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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
MERCATOR SOFTWARE, INC.
(NAME OF SUBJECT COMPANY)
MERCATOR SOFTWARE, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
587587106
(CUSIP NUMBER OF CLASS OF SECURITIES)
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ROY C. KING
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
MERCATOR SOFTWARE, INC.
45 DANBURY ROAD
WILTON, CT 06897
TELEPHONE: (203) 761-8600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATION ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
MICHAEL WEINSIER, ESQ.
CHARLES A. SAMUELSON, ESQ.
JENKENS & GILCHRIST PARKER CHAPIN LLP
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
TELEPHONE: (212) 704-6000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Mercator Software, Inc., a Delaware
corporation ("Mercator"). The address of its principal executive offices is 45
Danbury Road, Wilton, CT 06897. The telephone number of Mercator at its
principal executive offices is (203) 761-8600.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is Mercator's common stock, par value $0.01 per share ("Mercator Common
Stock"), and the associated preferred stock purchase rights (such rights,
together with the Mercator Common Stock, the "Shares"). As of July 31, 2003,
there were 35,266,939 shares of Mercator Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The filing person is the subject company. Mercator's name, business address
and business telephone number are set forth in Item 1 above.
On August 2, 2003, Mercator entered into an Agreement and Plan of Merger
(the "Merger Agreement") among Mercator, Ascential Software Corporation, a
Delaware corporation ("Ascential"), and Greek Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Ascential ("Purchaser").
This Statement relates to the tender offer by Purchaser to purchase all of
the issued and outstanding Shares at a purchase price of $3.00 per share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the offer to purchase dated August 8, 2003 (the "Offer
to Purchase") and in the related letter of transmittal (the "Letter of
Transmittal" which, together with the Offer to Purchase, as amended or
supplemented from time to time, constitute the "Offer").
The Offer is described in the Tender Offer Statement on Schedule TO (as
amended or supplemented from time to time, the "Schedule TO") filed by Ascential
and Purchaser with the Securities and Exchange Commission on August 8, 2003.
The Offer is being made pursuant to the Merger Agreement. The Merger
Agreement also provides that, subject to the satisfaction or waiver of certain
conditions, including regulatory approvals, as soon as practicable following the
date on which Purchaser accepts for payment all Shares validly tendered and not
withdrawn pursuant to the Offer, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Purchaser will be merged with and into Mercator
(the "Merger"), with Mercator surviving as a wholly-owned subsidiary of
Ascential. At the effective time of the Merger, each Share outstanding (other
than Shares owned by Mercator, Ascential, Purchaser or any of their respective
subsidiaries, and Shares held by stockholders who comply with all of the
relevant provisions of Section 262 of the DGCL relating to the dissenters'
rights of appraisal) will be converted into the right to receive the same amount
of cash that is being offered in the Offer. A copy of the Merger Agreement is
filed as Exhibit (e)(1) and is incorporated herein by reference.
As set forth in the Schedule TO, the principal executive offices of
Ascential and Purchaser are 50 Washington Street, Westborough, MA 01581. The
telephone number of each of them at their principal executive offices is (508)
366-3888.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS, AND AGREEMENTS
Certain members of Mercator's board (the "Board" or the "Board of
Directors") and management have interests in the transactions contemplated by
the Merger Agreement that are in addition to their interests as stockholders of
Mercator generally. Except as described herein or incorporated herein by
reference, to Mercator's knowledge, as of the date of this Statement, there are
no material contracts, agreements, arrangements or understandings or any actual
or potential conflict of interest between Mercator or its affiliates and (a) its
executive officers, directors and affiliates or (b) Ascential or Purchaser and
its executive officers, directors and affiliates.
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The Board was aware of these interests and considered them, along with the
other matters described below in "Item 4. The Solicitation or
Recommendation -- Reasons for the Recommendation of the Board of Directors," in
approving the Merger Agreement and the transactions contemplated thereby.
