Acquisition, Company shall pay to Parent an
amount in cash equal to $12.0 million (the "Termination Fee").
Notwithstanding the foregoing, a Termination Fee will not be payable
pursuant to a termination pursuant to Section 7.1(b) if (a) as of the
Outside Date (as such date may be extended pursuant to the terms of this
Agreement): (i) the conditions set forth in Section 6.2(a) or 6.2(b)
shall have not been satisfied or waived, (ii) the condition set forth in
Section 6.1(e) shall have not been satisfied, (iii) the shareholders of
Parent shall have voted against the Share Issuance at a meeting called
for that purpose, or (iv) Parent's legal counsel shall have not
delivered to Parent the opinion referenced in Section 6.1(d) and
Company's legal counsel shall have delivered the opinion referenced in
Section 6.1(d) to Company; or (b) Company shall have sustained the
burden of proving, in a court of competent jurisdiction, that any of the
following resulted from the material breach by Parent of its obligations
under Sections 5.1, 5.2 and 5.15 of this Agreement (x) the S-4 shall
have not been declared effective as of the Outside Date (as such date
may be extended pursuant to the terms of this Agreement), (y) requisite
waiting periods under the HSR Act shall have not expired or terminated
early and requisite foreign antitrust approvals shall have not been
obtained as of the Outside Date (as such date may be extended pursuant
to the terms of this Agreement), or (z) the Parent Stockholders' Meeting
shall have not been held as of the Outside Date (as such date may be
extended pursuant to the terms of this Agreement).
(ii) The Company acknowledges that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not
enter into this Agreement; accordingly, if the Company fails to pay in a
timely manner the amounts due pursuant to this Section 7.3(b) and, in
order to obtain such payment, Parent makes a claim that results in a
judgment against the Company for the amounts set forth in this
Section 7.3(b), the Company shall pay to Parent its costs and expenses
(including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts set forth in this
Section 7.3(b) at the prime rate of Bank of America N.A. in effect on
the date such payment was required to be made. For the purposes of this
Agreement, "Company Acquisition" shall mean any of the following
transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than 55% of the
aggregate equity interests in the surviving, resulting or acquiring
entity of such transaction, (ii) a sale or other disposition by the
Company of assets representing in excess of 45% of the aggregate fair
market value of the Company's business immediately prior to such sale or
(iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by the Company), directly
or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 45% of the voting power of
the then outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent, Merger Sub and Company.
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7.5 Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at
the following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
SmartForce PLC
900 Chesapeake Drive
Redwood City, CA 94063
Attention: Gregory M. Priest
Telecopy No.: (650) 817-5900
with copies to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Steven V. Bernard
Telecopy No.: (650) 493-6811
and to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market
Spear Tower, Suite 3300
San Francisco, California 94105
Attention: Steve L. Camahort
Telecopy No.: (415) 947-2099
(b) if to Company, to:
Centra Software, Inc.
430 Bedford Street
Lexington, MA 02420
Attention: Leon Navickas
Telecopy No.: (781) 994-9004
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with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Robert L. Birnbaum and Robert W. Sweet, Jr.
Telecopy No.: (617) 832-7000
8.3 Interpretation; Definitions.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. When reference is made herein to "the
business of " an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference
to the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity.
(b) For purposes of this Agreement:
(i) the term "knowledge" means with respect to a party hereto, with
respect to any matter in question, the actual knowledge of the executive
officers of such party after reasonable inquiry;
(ii) the term "Material Adverse Effect," when used in connection with
an entity, means any fact, change, event, development, violation,
inaccuracy, circumstance or effect (any such item, an "Effect"),
individually or when taken together with all other Effects that have
occurred prior to the date of determination of the occurrence of the
Material Adverse Effect, that is or is reasonably likely to be
materially adverse to the business, assets (including intangible
assets), capitalization, financial condition or results of operations of
such entity taken as a whole with its subsidiaries; provided, however,
that, in no event shall any of the following, alone or in combination,
be deemed to constitute, nor shall any of the following be taken into
account in determining whether there has been or will be, a Material
Adverse Effect on any entity: (A) any Effect resulting from the
announcement or pendency of the Merger, (B) any change in such entity's
stock price or trading volume, in and of itself, (C) any Effect that
results from changes affecting any of the industries in which such
entity operates generally or the United States economy generally, or (D)
any Effect that results from changes affecting general worldwide
economic or capital market conditions;
(iii) the term "person" shall mean any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate,
trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity;
(iv) the term "Deposit Agreement" shall mean that certain Deposit
Agreement, dated as of April 13, 1995, as amended and restated as of May
22, 1998, among Parent, The Bank of New York, as Depositary, and the
owners and beneficial owners from time to time of American Depositary
Receipts; and
(v) the term "Affiliate Deposit Agreement" shall mean that certain
Deposit Agreement, dated as of November 30, 1995, as amended and
restated as of May 22, 1998, among Parent, The Bank of New York, as
Depositary, and the owners and beneficial owners from time to time of
Restricted American Depositary Receipts.
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8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedule and the
Parent Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as specifically provided
in Section 5.11.
8.6 Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Any purported assignment in
violation of this Section 8.10 shall be void.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
SMARTFORCE PLC
By: /s/ GREG PRIEST
--------------------------------
Name: Greg Priest
Title: Chairman of the Board,
President and Chief Executive
Officer
ATLANTIC ACQUISITION CORP. PLC
By: /s/ DAVID DRUMMOND
------------------------------
Name: David Drummond
Title: President
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
--------------------------------
Name: Leon Navickas
Title: Chairman and CEO
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EXHIBIT A-1
PERSONS TO SIGN VOTING AGREEMENTS
Leon Navickas
David Barrett
Richard D'Amore
Robert E. Hult
Anthony J. Mark
Stephen A. Johnson
Steven N. Lesser
Joseph M. Gruttadauria
EXHIBIT A-2
FORM OF COMPANY VOTING AGREEMENT
THIS COMPANY VOTING AGREEMENT (this "Agreement") is made and entered into as
of January , 2002, by and between SmartForce PLC, a corporation organized
under the laws of the Republic of Ireland ("Parent"), and the undersigned
stockholder (the "Stockholder") of Centra Software, Inc., a Delaware
corporation (the "Company").
RECITALS
A. The Company and Parent have entered into an Agreement and Plan of Merger
and Reorganization (the "Reorganization Agreement"), which provides for the
merger (the "Merger") of a wholly owned subsidiary of Parent with and into the
Company. Pursuant to the Merger, all outstanding capital stock of the Company
shall be converted into the right to receive American Depositary Shares of
Parent, as set forth in the Reorganization Agreement;
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such
number of shares of the outstanding capital stock of the Company and shares
subject to outstanding options and warrants as is indicated on the signature
page of this Agreement; and
C. In consideration of the execution of the Reorganization Agreement by
Parent, Stockholder (solely in his or her capacity as such) agrees to vote the
Shares (as defined below) so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Certain Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Reorganization Agreement. For purposes of this
Agreement:
(a) "Expiration Date" shall mean the earlier to occur of (i) such date
and time as the Reorganization Agreement shall have been terminated pursuant
to Article VII thereof, or (ii) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the
Reorganization Agreement.
(b) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental
authority.
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(c) "Shares" shall mean: (i) all securities of the Company (including all
shares of Company Common Stock and all options, warrants and other rights to
acquire shares of Company Common Stock) owned of record or beneficially by
Stockholder as of the date of this Agreement; and (ii) all additional
securities of the Company (including all additional shares of Company Common
Stock and all additional options, warrants and other rights to acquire
shares of Company Common Stock) of which Stockholder acquires ownership
during the period from the date of this Agreement through the Expiration
Date; provided that "Shares" shall not include any securities of Company
sold pursuant to a plan for trading securities adopted prior to the date
hereof by Stockholder designed to avail Stockholder of the affirmative
defense provided by Rule 10b5-1 promulgated under the Exchange Act (a "Rule
10b5-1 Plan") or pursuant to a margin agreement or similar agreement entered
into by Stockholder prior to the date hereof.
(d) Transfer. A Person shall be deemed to have effected a "Transfer" of
a security if such person directly or indirectly: (i) sells, offers to sell,
makes any short sales of, pledges, encumbers, lends, hypothecates, enters
into any type of equity swap or hedging of, grants an option with respect
to, transfers or disposes of such security, any interest therein, or the
economic consequences of ownership of such security or (ii) enters into an
agreement, contract or commitment providing for the sale of, making any
short sales of, pledge of, lending of, encumbrance of, equity swap or
hedging of, grant of an option with respect to, transfer of or disposition
of such security, any interest therein or the economic consequences of
ownership of such security, other than any such actions pursuant to which
such Person maintains all voting rights with respect to such security.