THE MERGER AGREEMENT
The summary of the Merger Agreement and the statement of the conditions to
the Offer are contained in Sections 11 and 14, respectively, of the Offer to
Purchase. The Offer to Purchase, which was filed as Exhibit (a)(1) to the
Schedule TO and is being mailed to stockholders together with this Statement,
and the Merger Agreement, which was filed as Exhibit (e)(1) hereto, are
incorporated herein by reference.
EFFECTS OF THE OFFER AND THE MERGER UNDER MERCATOR'S STOCK OPTION PLANS AND
AGREEMENTS BETWEEN MERCATOR AND/OR ASCENTIAL AND CERTAIN MEMBERS OF ITS BOARD
AND MANAGEMENT
NEW EMPLOYMENT ARRANGEMENTS. Mark W. Register, Mercator's Executive Vice
President and President, Worldwide Field Operations, and Thracy P. Varvoglis,
Mercator's Senior Vice President, Financial Services and Industry Solutions
Group, will, upon consummation of the Offer, become employees of Ascential. Mr.
Register will receive base salary of $250,000 per year and have a bonus
opportunity equal to 50% of his base salary pursuant to Ascential's Key Employee
Incentive Plan. Mr. Varvoglis will receive base salary of $200,000 per year and
have a bonus opportunity equal to 50% of his base salary pursuant to Ascential's
Key Employee Incentive Plan. Messrs. Register and Varvoglis will also enter into
change in control agreements with Ascential upon the effectiveness of their
employment agreements that will, upon a change in control of Ascential, provide
each of them with 100% vesting of their then unvested stock options and,
following a termination without "cause" or with "good reason" within one year
following the change in control, provide Mr. Register with severance equal to
two times his then annual base salary and target bonus and Mr. Varvoglis with
severance equal to one times his then annual base salary and target bonus.
Messrs. Register and Varvoglis have waived the right to receive certain
benefits pursuant to Mercator's change of control protection plan discussed
below and have entered into retention agreements with Ascential to become
effective upon consummation of the Offer. Under these retention agreements,
Ascential has agreed to pay them retention amounts as follows: (a) 15% of such
amount on the six-month anniversary of consummation of the Offer; (b) 25% of
such amount on the one-year anniversary of consummation of the Offer; (c) 30% of
such amount on the 18-month anniversary of consummation of the Offer; and (d)
the remainder of such amount on the two-year anniversary of consummation of the
Offer. Other than with respect to a termination by Ascential that is not for
"cause" or a departure by the executive for "good reason," they will lose the
right to receive any amount they have not been paid if their employment with
Ascential terminates. (The amounts to which Messrs. Register and Varvoglis are
so entitled are equal to the amounts they would have received under Mercator's
change of control protection plan if they had been constructively terminated and
are described below under "Change of Control Arrangements.") If, during the
first year of their employment with Ascential, either of Messrs. Register or
Varvoglis is terminated by Ascential other than for "cause" or if they leave for
"good reason," they will be entitled to receive the greater of the amount due to
them as described above and, if applicable, the amount due to them under their
change of control agreements with Ascential. Messrs. Register and Varvoglis have
also entered into non-disclosure, non-competition, non-solicitation and
development agreements with Ascential pursuant to which they have agreed, among
other things, not to compete with Ascential during the term of their employment
and for one year thereafter.
Roy C. King, Mercator's Chairman of the Board of Directors, Chief Executive
Officer and President, Michael J. Collins, Mercator's Senior Vice President and
Chief Marketing Officer, Jill M. Donohoe, Mercator's Senior Vice President,
Global Alliances and Corporate Development, David L. Goret, Mercator's Senior
Vice President, General Counsel and Secretary, Kenneth J. Hall, Mercator's
Executive Vice President, Chief Financial Officer and Treasurer, David S.