2. Transfer of Shares.
(a) Transferee of Shares to be Bound by this Agreement. Stockholder
agrees that, during the period from the date of this Agreement through the
Expiration Date, Stockholder shall not cause or permit any Transfer (other
than a Transfer (i) pursuant to a Rule 10b5-1 Plan adopted prior to the date
hereof by Stockholder, (ii) pursuant to any margin agreement or similar
agreement entered into by Stockholder prior to the date hereof which
Transfer does not, when aggregated with all other Transfers after the date
hereof and prior to the Expiration Date pursuant to any margin agreement or
similar agreement by other directors and executive officers of Company,
exceed 2.2% of the outstanding number of shares of common stock of Company
as of the date hereof), (iii) made in accordance with the Reorganization
Agreement, or (iv) specifically required by court order) of any of the
Shares to be effected unless each Person to which any of such Shares, or any
interest in any of such Shares, is or may be transferred shall have executed
a counterpart of this Agreement and a proxy in the form attached hereto as
Exhibit A (with such modifications as Parent may reasonably request) and
delivered such executed counterpart of this Agreement and the attached proxy
to Parent.
(b) Transfer of Voting Rights. Stockholder agrees that, during the
period from the date of this Agreement through the Expiration Date,
Stockholder shall not deposit (or permit the deposit of) any Shares in a
voting trust or grant any proxy or enter into any voting agreement or
similar agreement in contravention of the obligations of Stockholder under
this Agreement with respect to any of the Shares, except as expressly
provided in this Agreement or as may be specifically required by court order.
(c) No Limitation on Discretion as Director. This Agreement is intended
solely to apply to the exercise by Stockholder of rights attaching to
ownership of the Shares, and nothing herein shall be deemed to apply to, or
to limit in any manner the discretion of Stockholder who is a director of
the Company with respect to, any action which may be taken or omitted by
Stockholder acting in Stockholder's fiduciary capacity as a director of the
Company.
3. Agreement to Vote Shares.
(a) Agreement to Vote. Until the Expiration Date, at every meeting of
the stockholders of the Company called, and at every adjournment thereof,
and on every action or approval by written consent of the stockholders of
the Company, Stockholder (in his or her capacity as such) shall cause the
Shares to be
A-46
voted (i) to adopt and approve the Reorganization Agreement and approve the
Merger (the "Company Approval Matters"), (ii) in favor of any transaction
contemplated by the Merger or the Reorganization Agreement and (iii) in
favor of any matter that could reasonably be expected to facilitate the
Merger and against any matter that is inconsistent with the consummation of
the Merger and other transactions contemplated by the Reorganization
Agreement (including, without limitation, against any Acquisition Proposal).
(b) No other Agreement. Prior to the Expiration Date, the Stockholder
shall not enter into any agreement or understanding with any Person to vote
or give instructions in any manner inconsistent with the terms of this
Section 3.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable to the fullest extent
permissible by law, with respect to the Shares.
5. Representations and Warranties of the Stockholder. Stockholder (i) is
the beneficial owner of the shares of Company Common Stock indicated on the
final page of this Agreement; (ii) on and as of the date hereof, does not
beneficially own any securities of the Company other than the shares of Company
Common Stock and options and warrants to purchase shares of Common Stock of the
Company indicated on the final page of this Agreement; and (iii) has full power
and authority to make, enter into and carry out the terms of this Agreement and
the Proxy (including but not limited to the voting of the Shares in favor of
any transaction contemplated by the Merger or the Reorganization Agreement).
6. Additional Documents; Consents. Stockholder (solely in his or her
capacity as such) hereby covenants and agrees to (a) execute and deliver any
additional documents necessary or desirable, in the reasonable opinion of
Parent, to carry out the intent of this Agreement, and (b) obtain any consents
or approvals necessary or desirable, in the reasonable opinion of Parent, to
carry out the intent of this Agreement.
7. Termination. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
8. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either of the parties without prior written consent of the other.
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent shall be irreparably harmed and that there shall be
no adequate remedy at law for a violation of any of the covenants or
agreements of Stockholder set forth herein. Therefore, it is agreed that, in
addition to any other remedies that may be available to Parent upon any such
violation, Parent shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Parent at law or in equity.
A-47
(e) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):
If to Parent: SmartForce PLC
900 Chesapeake Drive
Redwood City, CA 94063
Telecopy No: (650)
817-5070
Attention: Gregory M.
Priest
With copies to: Wilson Sonsini Goodrich &
Rosati Professional
Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
Telecopy No: (650)
493-6811
Attention: Steven V.
Bernard
and
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market
Spear Street Tower, Suite
3300
San Francisco, California
94105
Telecopy No: (415)
947-2099
Attention: Steve L.
Camahort
If to Stockholder: To the address for notice set forth on the signature
page hereof.
(f) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without reference to rules of conflicts of law.
(g) Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
(h) Effect of Headings. The section headings are for convenience only and
shall not affect the construction or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
[The remainder of this page has been intentionally left blank]
A-48
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written. The undersigned is executing
this Agreement only in his capacity as a stockholder. Such signature in no way
affects his obligations as an officer or director of the Company.
SMARTFORCE PLC STOCKHOLDER
By: _________________________________ By: _________________________________
Signature of Authorized Signatory Signature
Name: _______________________________ Name: _______________________________
Title: ______________________________ Title: ______________________________
--------------------------------------
--------------------------------------
Print Address
--------------------------------------
Telephone
--------------------------------------
Facsimile No.
Shares beneficially owned:
________ shares of Company Common Stock
________ shares of Company Common Stock
issuable upon exercise outstanding
options, warrants or other rights
(Signature Page to Voting Agreement)
A-49
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of Centra Software, Inc., a Delaware corporation
(the "Company"), hereby irrevocably (to the fullest extent permitted by law)
appoints and and each of them, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of the Company issued or issuable in respect thereof on or
after the date hereof (collectively, the "Shares") in accordance with the terms
of this Proxy. The Shares beneficially owned by the undersigned stockholder of
the Company as of the date of this Proxy are listed on the final page of this
Proxy. Upon the undersigned's execution of this Proxy, any and all prior
proxies given by the undersigned with respect to any Shares are hereby revoked
and the undersigned agrees not to grant any subsequent proxies with respect to
the Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Company Voting
Agreement of even date herewith by and among SmartForce PLC, a corporation
organized under the laws of the Republic of Ireland ("Parent"), and the
undersigned stockholder (the "Voting Agreement"), and is granted in
consideration of Parent entering into that certain Agreement and Plan of Merger
and Reorganization (the "Reorganization Agreement"), by and among Parent, a
wholly owned subsidiary of Parent ("Merger Sub") and the Company. The
Reorganization Agreement provides for the merger of Merger Sub with and into
the Company in accordance with its terms (the "Merger"). As used herein, the
term "Expiration Date" shall mean the earlier to occur of (i) such date and
time as the Reorganization Agreement shall have been validly terminated
pursuant to Article VII thereof or (ii) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the
Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the
Expiration Date, to act as the undersigned's attorney and proxy to vote the
Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the
power to execute and deliver written consents) at every annual, special or
adjourned meeting of stockholders of the Company and in every written consent
in lieu of such meeting (i) in favor of the Reorganization Agreement and to
approve the Merger (the "Company Approval Matters"), (ii) in favor of any
transaction contemplated by the Merger or the Reorganization Agreement and
(iii) in favor of any matter that could reasonably be expected to facilitate
the Merger and against any matter that is inconsistent with the consummation of
the Merger and other transactions contemplated by the Reorganization Agreement
(including, without limitation, against any Acquisition Proposal).
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned stockholder may vote the
Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically
upon the Expiration Date; provided that, solely with respect to (i) Shares sold
prior to the Expiration Date pursuant to a plan for trading securities (a
"Trading Plan") adopted prior to the date hereof by the undersigned stockholder
designed to avail the undersigned stockholder of the affirmative defense
provided by Rule 10b5-1 promulgated under the Exchange Act ("Rule 10b5-1
Shares") or (ii) Shares sold prior to the Expiration Date pursuant to any
margin agreement or similar agreement entered into prior to the date hereof by
the undersigned stockholder ("Margin Shares"), this Proxy shall terminate and
be of no further force and effect with respect to such Rule 10b5-1 Shares or
Margin Shares immediately prior to the sale of such
A-50
Rule 10b5-1 Shares or Margin Shares pursuant to any Trading Plan or margin
agreement or similar agreement, respectively. The undersigned is executing this
Proxy only in his capacity as a stockholder. Such signature in no way affects
his obligations as an officer or director of the Company.
Dated: January , 2002
Signature of Stockholder: _________
Print Name of Stockholder: ________
Shares beneficially owned: ________
________ shares of the Company Common
Stock
________ shares of the Company Common
Stock issuable upon exercise
of outstanding options,
warrants or other rights.
[Signature Page to Irrevocable Proxy]
A-51
EXHIBIT B-1
PERSONS TO SIGN VOTING AGREEMENTS
Gregory Priest
David Drummond
Thomas F. McKeagney
Jeffrey Newton
Ronald Conway
John Grillos
Patrick McDonagh
James Krzywicki
Ferdinand von Prondzynski
A-52
EXHIBIT B-2
FORM OF PARENT VOTING AGREEMENT
THIS PARENT VOTING AGREEMENT (this "Agreement") is made and entered into as
of January , 2002, by and between Centra Software, Inc., a Delaware
corporation (the "Company") and the undersigned stockholder (the "Stockholder")
of SmartForce PLC, a corporation organized under the laws of the Republic of
Ireland ("Parent").