Linthicum, Mercator's Executive Vice President, Software Development and Chief
Technology Officer, and Ronald R. Smith, Mercator's Senior Vice President and
Chief Administrative Officer, have entered into continuity agreements with
Mercator. These continuity agreements will, if they remain employed by Mercator,
provide them with the same salary and benefits they presently receive from
Mercator for 60 days following consummation of the Offer. Additionally, they
will lose
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certain of the severance benefits to which they are otherwise entitled from
Mercator following a change of control if they are fired for "cause" during such
60-day period. Each person who signed a continuity agreement will, following
their departure from Mercator (and upon signing a release in favor of
Ascential), receive the severance benefits to which they are presently entitled
paid out over one year (instead of, in some cases, 18 months or longer).
All of Mercator's executive officers have signed a non-competition,
non-solicitation and development agreement in which they have agreed not to
compete with Ascential or Mercator for one year following the termination of
their employment with Mercator.
CHANGE OF CONTROL ARRANGEMENTS. In December 2001, the Compensation
Committee of the Board adopted a change of control protection plan. Pursuant to
this plan, upon consummation of the Offer (but without giving effect to the new
employment arrangements described above): (a) Messrs. King, Hall and Linthicum
will receive: (i) full acceleration of unvested options; and (ii) in the event
of constructive termination, as defined below, within one year of the change in
control, pro-ration of year-to-date annual bonus, eighteen months severance
(salary and target bonus) and continued benefits for eighteen months (pursuant
to his employment agreement, Mr. King will receive three years severance (salary
and target bonus) and benefits); (b) Messrs. Collins, Goret, Register, Smith and
Varvoglis and Ms. Donohoe will receive: (i) 50% acceleration of unvested stock
options; and (ii) if constructively terminated within one year of the change of
control, full acceleration of unvested stock options, pro-ration of year to date
annual bonus, 12 months severance (salary and target bonus) and benefits; and
(c) Gerald E. Klein, Mercator's General Counsel, Americas and Assistant
Secretary, will receive: (i) one year acceleration of unvested stock options,
and (ii) if constructively terminated within six months, full acceleration of
unvested stock options.
Constructive termination is defined as the occurrence of any of the
following, without the employee's written consent: (a) a significant diminution
of, or the assignment to the employee of any duties inconsistent with the
employee's title, status, duties or responsibilities; (b) a reduction in annual
base salary, target bonus or fringe benefit which by itself or in the aggregate
is material to employee's compensation; (c) the relocation of employee's office
more than fifty miles from the employee's current location; or (d) the failure
to obtain the written assumption of employee's employment agreement by any
successor to all or substantially all of Mercator's assets or business within
thirty days after a merger, consolidation, sale or a change of control.
As a result of the foregoing change of control plan, the approximate
amounts payable to each executive officer (not including the amount attributable
to the continuation of benefits under the change of control plan) would be as
follows (assuming that the vesting of their options is fully accelerated): Mr.
King, $3.5 million ($0.8 million of which is attributable to the assumed
cash-out of stock options at the price offered by Purchaser pursuant to the
Offer); Mr. Hall $1.9 million ($0.8 million of which is attributable to the
assumed cash-out of stock options at the price offered by Purchaser pursuant to
the Offer); Mr. Linthicum, $1.6 million ($0.6 million of which is attributable
to the assumed cash-out of stock options at the price offered by Purchaser
pursuant to the Offer), Mr. Collins, $0.9 million ($0.3 million of which is
attributable to the assumed cash-out of stock options at the price offered by
Purchaser pursuant to the Offer); Ms. Donohoe, $1.1 million ($0.5 million of
which is attributable to the assumed cash-out of stock options at the price
offered by Purchaser pursuant to the Offer); Mr. Goret, $0.8 million ($0.3
million of which is attributable to the assumed cash-out of stock options at the
price offered by Purchaser pursuant to the Offer); Mr. Klein, $0.1 million (all
of which is attributable to the assumed cash-out of stock options at the price
offered by Purchaser pursuant to the Offer); Mr. Register, $1.4 million ($0.7
million of which is attributable to the assumed cash-out of stock options at the
price offered by Purchaser pursuant to the Offer); Mr. Smith, $0.8 million ($0.2
million of which is attributable to the assumed cash-out of stock options at the
price offered by Purchaser pursuant to the Offer); and Mr. Varvoglis, $0.9
million ($0.2 million of which is attributable to the assumed cash-out of stock
options at the price offered by Purchaser pursuant to the Offer).