RECITALS
A. The Company and Parent have entered into an Agreement and Plan of Merger
and Reorganization (the "Reorganization Agreement"), which provides for the
merger (the "Merger") of a wholly owned subsidiary of Parent with and into the
Company. Pursuant to the Merger, all outstanding capital stock of the Company
shall be converted into the right to receive American Depositary Shares of
Parent, as set forth in the Reorganization Agreement;
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such
number of shares of the outstanding capital stock of the Parent and shares
subject to outstanding options and warrants as is indicated on the signature
page of this Agreement; and
C. In consideration of the execution of the Reorganization Agreement by
Company, Stockholder (in his or her capacity as such) agrees to vote the Shares
(as defined below) so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Certain Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Reorganization Agreement. For purposes of this
Agreement:
(a) "Expiration Date" shall mean the earlier to occur of (i) such date
and time as the Reorganization Agreement shall have been terminated pursuant
to Article VII thereof, or (ii) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the
Reorganization Agreement.
(b) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental
authority.
(c) "Shares" shall mean: (i) all securities of the Parent (including all
Parent Ordinary Shares, Parent American Depositary Shares ("ADSs") and all
options, warrants and other rights to acquire Parent Ordinary Shares or
ADSs) owned of record or beneficially by Stockholder as of the date of this
Agreement; and (ii) all additional securities of the Parent (including all
additional Parent Ordinary Shares or ADSs and all additional options,
warrants and other rights to acquire Parent Ordinary Shares or ADSs) of
which Stockholder acquires ownership during the period from the date of this
Agreement through the Expiration Date; provided that "Shares" shall not
include any securities of Parent sold pursuant to a plan for trading
securities adopted prior to the date hereof by Stockholder designed to avail
Stockholder of the affirmative defense provided by Rule 10b5-1 promulgated
under the Exchange Act (a "Rule 10b5-1 Plan") or pursuant to a margin
agreement or similar agreement entered into by Stockholder prior to the date
hereof.
(d) Transfer. A Person shall be deemed to have effected a "Transfer" of
a security if such person directly or indirectly: (i) sells, offers to sell,
makes any short sales of, pledges, encumbers, lends, hypothecates, enters
into any type of equity swap or hedging of, grants an option with respect
to, transfers or disposes of such security, any interest therein, or the
economic consequences of ownership of such security
A-53
or (ii) enters into an agreement, contract or commitment providing for the
sale of, making any short sales of, pledge of, lending of, encumbrance of,
equity swap or hedging of, grant of an option with respect to, transfer of
or disposition of such security, any interest therein or the economic
consequences of ownership of such security, other than any such actions
pursuant to which such Person maintains all voting rights with respect to
such security.
2. Transfer of Shares.
(a) Transferee of Shares to be Bound by this Agreement. Stockholder
agrees that, during the period from the date of this Agreement through the
Expiration Date, Stockholder shall not cause or permit any Transfer (other
than a Transfer (i) pursuant to a Rule 10b5-1 Plan adopted prior to the date
hereof by Stockholder, (ii) pursuant to any margin agreement or similar
agreement entered into by Stockholder prior to the date hereof which
Transfer does not, when aggregated with all other Transfers after the date
hereof and prior to the Expiration Date pursuant to any margin agreement or
similar agreement by other directors and executive officers of Parent,
exceed 2.2% of the outstanding number of ADSs of Parent as of the date
hereof), or (iii) specifically required by court order) of any of the Shares
to be effected unless each Person to which any of such Shares, or any
interest in any of such Shares, is or may be transferred shall have executed
a counterpart of this Agreement and a proxy in the form attached hereto as
Exhibit A (with such modifications as Company may reasonably request) and
delivered such executed counterpart of this Agreement and the attached proxy
to Company.
(b) Transfer of Voting Rights. Stockholder agrees that, during the
period from the date of this Agreement through the Expiration Date,
Stockholder shall not deposit (or permit the deposit of) any Shares in a
voting trust or grant any proxy or enter into any voting agreement or
similar agreement in contravention of the obligations of Stockholder under
this Agreement with respect to any of the Shares, except as expressly
provided in this Agreement or as may be specifically required by court order.
(c) No Limitation on Discretion as Director. This Agreement is intended
solely to apply to the exercise by Stockholder of rights attaching to
ownership of the Shares, and nothing herein shall be deemed to apply to, or
to limit in any manner the discretion of Stockholder who is a director of
the Parent with respect to, any action which may be taken or omitted by
Stockholder acting in Stockholder's fiduciary capacity as a director of the
Parent.
3. Agreement to Vote Shares.
(a) Agreement to Vote. Until the Expiration Date, at every meeting of
the stockholders of the Parent called, and at every adjournment thereof, and
on every action or approval by written consent, proxy or otherwise of the
stockholders of the Parent, Stockholder (solely in his or her capacity as
such) shall cause the Shares to be voted (i) to approve the issuance of the
Parent ADSs pursuant to the Merger (the "Parent Approval Matters"), (ii) in
favor of any transaction contemplated by the Merger or the Reorganization
and (iii) in favor of any matter that could reasonably be expected to
facilitate the Merger.
(b) No other Agreement. Prior to the Expiration Date, the Stockholder
shall not enter into any agreement or understanding with any Person to vote
or give instructions in any manner inconsistent with the terms of this
Section 3.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Company a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable to the fullest extent
permissible by law, with respect to the Shares.
5. Representations and Warranties of the Stockholder. Stockholder (i) is
the beneficial owner of the Parent Ordinary Shares or ADSs indicated on the
final page of this Agreement; (ii) on and as of the date hereof, does not
beneficially own any securities of the Company other than the Parent Ordinary
Shares or ADSs and options and warrants to purchase Parent Ordinary Shares or
ADSs indicated on the final page of this Agreement;
A-54
and (iii) has full power and authority to make, enter into and carry out the
terms of this Agreement and the Proxy (including but not limited to the voting
of the Shares in favor of any transaction contemplated by the Merger or the
Reorganization Agreement).
6. Additional Documents; Consents. Stockholder (solely in his or her
capacity as such) hereby covenants and agrees to (a) execute and deliver any
additional documents necessary or desirable, in the reasonable opinion of
Company, to carry out the intent of this Agreement, and (b) obtain any consents
or approvals necessary or desirable, in the reasonable opinion of Company, to
carry out the intent of this Agreement.
7. Termination. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
8. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either of the parties without prior written consent of the other.
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Company shall be irreparably harmed and that there shall be
no adequate remedy at law for a violation of any of the covenants or
agreements of Stockholder set forth herein. Therefore, it is agreed that, in
addition to any other remedies that may be available to Company upon any
such violation, Company shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Company at law or in equity.
(e) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following address (or at such other address for a party
as shall be specified by like notice):
If to Company: Centra Software, Inc.
430 Bedford Street
Lexington, MA 02420
Telecopy No: (781)
994-9004 Attention: Leon
Navickas
With copies to: Foley Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Telecopy No: (617)
832-7000 Attention:
Robert Sweet
If to Stockholder: To the address for notice set forth on the signature page
hereof.
A-55
(f) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without reference to rules of conflicts of law. If,
however, the laws of the Republic of Ireland require that Irish law be
applied to this Agreement, then in any such case the laws of the Republic of
Ireland shall govern.
(g) Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
(h) Effect of Headings. The section headings are for convenience only
and shall not affect the construction or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
[The remainder of this page has been intentionally left blank]
A-56
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written. The undersigned is executing
this Agreement only in his capacity as a stockholder. Such signature in no way
affects his obligations as an officer or director of the Parent.
CENTRA SOFTWARE, INC. STOCKHOLDER
By: _________________________________ By: ______________________________
Signature of Authorized signatory Signature
Name: _______________________________ Name: ____________________________
Title: ______________________________ Title: ___________________________
------------------------------------
------------------------------------
Print Address
------------------------------------
Telephone
------------------------------------
Facsimile No.
Shares beneficially owned:
________ Parent ADS or Ordinary
Shares
________ Parent ADS or Ordinary
Shares issuable upon exercise of
outstanding options, warrants or
other rights
[Signature Page to Voting Agreement]
A-57
Exhibit A
IRREVOCABLE PROXY
The undersigned stockholder of SmartForce PLC, a public limited company
organized under the laws of the Republic of Ireland (the "Parent"), hereby
irrevocably (to the fullest extent permitted by law) appoints and
and each of them, as the sole and exclusive attorneys and proxies
of the undersigned, with full power of substitution and resubstitution, to vote
and exercise all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to all of the Parent Ordinary
Shares or American Depositary Shares ("ADSs") that now are or hereafter may be
beneficially owned by the undersigned, and any and all other shares or
securities of the Parent issued or issuable in respect thereof on or after the
date hereof (collectively, the "Shares") in accordance with the terms of this
Proxy. The Shares beneficially owned by the undersigned stockholder of the
Parent as of the date of this Proxy are listed on the final page of this Proxy.