BONUS POOL. The Board has reserved a bonus pool of $400,000, to be awarded
to employees of Mercator that are identified by the Board or its Compensation
Committee.
CERTAIN DIRECTORS. During March 2003, the Board determined that two of its
members, Messrs. Sisco and Stevens, should provide management with advice and
oversight during the proxy contest and in
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connection with Mercator's evaluation of strategic alternatives and should keep
the Board informed about the proxy contest and such evaluation. As compensation
for providing such advice and oversight, Mercator agreed to pay Mr. Sisco $3,500
per week during the proxy contest and $1,750 per week thereafter and agreed to
pay Mr. Stevens $6,500 per week during the proxy contest and $3,250 per week
thereafter. At the time the Board assigned these tasks to Messrs. Sisco and
Stevens, it was expected that the assignment would end before the end of June.
However, Mercator's evaluation of strategic alternatives lasted longer than
originally anticipated and, as of August 1, 2003, Messrs. Sisco and Stevens had
earned approximately $40,000 and $73,000, respectively, for their services. They
are also reimbursed for all out-of-pocket expenses they incur in connection with
such services.
TREATMENT OF OPTIONS. The Merger Agreement provides that, at the effective
time of the Merger, each then outstanding option to acquire Shares under one of
Mercator's stock option plans (other than under its 1997 Directors' Option
Plan), whether or not then exercisable, will (without any action on the part of
Mercator:
- automatically be converted into an option to purchase Ascential's common
stock;
- have the same terms, and be subject to the same conditions, as they had
before Mercator signed the Merger Agreement (after giving effect to any
acceleration of vesting to which the holders are entitled as a result of
the transactions contemplated by the Merger Agreement), except that each
such option will be exercisable for the number of shares of Ascential's
common stock that is equal to the product of:
-- the number of Shares issuable upon exercise of such option immediately
prior to the Merger; and
-- $3.00 per share divided by the average of: (i) the closing prices of
Ascential's common stock during the 20 trading days preceding the fifth
trading day prior to the public announcement of the Merger Agreement;
and (ii) the closing prices of Ascential's common stock during the 20
trading days preceding the fifth trading day prior to the date of the
Merger (such average, the "Option Exchange Ratio");
- the per share exercise price of each such option will be changed to the
quotient equal to: (i) the exercise price of such option immediately
prior to the effective time of the Merger; and (ii) the Option Exchange
Ratio.
Mercator's 1997 Directors' Option Plan provides that, prior to the
effective time of the Merger, all of the then outstanding options thereunder
will become fully vested and exercisable and that, following the effective time
of the Merger, any unexercised options thereunder will be cancelled.
The number of shares subject to options granted to: (a) directors, the
vesting of which would be accelerated in the manner described above, is as
follows: Ms. Galley, 77,500 shares; Mr. Keet, 40,000 shares; Mr. King, 621,876
shares; Mr. Lehman, 85,500 shares; Mr. Schadt, 43,000 shares; Mr. Sisco, 40,000
shares; and Mr. Stevens, 54,250 shares; and (b) non-director executive officers,
the vesting of which would be accelerated in the manner described above and
under "Change of Control Arrangements," is as follows: Mr. Collins, 89,064
shares; Ms. Donohoe, 227,351 shares; Mr. Goret, 90,470 shares; Mr. Hall, 348,874
shares; Mr. Klein, 31,462 shares; Mr. Linthicum, 342,197 shares; Mr. Register,
302,815 shares; Mr. Smith, 104,376 shares; and Mr. Varvoglis, 104,301 shares.