Upon the undersigned's execution of this Proxy, any and all prior proxies given
by the undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the
Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Parent Voting
Agreement of even date herewith by and among Centra Software, Inc., a Delaware
corporation ("Company"), and the undersigned stockholder (the "Voting
Agreement"), and is granted in consideration of Company entering into that
certain Agreement and Plan of Merger and Reorganization (the "Reorganization
Agreement"), by and among Parent, a wholly owned subsidiary of Parent ("Merger
Sub") and the Company. The Reorganization Agreement provides for the merger of
Merger Sub with and into the Company in accordance with its terms (the
"Merger"). As used herein, the term "Expiration Date" shall mean the earlier to
occur of (i) such date and time as the Reorganization Agreement shall have been
validly terminated pursuant to Article VII thereof or (ii) such date and time
as the Merger shall become effective in accordance with the terms and
provisions of the Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the
Expiration Date, to act as the undersigned's attorney and proxy to vote the
Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the
power to execute and deliver written consents) at every annual, special or
adjourned meeting of stockholders of the Parent and in every written consent in
lieu of such meeting (i) in favor of the Parent Approval Matters (as defined in
the Voting Agreement), (ii) in favor of any transaction contemplated by the
Merger or the Reorganization and (iii) in favor of any matter that could
reasonably be expected to facilitate the Merger.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned stockholder may vote the
Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically
upon the Expiration Date; provided that, solely with respect to Shares sold
prior to the Expiration Date pursuant to a plan for trading securities (a
"Trading Plan") adopted prior to the date hereof by the undersigned stockholder
designed to avail the undersigned stockholder of the affirmative defense
provided by Rule 10b5-1 promulgated under the Exchange Act ("Rule 10b5-1
Shares") or (ii) Shares sold prior to the Expiration Date pursuant to any
margin agreement or similar agreement entered into prior to the date hereof by
the undersigned stockholder ("Margin Shares"), this Proxy shall terminate and
be of no further force and effect with respect to such Rule 10b5-1 Shares or
Margin Shares immediately prior to the sale of such Rule 10b5-1 Shares or
Margin Shares pursuant to any Trading Plan or margin agreement or similar
agreement,
A-58
respectively. The undersigned is executing this Proxy only in his capacity as a
stockholder. Such signature in no way affects his obligations as an officer or
director of the Parent.
Dated: January , 2002
Signature of Stockholder: _________
Print Name of Stockholder: ________
Shares beneficially owned: ________
__________ Parent ADS or Ordinary
Shares
__________ Parent ADS or Ordinary
Shares issuable upon exercise of
outstanding options, warrants or
other rights.
[Signature Page to Irrevocable Proxy]
A-59
EXHIBIT C
FORM OF AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (this "Agreement") is made and entered into as of
January _, 2002, by and between SmartForce PLC, a public limited company
organized under the laws of the Republic of Ireland ("Parent"), and the
undersigned stockholder who may be deemed an affiliate ("Affiliate") of Centra
Software, Inc., a Delaware corporation ("Company"). Capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to them in the
Reorganization Agreement (as defined below).
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Merger and Reorganization (the "Reorganization
Agreement") which provides for the merger (the "Merger") of a wholly-owned
subsidiary of Parent ("Merger Sub") with and into the Company. Pursuant to the
Merger, all outstanding capital stock of the Company (the "Company Capital
Stock") shall be converted into the right to receive American Depositary Shares
of Parent as described in the Reorganization Agreement;
B. Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of the Company, as the term "affiliate" is used for purposes of
Rule 145 ("Rule 145") of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act") by the Securities and
Exchange Commission (the "SEC"); and
C. The execution and delivery of this Agreement by Affiliate is a material
inducement to Parent to enter into the Reorganization Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
that the representations, warranties and covenants by Affiliate set forth
herein shall be relied upon by Parent, the Company and their respective
affiliates and counsel, and that substantial losses and damages may be incurred
by these persons if Affiliate's representations, warranties or covenants are
breached. Affiliate has carefully read this Agreement and the Reorganization
Agreement and has discussed the requirements of this Agreement with Affiliate's
professional advisors, who are qualified to advise Affiliate with regard to
such matters.
2. Beneficial Ownership of Company Capital Stock. The Affiliate is the sole
record and beneficial owner of the number of shares of Company Capital Stock
set forth next to its name on the signature page hereto (the "Shares"). Except
for Shares subject to a margin agreement or similar agreement, there are no
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which Affiliate is party or by which it is bound obligating
Affiliate to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any Shares or obligating Affiliate to
grant or enter into any such option, warrant, call, right, commitment or
agreement. The Shares constitute all shares of Company Capital Stock owned,
beneficially or of record, by the Affiliate. The Shares are not subject to
preemptive rights created by any agreement to which Affiliate is party.
Affiliate has not engaged in any sale or other transfer of the Shares in
contemplation of the Merger.
3. Compliance with Rule 145 and the Securities Act.
(a) Affiliate has been advised that (i) the issuance of Parent ADSs in
connection with the Merger is expected to be effected pursuant to a
registration statement on Form S-4, and the resale of such shares shall be
subject to restrictions set forth in Rule 145, and (ii) Affiliate may be
deemed to be an affiliate of the Company as defined by paragraphs (c) and
(d) of Rule 145. Affiliate accordingly agrees not to sell, transfer
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or otherwise dispose of any American Depositary Shares ("Parent ADSs")
issued to Affiliate in the Merger unless (i) such sale, transfer or other
disposition is made in conformity with the requirements of Rule 145(d)(1)
and, to the extent required by the terms of the Deposit Agreement (as
defined below), Rule 144(h), or (ii) such sale, transfer or other
disposition is made pursuant to an effective registration statement under
the Securities Act or an appropriate exemption from registration, or (iii)
Affiliate delivers to Parent a written opinion of counsel, reasonably
acceptable to Parent in form and substance, that such sale, transfer or
other disposition is otherwise exempt from registration under the Securities
Act. Affiliate acknowledges that the Parent ADSs issued to Affiliate in the
Merger will be deposited in a restricted ADR (as defined below) facility
pursuant to that certain Deposit Agreement, dated as of November 30, 1995,
as amended and restated as of May 22, 1998, among Parent, The Bank of New
York and all owners and beneficial owners from time to time of restricted
ADRs issued thereunder (the "Deposit Agreement") and that, pursuant to the
Deposit Agreement, among other things, except as provided in clause (ii) of
the preceding sentence, sales of Parent ADSs issued to Affiliate in the
Merger may only be effected pursuant to Rule 145(d)(1). In addition to any
other requirements of this Agreement, Affiliate agrees to comply with the
requirements of Rule 144(h) with respect to the sale, transfer or other
disposition of Parent ADSs acquired by Affiliate in the Merger to the extent
required by the terms of the Deposit Agreement.
(b) Parent shall give stop transfer instructions to its transfer agent
with respect to any Parent ADSs received by Affiliate pursuant to the Merger
and there shall be placed on the American Depositary Receipt ("ADR")
representing such Parent ADSs, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 UNDER THE SECURITIES ACT APPLIES AND MAY ONLY BE
TRANSFERRED IN CONFORMITY WITH RULE 145(d)(1) OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY
ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
ADR without such legend) and Parent shall so instruct its transfer agent, if
Affiliate delivers to Parent (i) written evidence satisfactory to Parent
that the shares have been sold in compliance with Rule 145(d)(1) (in which
case, the substitute ADR shall be issued in the name of the transferee), or
(ii) an opinion of counsel, in form and substance reasonably satisfactory to
Parent, to the effect that public sale of the shares by the holder thereof
is no longer subject to Rule 145.
(c) Affiliate understands that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the ADRs
issued to his transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED FROM A PERSON
WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES" ACT) OR IN
ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO
THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH SALE, PLEDGE OR TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT."
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4. No Obligation to Register. Affiliate understands that Parent is under no
obligation to register the sale, transfer or other disposition of the Parent
ADSs by or on Affiliate's behalf under the Act or, to take any other action
necessary in order to make compliance with an exemption from such registration
available.
5. Termination. This Agreement shall automatically terminate and shall be
of no further force and effect in the event of the termination of the
Reorganization Agreement pursuant to Article VII of the Reorganization
Agreement.
6. Miscellaneous.
(a) Waiver; Severability. No waiver by any party hereto of any condition
or of any breach of any provision of this Agreement shall be effective
unless in writing and signed by each party hereto. In the event that any
provision of this Agreement, or the application of any such provision to any
person, entity or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to persons, entities or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected
and shall continue to be valid and enforceable to the fullest extent
permitted by law.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either of the parties without prior written consent of the other
party hereto.
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Injunctive Relief. Each of the parties acknowledge that (i) the
covenants and the restrictions contained in this Agreement are necessary,
fundamental, and required for the protection of Parent and the Company; (ii)
such covenants relate to matters which are of a special, unique, and
extraordinary character that gives each of such covenants a special, unique,
and extraordinary value; and (iii) a breach of any such covenants or any
other provision of this Agreement shall result in irreparable harm and
damages to Parent and the Company which cannot be adequately compensated by
a monetary award. Accordingly, it is expressly agreed that in addition to
all other remedies available at law or in equity, Parent and the Company
shall be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief
as may be used by any court of competent jurisdiction to restrain or enjoin
any of the parties hereto from breaching any such covenant or provision or
to specifically enforce the provisions hereof.
(e) Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the internal laws of the State
of Delaware without giving effect to any choice or conflict of law provision
or rule (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of Delaware.
(f) Entire Agreement. This Agreement sets forth the entire understanding
of Affiliate and Parent relating to the subject matter hereof and supersedes
all prior agreements and understandings between Affiliate and Parent
relating to the subject matter hereof.
(g) Attorneys' Fees. In the event of any legal actions or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding
results in a final judgment.
(h) Further Assurances. Affiliate shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
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(i) Third Party Reliance. Counsel to Parent shall be entitled to rely upon
this Affiliate Agreement.
(j) Survival. The representations, warranties, covenants and other
provisions contained in this Agreement shall survive the Merger.
(k) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):
If to Parent: SmartForce PLC
900 Chesapeake Drive
Redwood City, CA 94063
Attention: Gregory M.
Priest
Facsimile: (650) 817-5070
With a copies to: Wilson Sonsini Goodrich &
Rosati Professional
Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Steven V.
Bernard Facsimile: (650)
493-6811
and
Wilson Sonsini Goodrich &
Rosati Professional
Corporation
One Market Spear Tower
Suite 3300
San Francisco, CA 94105
Attention: Steve L.
Camahort Facsimile: (415)
947-2099
If to Affiliate: To the address for notice set forth on the signature page
hereof.
Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement to be
duly executed on the day and year first above written.
SMARTFORCE PLC AFFILIATE
By: ___________________________ By: ________________________________
Name: _________________________ Affiliate's Address for Notice:
Title: ________________________ ______________________________________
______________________________________
______________________________________
Shares beneficially owned:
________ shares of Company Common Stock
________ shares of Company Common Stock
issuable upon exercise of
outstanding options, warrants
or other rights
________ shares of Parent ADS
[Signature Page to Affiliate Agreement]
A-64
ANNEX B
[CSFB Letterhead]
January 16, 2002
Board of Directors
SmartForce PLC
900 Chesapeake Drive
Redwood City, CA 94063
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to SmartForce PLC (the "Acquiror") of the Exchange
Ratio (as defined below) set forth in the Agreement and Plan of Merger and
Reorganization, dated as of January 16, 2002 (the "Merger Agreement"), by and
among the Acquiror, Atlantic Acquisition Corp., a wholly owned subsidiary of
the Acquiror ("Merger Sub"), and Centra Software, Inc. (the "Company"). The
Merger Agreement provides for, among other things, the merger (the "Merger") of
Merger Sub with and into the Company pursuant to which the Company will become
a wholly owned subsidiary of the Acquiror and each outstanding share of common
stock, par value $.001 per share, of the Company ("Company Common Stock") will
be converted into the right to receive 0.425 (the "Exchange Ratio") American
Depositary Shares of the Acquiror ("Acquiror ADSs").
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to the
Company and the Acquiror. We have also reviewed certain other information,
including financial forecasts, provided to us or discussed with us by the
Company and the Acquiror, and have met with the managements of the Company and
the Acquiror to discuss the business and prospects of the Company and the
Acquiror, respectively. We have also considered certain financial and stock
market data of the Company and the Acquiror, and we have compared that data
with similar data for other publicly held companies in businesses similar to
those of the Company and the Acquiror, and we have considered, to the extent
publicly available, the financial terms of certain other business combinations
and other transactions that have been recently effected or announced. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant. In addition, we have relied upon, without independent verification,
the assessment of the managements of the Acquiror and the Company as to (i)
their ability to retain key employees, (ii) the strategic benefits and
potential cost savings and other synergies (including the amount, timing and
achievability thereof) anticipated to result from the Merger, (iii) the
existing technology, products and services of the Acquiror and the Company and
the validity of, and risks associated with, the future technology, products and
services of the Acquiror and the Company and (iv) the ability to integrate the
businesses of the Acquiror and the Company.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the publicly available financial forecasts relating to the Company
and the Acquiror, we reviewed and discussed such forecasts with the managements
of the Company and the Acquiror and we were advised, and we assumed, with your
consent, that such forecasts represent reasonable estimates and judgments as to
the future financial performance of the Company and the Acquiror, respectively.
In addition, the management of the Acquiror has reviewed with us certain pro
forma financial forecasts for the Company assuming completion of the Merger and
has advised us, and we have assumed, that, such pro forma forecasts represent
reasonable estimates and judgments as to the future financial performance of
the Company following the Merger. You have also informed us, and we have
assumed, that the Merger will be treated as a tax-free reorganization for
federal income tax purposes. We also have assumed, with your consent, that in
the course of obtaining necessary regulatory and third party approvals and
consents for the Merger, no modification, delay, limitation, restriction or
condition will be imposed that will have a material adverse effect on the
Acquiror or the Company or the
B-1
contemplated benefits of the Merger and that the Merger will be consummated in
accordance with the terms of the Merger Agreement without waiver, modification
or amendment of any material terms, conditions or agreements therein. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company or the Acquiror, nor have we been furnished with any such
evaluations or appraisals. Our opinion is necessarily based upon information
available to us as of the date hereof, and upon financial, economic, market and
other conditions as they exist and can be evaluated on the date hereof. We are
not expressing any opinion as to what the value of Acquiror ADSs actually will
be when issued to holders of Company Common Stock pursuant to the Merger or the
prices at which Acquiror ADSs will trade at any time. Our opinion does not
address the relative merits of the Merger as compared to other business
strategies that might be available to the Acquiror, nor does it address the
underlying business decision of the Acquiror to engage in the Merger.
We have acted as financial advisor to the Board of Directors of the Acquiror
in connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
We will also receive a fee for rendering this opinion. In the past, we and our
affiliates have provided certain investment banking and financial services to
the Acquiror. In the ordinary course of our business, we and our affiliates may
actively trade the debt and equity securities of both the Company and the
Acquiror for our and such affiliates' own accounts and for the accounts of
customers and, accordingly, may at any time hold long or short positions in
such securities.
It is understood that this letter is for the information of the Board of
Directors of the Acquiror in connection with its consideration of the Merger
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote or act on any matter relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
Acquiror.
Very truly yours,
/S/ CREDIT SUISSE FIRST BOSTON
CORPORATION
B-2
ANNEX C
PERSONAL AND CONFIDENTIAL
January 16, 2002
Board of Directors
Centra Software, Inc.
430 Bedford Street
Lexington, MA 02420
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.001
per share (the "Shares"), of Centra Software, Inc. (the "Company") of the 0.425
American Depositary Shares (the "ADSs"), each of which represents and is
exchangeable for one Ordinary Share, par value IR9.375 pence per share, of
SmartForce Public Limited Company ("SmartForce") to be received for each Share
(the "Exchange Ratio") pursuant to the Agreement and Plan of Merger and
Reorganization, dated as of January 16, 2002 (the "Agreement"), among
SmartForce, Atlantic Acquisition Corp., a wholly-owned subsidiary of
SmartForce, and the Company.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in performing financial analyses with respect to businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities and private placements and for estate, corporate and other
purposes. We are familiar with the Company having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We also have provided certain
investment banking services to SmartForce from time to time and may provide
investment banking services to SmartForce in the future. Goldman, Sachs & Co.
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company or SmartForce for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-1, including the prospectus
contained therein dated February 3, 2000, of the Company relating to the
initial public offering of the Shares; Annual Reports to Stockholders and
Annual Reports on Form 10-K of the Company for the year ended December 31, 2000
and SmartForce for the five years ended December 31, 2000; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
SmartForce; certain other communications from the Company and SmartForce to
their respective stockholders; and certain internal financial analyses and
forecasts for the Company and SmartForce prepared by their respective
managements, including certain cost savings and operating synergies projected
by the managements of the Company and SmartForce to result from the transaction
contemplated by the Agreement (the "Synergies"). We also have held discussions
with members of the senior management of the Company and SmartForce regarding
their assessment of the strategic rationale for, and the potential benefits of,
the transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. We also have held discussions with senior management of the Company
C-1
Board of Directors
Centra Software, Inc.
January 16, 2002
Page Two
regarding the risks and uncertainties of achieving the internal financial
forecasts for the Company prepared by its management. In addition, we have
reviewed the reported price and trading activity for the Shares and the ADSs,
compared certain financial and stock market information for the Company and
SmartForce with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the e-learning industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
In that regard, we have assumed with your consent that the internal financial
forecasts prepared by the management of SmartForce have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of SmartForce and that the Synergies have been reasonably prepared on
a basis reflecting the best currently available estimates and judgments of the
Company and SmartForce. In addition, we have not made an independent evaluation
or appraisal of the assets and liabilities of the Company or SmartForce or any
of their subsidiaries and we have not been furnished with any such evaluation
or appraisal. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Agreement and such opinion does not constitute a recommendation as to how
any holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of Shares.
Very truly yours,
C-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The articles of association of SmartForce authorize the company to indemnify
the directors and officers of the company against certain liabilities and
expenses incurred by such persons in connection with claims made by reason of
their being such a director or officer. The company's subsidiary, SmartForce
USA, has entered into indemnification agreements with its directors and
officers and directors and officers of SmartForce serving at the request of
SmartForce USA. The indemnification agreements under certain circumstances
require SmartForce, among other things, to indemnify such officers and
directors against certain liabilities that may arise by reason of their status
or service as directors or officers (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified. SmartForce has obtained directors and officers' insurance
providing indemnification for certain of the company's directors, officers,
affiliates or employees for certain liabilities.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description
------- -----------
2.1 Amended and Restated Agreement and Plan of Reorganization dated November 29, 1995 among
SmartForce, CBT Acquisition Subsidiary, a Delaware corporation, and Personal Training Systems,
Inc., a California corporation (Incorporated by reference to exhibit 2.1 to SmartForce's Current
Report on Form 8-K dated December 13, 1995).