INDEMNIFICATION. The Merger Agreement provides that for six years after
the effective time of the Merger, Ascential and the corporation surviving the
Merger (the "Surviving Corporation") shall jointly and severally, indemnify,
defend and hold harmless each present and former officer and director of
Mercator, and each person who becomes an officer or director of Mercator prior
to the effective time of the Merger, against all losses, claims, damages,
liabilities, costs, fees and expenses arising out of acts or omissions occurring
at or prior to the effective time of the Merger to the full extent required
under the terms of Mercator's Amended and Restated Certificate of Incorporation
and Amended and Restated By-Laws or any indemnification agreement between
Mercator and such person, each as in effect as of the date of the Merger
Agreement. Reasonable attorneys fees, judgments, fines, losses, claims,
liabilities and settlements (effected with the
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written consent of Ascential or Surviving Corporation, which consent shall not
be unreasonably withheld) are included. In the event that any claim or assertion
is made within such six year period, rights to indemnification shall continue
until disposition of the claim.
The Merger Agreement further provides that Ascential or the Surviving
Corporation shall maintain Mercator's existing officers' and directors'
liability insurance for a period of not less than two years after the effective
time of the Merger, or such other insurance as the Board shall identify.
Ascential or the Surviving Corporation may substitute policies of substantially
equivalent coverage, amounts, and terms. However, in no event shall Ascential
and the Surviving Corporation be required to pay aggregate premiums for all such
insurance in excess of two times 105% of the premiums paid or to be paid by
Mercator as of the date of the Merger Agreement for such insurance during the
12-month period ending June 30, 2004. If the premiums for such coverage exceeds
such amount, the Surviving Corporation shall purchase a policy with the greatest
coverage available that does not exceed, in the aggregate, two times 105% of the
premiums paid or to be paid by Mercator as of the date of the Merger Agreement
for such insurance during the 12-month period ending June 30, 2004.
STOCK TENDER AGREEMENT
"Item 4. The Solicitation or Recommendation -- Intent to Tender" includes
a discussion of the Stock Tender Agreement pursuant to which directors,
executive officers and officers of Mercator have agreed, prior to termination of
the Merger Agreement, to tender their Shares in the Offer and to vote their
Shares in favor of the Merger and against approval of any proposal made in
opposition to, or in competition with, the Merger and the Merger Agreement.
COMMON STOCK OPTION AGREEMENT
Ascential, Purchaser and Mercator have entered into a Common Stock Option
Agreement (the "Option Agreement") under which Mercator has granted Purchaser an
option to purchase from Mercator not more than 19.99% of the then outstanding
Shares, at a price per Share equal to $3.00. This option is exercisable by
Purchaser only after the acceptance of and payment for Shares pursuant to the
Offer, and it is also conditioned upon Purchaser owning at least 90% of the
outstanding Shares immediately following the exercise of the option. The portion
of the purchase price owing upon exercise of such option will be equal to the
product of (i) the number of Shares purchased pursuant to such option multiplied
by (ii) the par value per Share will be paid to Mercator in cash, and the
balance of the purchase price will be paid by delivery to Mercator of a non-
interest bearing unsecured demand note from Purchaser that is guaranteed by
Ascential. Such option may be exercised on two day's written notice given by
Purchaser to Mercator.
The Option Agreement was filed as Exhibit (e)(2) hereto and is incorporated
herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF MERCATOR'S BOARD OF DIRECTORS
At a meeting held on August 1, 2003, the Board of Directors unanimously:
- determined that the Offer, the Merger and the Merger Agreement were
advisable, fair to and in the best interest of Mercator's stockholders,
and approved and adopted the Merger Agreement and the transactions
contemplated thereby, including the Offer and Merger, in all respects;
and
- recommended acceptance of the Offer and approval and adoption of the
Merger Agreement and the Merger by Mercator's stockholders.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
MERCATOR TENDER THEIR SHARES PURSUANT TO THE OFFER. Copies of a letter to the
stockholders of Mercator communicating the Board's recommendation and Mercator's
press release announcing the Merger Agreement and the transactions contemplated
thereby are filed as Exhibits (a)(3) and (a)(4) hereto, respectively, and are
incorporated herein by reference.
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(B)(I) BACKGROUND
The following information was prepared by Mercator and Ascential.