2.2 Implementation Deed dated as of November 26, 1996, as amended, among SmartForce, Applied
Learning Limited and Arie Baalbergen, James Josephson, Geoffrey Bransbury and Brian Hacker
(including schedules thereto) (Incorporated by reference to exhibit 2.1 to SmartForce's Current
Report on Form 8-K dated March 14, 1997).
2.3 Agreement and Plan of Reorganization, dated as of March 16, 1998, among SmartForce, Rockets
Acquisition Corp. and The Forefront Group, Inc. (Incorporated by reference to exhibit 2.1 to
SmartForce's Registration Statement on Form S-4 filed with the Securities and Exchange
Commission on April 27, 1998 (File No. 333-51159)).
2.4 Share Purchase Agreement dated as of November 30, 1998, as amended and restated March 30,
1999, among SmartForce, Knowledge Well Limited ("KWL"), Knowledge Well Group Limited
("KWGL") and the shareholders of KWL and KWGL (Incorporated by reference to exhibit 2.1 to
SmartForce's Current Report on Form 8-K dated June 18, 1999 (File No. 0-25674)).
2.5 Agreement and Plan of Reorganization, dated April 10, 2000, by and among SmartForce, Learning
Productions Acquisition Corp., Learning Productions, LLC, Steve Goodman and Scott Mitchell
(Incorporated by reference to exhibit 2.1 to SmartForce's Registration Statement on Form S-3
declared effective with the Securities and Exchange Commission on May 31, 2000
(File No. 333-38240)).
2.6(1) Agreement and Plan of Reorganization, dated as of January 23, 2001, by and among SmartForce,
Centra Inc. and Atlantic Acquisition Corp.
3.1 Memorandum of Association of SmartForce as amended on March 24, 1992, March 31, 1995,
April 28, 1998, January 26, 2000 and July 10, 2001 (Incorporated by reference to exhibit 3.1 to
SmartForce's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001 as
filed with the Securities and Exchange Commission on November 14, 2001 (File No. 0-25674)).
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Exhibit
Number Description
------- -----------
3.2 Articles of Association of SmartForce as amended on July 6, 1995, April 28, 1998, January 26, 2000
and July 10, 2001 (Incorporated by reference to exhibit 3.2 to SmartForce's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2001 as filed with the Securities and Exchange
Commission on November 14, 2001 (File No. 0-25674)).
4.1 Specimen certificate representing the ordinary shares (Incorporated by reference to exhibit 4.1 to
SmartForce's Registration Statement on Form F-1 declared effective with the Securities and
Exchange Commission on April 13, 1995 (File No. 33-89904)).
4.2 Amended and Restated Deposit Agreement (including the form of American Depositary Receipt),
dated as of April 13, 1995 as amended and restated as of May 22, 1998, among SmartForce, The
Bank of New York, as Depositary, and each Owner and Beneficial Owner from time to time of
American Depositary Receipts issued thereunder (Incorporated by reference to exhibit (a) to
Post-Effective Amendment No. 1 to SmartForce's Registration Statement on Form F-6
(File No. 333-8380)).
4.3 Amended and Restated Restricted Deposit Agreement (including the form of American Depositary
Receipt), dated as of November 30, 1995 and amended and restated as of May 22, 1998, among
SmartForce, The Bank of New York, as Depositary, and each Owner and Beneficial Owner from
time to time of American Depositary Receipts issued thereunder (Incorporated by reference to
exhibit 4.2 to SmartForce's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998 as filed with the Securities and Exchange Commission on August 13, 1998 (File No. 0-25674)).
4.4 Restricted Deposit Agreement (B), dated as of June 8, 1999, among SmartForce, The Bank of New
York, and the Owners and Beneficial Owners of Restricted American Depositary Receipts
(Incorporated by reference to exhibit 2.1 to SmartForce's Current Report on Form 8-K dated
June 18, 1999 (File No. 0-25674)).
4.5 Declaration of Subscription Rights dated as of October 4, 1998 (Incorporated by reference to
exhibit 4.1 to SmartForce's Report on Form 8-A filed with the Securities and Exchange Commission
on October 5, 1998).
5.1 Opinion of Binchys, Solicitors
8.1 Form of Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
8.2 Form of Tax Opinion of Foley, Hoag & Eliot LLP
9.1(1) Form of SmartForce Voting Agreement
9.2(1) Form of Centra Voting Agreement
10.1 1990 Share Option Scheme (Incorporated by reference to exhibit 10.1 to SmartForce's Registration
Statement on Form F-1 declared effective with the Securities and Exchange Commission on
April 13, 1995 (File No. 33-89904)).
10.2 1994 Share Option Plan (Incorporated by reference to exhibit 10.2 to SmartForce's Registration
Statement on Form F-1 declared effective with the Securities and Exchange Commission on
April 13, 1995 (File No. 33-89904)).
10.3 1995 Employee Share Purchase Plan (Incorporated by reference to exhibit 10.3 to SmartForce's
Registration Statement on Form F-1 declared effective with the Securities and Exchange
Commission on April 13, 1995 (File No. 0-25674)).
10.4 Form of Indemnification Agreement between CBT Systems USA, Ltd. (formerly, Thornton
Holdings, Ltd.) and its directors and officers dated as of April, 1995 (Incorporated by reference to
exhibit 10.5 to SmartForce's Registration Statement on Form F-1 declared effective with the
Securities and Exchange Commission on April 13, 1995 (File No. 33-89904)).
II-2
Exhibit
Number Description
------- -----------
10.5 Supplemental Agreement among Hoskyns, SmartForce and CBT Systems Limited dated as of
March 31, 1995 (Incorporated by reference to exhibit 10.9 to the Company's Registration Statement
on Form F-1 declared effective with the Securities and Exchange Commission on April 13, 1995
(File No. 33-89904)).
10.6 Share Purchase Agreement between CBT Systems Limited and the Company dated as of March 31,
1995 (Incorporated by reference to exhibit 10.10 to SmartForce's Registration Statement on
Form F-1 declared effective with the Securities and Exchange Commission on April 13, 1995
(File No. 33-89904)).
10.7 Distribution and License Agreement between SmartForce and CBT Systems Limited dated as of
March 14, 1995 (including form of Amendment No. 1) (Incorporated by reference to exhibit 10.11 to
SmartForce's Registration Statement on Form F-1 declared effective with the Securities and
Exchange Commission on April 13, 1995 (File No. 33-89904)).
10.8 License Agreement dated June 7, 1994 between CBT (Technology) Limited and CBT Systems
Limited (Incorporated by reference to exhibit 10.20 to SmartForce's Registration Statement on Form
F-1 declared effective with the Securities and Exchange Commission on April 13, 1995 (File No. 33-
89904)).
10.9 Cost Sharing Agreement dated January 4, 1994 between CBT (Technology) Limited and CBT
Systems Limited (Incorporated by reference to exhibit 10.21 to SmartForce's Registration Statement
on Form F-1 declared effective with the Securities and Exchange Commission on April 13, 1995
(File No. 33-89904)).
10.10 Agreement between SmartForce and Patrick J. McDonagh dated April 9, 1995 (Incorporated by
reference to exhibit 10.22 to SmartForce's Registration Statement on Form F-1 declared effective
with the Securities and Exchange Commission on April 13, 1995 (File No. 33-89904)).
10.11 Personal Training Systems, Inc. 1991 Stock Plan (Incorporated by reference to exhibit 4.1 to
SmartForce's Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on January 21, 1996 (File No. 333-504)).
10.13 1996 Supplemental Stock Plan (Incorporated by reference to exhibit 10.16 to SmartForce's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 as filed with the Securities and
Exchange Commission on March 30, 1997 (File No. 0-25674)).
10.14 Letter Agreement between CBT Systems USA, Ltd. and William B. Lewis (Incorporated by
reference to exhibit 10.18 to SmartForce's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 as filed with the Securities and Exchange Commission on March 30, 1997
(File No. 0-25674)).
10.15 Applied Learning Limited Executive Option Plan (Incorporated by reference to exhibit 4.1 to
SmartForce's Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on April 16, 1997 (File No. 333-25245)).
10.16 Agreement dated November 21, 1997 between CBT Systems Limited and Clarion Worldwide
Limited (Incorporated by reference to exhibit 10.21 to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 as filed with the Securities and Exchange Commission on
March 18, 1998 (File No. 0-25674)).
10.17 Lease Agreement dated April 6, 1998 between CBT Systems USA, Ltd. and SmartForce, as tenants,
and Seaport Centre Associates, LLC, as landlord, for the facility located at 900 Chesapeake Drive,
Redwood City, California 94063 (Incorporated by reference to exhibit 10.1 to SmartForce's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998 as filed with the
Securities and Exchange Commission on November 11, 1998).