Information about Ascential was provided by Ascential and Mercator does not take
any responsibility for the accuracy or completeness of any information regarding
meetings or discussions in which Mercator did not participate.
From time to time, Mercator's management and Board have reviewed with their
legal and financial advisors various strategic alternatives, including remaining
an independent public company, the possibility of acquisitions or mergers with
other companies and other transactions. In connection with the Board's review of
such alternatives, J.P. Morgan Securities Inc. ("JPMorgan") provided the Board
with information about industry dynamics and Mercator's competitive landscape
during 2001 and 2002.
Additionally, Ascential approached Mercator regarding a possible business
partnership at the end of 2001. Preliminary discussions between representatives
of Mercator and Ascential were held in January and February of 2002 regarding
their respective product suites, capabilities and technologies. At that time,
the parties mutually determined not to proceed with any further discussions.
During December 2002, representatives of Strategic Software Holdings, LLC
("SSH"), a company that had acquired 2,000,000 shares of Mercator Common Stock
during the prior month, had several conversations with management and verbally
indicated that SSH was interested in acquiring 51% of the Shares. In light of
this verbal expression of interest, Mercator tentatively agreed to further
discussions with these representatives to be held on January 10, 2003.
The Board met on January 6, 2003 to discuss the nature and terms of the
verbal expression of interest, consider Mercator's own strategic plan and
progress in achieving that plan and other prospects for achieving value for
stockholders and the relative valuation of Mercator and its peers. Based on
these discussions, the Board determined not to engage in further discussions
with SSH, except in so far as Mercator communicates with and informs
stockholders in the ordinary course. On January 9, 2003, Mercator notified SSH
that Mercator was canceling the proposed meeting.
On March 14, 2003, SSH nominated a slate of seven directors to replace the
seven members of the Board. During the ensuing proxy contest, several members of
the Board discussed the possibility of more aggressively exploring Mercator's
strategic alternatives in order to improve the return for Mercator's
stockholders. The Board determined to engage an investment bank in order to
assist Mercator in the review of these alternatives and that two of its members,
Dennis Sisco and Mark Stevens, would work closely with management in connection
with the ongoing proxy contest, as well as a more in-depth review of such
alternatives. Thereafter, Messrs. Sisco and Stevens regularly participated in
meetings with Mercator's management and legal and financial advisors relating to
the proxy contest and the review of strategic alternatives. Messrs. Sisco and
Stevens also regularly updated the members of the Board on the progress of this
review and, until the end of the proxy contest, met regularly with management
and provided updates to the Board on its status and progress.
On March 31, 2003, SSH submitted a proposal directly to the Board
purporting to contain an offer, subject to, among other things, receipt of
financing, pursuant to which SSH would acquire all of the outstanding Shares not
already owned by SSH for $2.17 per share in cash.
On April 1, 2003, Mr. Bienvenu, two of his lawyers and a representative
from his financial advisor met with Messrs. Stevens, Sisco and Kenneth J. Hall,
Mercator's Executive Vice President, Chief Financial Officer and Treasurer, as
well as two representatives from Mercator's outside counsel, Jenkens & Gilchrist
Parker Chapin LLP ("Jenkens & Gilchrist"). At the meeting, Mr. Bienvenu told
Mercator, among other things, that he had not yet received any financing for his
offer to buy Mercator and the strategy he proposed for Mercator was "extremely
risky."
Also on April 1, 2003, Mercator formally engaged JPMorgan to provide advice
in the proxy contest with SSH and in connection with a possible strategic
transaction involving Mercator.
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At a meeting on April 3, 2003, the Board considered Mr. Bienvenu's
proposal. After discussion and presentations from Jenkens & Gilchrist and
JPMorgan, the Board unanimously determined that the proposal by SSH was not in
the best interests of its stockholders.