II-3
Exhibit
Number Description
------- -----------
10.18 Consulting Agreement dated January 30, 1998 between CBT Systems USA, Ltd. and Gregory M.
Priest (Incorporated by reference to exhibit 10.1 to SmartForce's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1998 as filed with the Securities and Exchange Commission on
May 13, 1998).
10.19 Agreement and Mutual Release dated June 3, 1998 between SmartForce and Jeffrey N. Newton
(Incorporated by reference to exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1998 as filed with the Securities and Exchange Commission on
August 13, 1998).
10.20 Agreement and Mutual Release dated February 11, 1998 between SmartForce and William A.
Beamish (Incorporated by reference to exhibit 10.21 to SmartForce's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 as filed with the Securities and Exchange Commission
on March 30, 1999 (File No. 0-25674)).
10.21 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and William G. McCabe. In addition to this employment agreement, Mr. McCabe
provides certain other services to the Company under a consulting agreement between CBT Systems
Ltd. and Clarion Worldwide Limited (Incorporated by reference to exhibit 10.21 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 as filed with the
Securities and Exchange Commission on March 18, 1998 (File No. 0-25674)). (Incorporated by
reference to exhibit 10.1 to SmartForce's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 as filed with the Securities and Exchange Commission on November 12, 1999
(File No. 0-25674)).
10.22 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and Gregory M. Priest. (Incorporated by reference to exhibit 10.2 to SmartForce's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 as filed with the Securities
and Exchange Commission on November 12, 1999 (File No. 0-25674)).
10.23 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and William A. Beamish. In addition to this employment agreement, Mr. Beamish
provides certain other services to the Company under a consulting agreement between CBT Systems
Ltd. and Clarion Worldwide Limited (Incorporated by reference to exhibit 10.21 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 as filed with the
Securities and Exchange Commission on March 18, 1998 (File No. 0-25674)). (Incorporated by
reference to exhibit 10.3 to SmartForce's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 as filed with the Securities and Exchange Commission on November 12, 1999
(File No. 0-25674)).
10.24 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and William B. Lewis (Incorporated by reference to exhibit 10.4 to SmartForce's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 as filed with the Securities
and Exchange Commission on November 12, 1999 (File No. 0-25674)).
10.25 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and Jeffrey N. Newton (Incorporated by reference to exhibit 10.5 to SmartForce's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 as filed with the Securities
and Exchange Commission on November 12, 1999 (File No. 0-25674)).
10.26 2001 Outside Director Option Plan (Incorporated by reference to exhibit 10.1 to SmartForce's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 as filed with the Securities
and Exchange Commission on November 14, 2001 (File No. 0-25674)).
23.1 Consent of Ernst & Young, Independent Auditors
II-4
Exhibit
Number Description
------- -----------
23.2 Consent of Arthur Andersen, Independent Auditors
23.5 Consent of Binchys, Solicitors (included in opinion filed as Exhibit 5.1)
23.6 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in opinion filed as
Exhibit 8.1)
23.7 Consent of Foley, Hoag & Eliot LLP (included in opinion filed as Exhibit 8.2)
24.1 Power of Attorney (see page II-7)
99.1 Form of SmartForce PLC proxy card
99.2 Form of Centra Software, Inc. proxy card
99.3 Consent of Person About to Become a Director--Leon Navickas
99.4 Consent of Credit Suisse First Boston Corporation
99.5 Consent of Goldman, Sachs & Co.
99.6 Letter to Commission Pursuant to Temporary Note 3T
--------
(1) Filed as an annex to the joint proxy statement/prospectus constituting a
part of this registration statement and incorporated by reference herein.
(b) Financial statement schedules
Not applicable.
(c) Reports, opinions or appraisals
Opinions of Credit Suisse First Boston Corporation and Goldman, Sachs & Co.
(attached as Annexes B and C, respectively, to the joint proxy
statement/prospectus filed as part of this registration statement).
Item 22. Undertakings
(1) The undersigned Registrant hereby undertakes as follows: that prior to
any public offering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
undersigned Registrant undertakes that such offering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
II-5
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(4) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(5) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(6) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Redwood City, State of California, on the 22nd day of March, 2002.
SMARTFORCE PUBLIC LIMITED COMPANY
By: /s/ GREGORY M. PRIEST
-----------------------------
Gregory M. Priest
President, Chief Executive
Officer
and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gregory M. Priest and Patrick Eric Murphy and
each of them, as attorneys-in-fact, each with the power of substitution, for
him or her and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to sign any registration statement for the same
offering covered by this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as
amended, and all post-effective amendments thereto, and to file the same, with
all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or her or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities indicated below on the 22nd day of March, 2002.
Signature Title Date
--------- ----- ----
/s/ GREGORY M. PRIEST President, Chief Executive March 22, 2002
------------------------------ Officer and Chairman of the
Gregory M. Priest Board of Directors
(Principal Executive
Officer and Acting
Principal Financial Officer)
/s/ PATRICK ERIC MURPHY Vice President, Finance March 22, 2002
------------------------------ (Acting Principal
Patrick Eric Murphy Accounting Officer)
/s/ RONALD C. CONWAY Director March 22, 2002
------------------------------
Ronald C. Conway
/s/ JOHN M. GRILLOS Director March 22, 2002
------------------------------
John M. Grillos
/s/ JAMES S. KRZYWICKI Director March 22, 2002
------------------------------
James S. Krzywicki
/s/ PATRICK J. MCDONAGH Director March 22, 2002
------------------------------
Patrick J. McDonagh
/s/ FERDINAND VON PRONDZYNSKI Director March 22, 2002
------------------------------
Ferdinand von Prondzynski
II-7
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2.1 Amended and Restated Agreement and Plan of Reorganization dated November 29, 1995 among
SmartForce, CBT Acquisition Subsidiary, a Delaware corporation, and Personal Training Systems,
Inc., a California corporation (Incorporated by reference to exhibit 2.1 to SmartForce's Current
Report on Form 8-K dated December 13, 1995).
2.2 Implementation Deed dated as of November 26, 1996, as amended, among SmartForce, Applied
Learning Limited and Arie Baalbergen, James Josephson, Geoffrey Bransbury and Brian Hacker
(including schedules thereto) (Incorporated by reference to exhibit 2.1 to SmartForce's Current
Report on Form 8-K dated March 14, 1997).
2.3 Agreement and Plan of Reorganization, dated as of March 16, 1998, among SmartForce, Rockets
Acquisition Corp. and The Forefront Group, Inc. (Incorporated by reference to exhibit 2.1 to
SmartForce's Registration Statement on Form S-4 filed with the Securities and Exchange
Commission on April 27, 1998 (File No. 333-51159)).
2.4 Share Purchase Agreement dated as of November 30, 1998, as amended and restated March 30,
1999, among SmartForce, Knowledge Well Limited ("KWL"), Knowledge Well Group Limited
("KWGL") and the shareholders of KWL and KWGL (Incorporated by reference to exhibit 2.1 to
SmartForce's Current Report on Form 8-K dated June 18, 1999 (File No. 0-25674)).
2.5 Agreement and Plan of Reorganization, dated April 10, 2000, by and among SmartForce, Learning
Productions Acquisition Corp., Learning Productions, LLC, Steve Goodman and Scott Mitchell
(Incorporated by reference to exhibit 2.1 to SmartForce's Registration Statement on Form S-3
declared effective with the Securities and Exchange Commission on May 31, 2000
(File No. 333-38240)).
2.6(1) Agreement and Plan of Reorganization, dated as of January 23, 2001, by and among SmartForce,
Centra and Atlantic Acquisition Corp.
3.1 Memorandum of Association of SmartForce as amended on March 24, 1992, March 31, 1995,
April 28, 1998, January 26, 2000 and July 10, 2001 (Incorporated by reference to exhibit 3.1 to
SmartForce's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001 as
filed with the Securities and Exchange Commission on November 14, 2001 (File No. 0-25674)).
3.2 Articles of Association of SmartForce as amended on July 6, 1995, April 28, 1998, January 26, 2000
and July 10, 2001 (Incorporated by reference to exhibit 3.2 to SmartForce's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2001 as filed with the Securities and Exchange
Commission on November 14, 2001 (File No. 0-25674)).
4.1 Specimen certificate representing the ordinary shares (Incorporated by reference to exhibit 4.1 to
SmartForce's Registration Statement on Form F-1 declared effective with the Securities and
Exchange Commission on April 13, 1995 (File No. 33-89904)).
4.2 Amended and Restated Deposit Agreement (including the form of American Depositary Receipt),
dated as of April 13, 1995 as amended and restated as of May 22, 1998, among SmartForce, The
Bank of New York, as Depositary, and each Owner and Beneficial Owner from time to time of
American Depositary Receipts issued thereunder (Incorporated by reference to exhibit (a) to
Post-Effective Amendment No. 1 to SmartForce's Registration Statement on Form F-6
(File No. 333-8380)).
4.3 Amended and Restated Restricted Deposit Agreement (including the form of American Depositary
Receipt), dated as of November 30, 1995 and amended and restated as of May 22, 1998, among
SmartForce, The Bank of New York, as Depositary, and each Owner and Beneficial Owner from
time to time of American Depositary Receipts issued thereunder (Incorporated by reference to
exhibit 4.2 to SmartForce's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998 as filed with the Securities and Exchange Commission on August 13, 1998 (File No. 0-25674)).
Exhibit
Number Description
------- -----------
4.4 Restricted Deposit Agreement (B), dated as of June 8, 1999, among SmartForce The Bank of New
York, and the Owners and Beneficial Owners of Restricted American Depositary Receipts
(Incorporated by reference to exhibit 2.1 to SmartForce's Current Report on Form 8-K dated
June 18, 1999 (File No. 0-25674)).
4.5 Declaration of Subscription Rights dated as of October 4, 1998 (Incorporated by reference to
exhibit 4.1 to SmartForce's Report on Form 8-A filed with the Securities and Exchange Commission
on October 5, 1998).
5.1 Opinion of Binchys, Solicitors
8.1 Form of Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
8.2 Form of Tax Opinion of Foley, Hoag & Eliot LLP
9.1(1) Form of SmartForce Voting Agreement
9.2(1) Form of Centra Voting Agreement
10.1 1990 Share Option Scheme (Incorporated by reference to exhibit 10.1 to SmartForce's Registration
Statement on Form F-1 declared effective with the Securities and Exchange Commission on
April 13, 1995 (File No. 33-89904)).
10.2 1994 Share Option Plan (Incorporated by reference to exhibit 10.2 to SmartForce's Registration
Statement on Form F-1 declared effective with the Securities and Exchange Commission on
April 13, 1995 (File No. 33-89904)).
10.3 1995 Employee Share Purchase Plan (Incorporated by reference to exhibit 10.3 to SmartForce's
Registration Statement on Form F-1 declared effective with the Securities and Exchange
Commission on April 13, 1995 (File No. 0-25674)).
10.4 Form of Indemnification Agreement between CBT Systems USA, Ltd. (formerly, Thornton
Holdings, Ltd.) and its directors and officers dated as of April, 1995 (Incorporated by reference to
exhibit 10.5 to SmartForce's Registration Statement on Form F-1 declared effective with the
Securities and Exchange Commission on April 13, 1995 (File No. 33-89904)).
10.5 Supplemental Agreement among Hoskyns, SmartForce and CBT Systems Limited dated as of
March 31, 1995 (Incorporated by reference to exhibit 10.9 to SmartForce's Registration Statement
on Form F-1 declared effective with the Securities and Exchange Commission on April 13, 1995
(File No. 33-89904)).
10.6 Share Purchase Agreement between CBT Systems Limited and SmartForce dated as of March 31,
1995 (Incorporated by reference to exhibit 10.10 to SmartForce's Registration Statement on Form F-
1 declared effective with the Securities and Exchange Commission on April 13, 1995
(File No. 33-89904)).
10.7 Distribution and License Agreement between SmartForce and CBT Systems Limited dated as of
March 14, 1995 (including form of Amendment No. 1) (Incorporated by reference to exhibit 10.11 to
SmartForce's Registration Statement on Form F-1 declared effective with the Securities and
Exchange Commission on April 13, 1995 (File No. 33-89904)).
10.8 License Agreement dated June 7, 1994 between CBT (Technology) Limited and CBT Systems
Limited (Incorporated by reference to exhibit 10.20 to SmartForce's Registration Statement on Form
F-1 declared effective with the Securities and Exchange Commission on April 13, 1995 (File No. 33-
89904)).
10.9 Cost Sharing Agreement dated January 4, 1994 between CBT (Technology) Limited and CBT
Systems Limited (Incorporated by reference to exhibit 10.21 to SmartForce's Registration Statement
on Form F-1 declared effective with the Securities and Exchange Commission on April 13, 1995
(File No. 33-89904)).
Exhibit
Number Description
------- -----------
10.10 Agreement between SmartForce and Patrick J. McDonagh dated April 9, 1995 (Incorporated by
reference to exhibit 10.22 to the Company's Registration Statement on Form F-1 declared effective
with the Securities and Exchange Commission on April 13, 1995 (File No. 33-89904)).
10.11 Personal Training Systems, Inc. 1991 Stock Plan (Incorporated by reference to exhibit 4.1 to
SmartForce's Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on January 21, 1996 (File No. 333-504)).
10.13 1996 Supplemental Stock Plan (Incorporated by reference to exhibit 10.16 to SmartForce's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 as filed with the Securities and
Exchange Commission on March 30, 1997 (File No. 0-25674)).
10.14 Letter Agreement between CBT Systems USA, Ltd. and William B. Lewis (Incorporated by
reference to exhibit 10.18 to SmartForce's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 as filed with the Securities and Exchange Commission on March 30, 1997
(File No. 0-25674)).
10.15 Applied Learning Limited Executive Option Plan (Incorporated by reference to exhibit 4.1 to
SmartForce's Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on April 16, 1997 (File No. 333-25245)).
10.16 Agreement dated November 21, 1997 between CBT Systems Limited and Clarion Worldwide
Limited (Incorporated by reference to exhibit 10.21 to SmartForce's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 as filed with the Securities and Exchange Commission
on March 18, 1998 (File No. 0-25674)).
10.17 Lease Agreement dated April 6, 1998 between CBT Systems USA, Ltd. and SmartForce, as tenants,
and Seaport Centre Associates, LLC, as landlord, for the facility located at 900 Chesapeake Drive,
Redwood City, California 94063 (Incorporated by reference to exhibit 10.1 to SmartForce's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998 as filed with the
Securities and Exchange Commission on November 11, 1998).
10.18 Consulting Agreement dated January 30, 1998 between CBT Systems USA, Ltd. and Gregory M.
Priest (Incorporated by reference to exhibit 10.1 to SmartForce's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1998 as filed with the Securities and Exchange Commission on
May 13, 1998).
10.19 Agreement and Mutual Release dated June 3, 1998 between SmartForce and Jeffrey N. Newton
(Incorporated by reference to exhibit 10.1 to SmartForce's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1998 as filed with the Securities and Exchange Commission on
August 13, 1998).
10.20 Agreement and Mutual Release dated February 11, 1998 between SmartForce and William A.
Beamish (Incorporated by reference to exhibit 10.21 to SmartForce's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 as filed with the Securities and Exchange Commission
on March 30, 1999 (File No. 0-25674)).
10.21 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and William G. McCabe. In addition to this employment agreement, Mr. McCabe
provides certain other services to SmartForce under a consulting agreement between CBT Systems
Ltd. and Clarion Worldwide Limited (Incorporated by reference to exhibit 10.21 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 as filed with the
Securities and Exchange Commission on March 18, 1998 (File No. 0-25674)). (Incorporated by
reference to exhibit 10.1 to SmartForce's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 as filed with the Securities and Exchange Commission on November 12, 1999
(File No. 0-25674)).
Exhibit
Number Description
------- -----------
10.22 Employment Agreement effective as of June 18, 1999 between SmartForce, CBT Systems USA, Ltd.
and Gregory M. Priest (Incorporated by reference to exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 as filed with the Securities and Exchange
Commission on November 12, 1999 (File No. 0-25674)).
10.23 Employment Agreement effective as of June 18, 1999 between SmartForce, CBT Systems USA, Ltd.
and William A. Beamish. In addition to this employment agreement, Mr. Beamish provides certain
other services to SmartForce under a consulting agreement between CBT Systems Ltd. and Clarion
Worldwide Limited (Incorporated by reference to exhibit 10.21 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 as filed with the Securities and Exchange
Commission on March 18, 1998 (File No. 0-25674)). (Incorporated by reference to exhibit 10.3 to
SmartForce's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 as filed with
the Securities and Exchange Commission on November 12, 1999 (File No. 0-25674)).
10.24 Employment Agreement effective as of June 18, 1999 between CBT Group PLC, CBT Systems
USA, Ltd. and William B. Lewis (Incorporated by reference to exhibit 10.4 to SmartForce's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 as filed with the Securities
and Exchange Commission on November 12, 1999 (File No. 0-25674)).
10.25 Employment Agreement effective as of June 18, 1999 between SmartForce, CBT Systems USA, Ltd.
and Jeffrey N. Newton (Incorporated by reference to exhibit 10.5 to SmartForce's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 as filed with the Securities and Exchange
Commission on November 12, 1999 (File No. 0-25674)).
10.26 2001 Outside Director Option Plan (Incorporated by reference to exhibit 10.1 to SmartForce's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 as filed with the Securities
and Exchange Commission on November 14, 2001 (File No. 0-25674)).
23.1 Consent of Ernst & Young, Independent Auditors
23.2 Consent of Arthur Andersen, Independent Auditors
23.5 Consent of Binchys, Solicitors (included in opinion filed as Exhibit 5.1)
23.6 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in opinion filed as
Exhibit 8.1)
23.7 Consent of Foley, Hoag & Eliot LLP (included in opinion filed as Exhibit 8.2)
24.1 Power of Attorney (see page II-7)
99.1 Form of SmartForce PLC proxy card
99.2 Form of Centra Software, Inc. proxy card
99.3 Consent of Person About to Become a Director--Leon Navickas
99.4 Consent of Credit Suisse First Boston Corporation
99.5 Consent of Goldman, Sachs & Co.
99.6 Letter to Commission Pursuant to Temporary Note 3T
--------
(1) Filed as an annex to the joint proxy statement/prospectus constituting a
part of this registration statement and incorporated by reference herein.