On April 7, 2003, Mr. Roy C. King, Mercator's Chairman of the Board, Chief
Executive Officer and President, and Messrs. Sisco, Stevens and Hall, as well as
David L. Goret, Mercator's General Counsel, met at the offices of JPMorgan with
representatives of JPMorgan and Jenkens & Gilchrist. The participants in the
meeting discussed a process in which JPMorgan would solicit indications of
interest from third parties who might be interested in acquiring Mercator,
discussed a preliminary list of third parties to be contacted and reviewed
strategic issues involved in managing the process.
During the week of April 7, 2003, JPMorgan initiated a program to contact
third parties that could be interested in acquiring Mercator. On that date,
JPMorgan contacted Robert McBride regarding a possible transaction between
Ascential and Mercator. JPMorgan eventually contacted 17 third parties, nine of
whom executed non-disclosure agreements.
At a meeting on April 8, 2003, the Board considered the process reviewed by
Messrs. Sisco, Stevens, Hall and Goret during the previous day.
On April 11, 2003, Peter Gyenes, Ascential's Chairman of the Board and
Chief Executive Officer, spoke with Mr. King, Mercator's Chairman of the Board,
Chief Executive Officer and President, regarding the possibility of Ascential
purchasing Mercator.
On April 17, 2003, Mercator and SSH entered into a settlement agreement
pursuant to which, among other things, SSH agreed to support (and the members of
the SSH group agreed to vote all of their shares of Mercator Common Stock in
favor of) Mercator's slate of seven nominees standing for election as directors
at its 2003 annual meeting. Under the settlement agreement, SSH also agreed to
certain "standstill" restrictions until January 15, 2004. These restrictions
prevent the members of the SSH group from, among other things: (i) attempting to
gain control of the Board; (ii) making any "hostile" proposals to acquire the
Company; and (iii) subject to certain agreed-upon exceptions, selling any
Shares. The settlement agreement permitted SSH to make a "qualified proposal"
(as defined in the settlement agreement).
During the period from April 25, 2003 through June 17, 2003, seven third
parties received management presentations and had question and answer sessions
with Mercator's management, including Ascential (whose management presentation
was on May 16, 2003).
On April 28, 2003, Mercator and Ascential agreed upon and Bear, Stearns &
Co. Inc. ("Bear Stearns"), Ascential's financial advisor, on behalf of
Ascential, and JPMorgan and Mercator executed a non-disclosure agreement, a copy
of which has been filed as Exhibit (e)(3) hereto. Ascential and Bear Stearns
received information to help Ascential evaluate the Mercator opportunity on the
following day.
During the period from April 30, 2003 to June 23, 2003, JPMorgan received
preliminary expressions of interest from Ascential and four other third parties
interested in acquiring Mercator.
At a regularly scheduled meeting of the Board on May 14, 2003,
representatives of JPMorgan provided Mercator's directors with an update of the
work that had been completed to date in connection with the solicitation of
third parties who might be interested in acquiring Mercator.
During the period from May 16, 2003 through June 9, 2003, members of senior
management of Mercator and Ascential continued their discussions regarding the
possibility of a transaction.
At the annual meeting of the Board on May 30, 2003, representatives of
JPMorgan provided Mercator's directors with an update of the work that had been
completed to date in connection with the solicitation of third parties who might
be interested in acquiring Mercator.
On June 2, 2003, Mr. King spoke with Peter Gyenes, Ascential's Chairman and
Chief Executive Officer, regarding Ascential's interest in pursuing a
transaction with Mercator.
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On June 9, 2003, Ascential presented Mercator with a non-binding
preliminary indication of interest to acquire Mercator at a price per share of
between $2.30 and $3.00. Additionally, Ascential highlighted the fact that
additional due diligence would be required in order to develop a more definitive
proposal.
On June 12 and 13, 2003, members of Mercator's senior management provided
Ascential's senior management with an overview of Mercator and discussed ways
the two companies could be combined.
On June 18, 2003, JPMorgan received a due diligence request list from
Ascential.
During the period from June 18, 2003 through June 30, 2003, several
conference calls took place between Ascential and Mercator to discuss the
potential for a transaction.
On June 20, 2003, Mr. Gyenes spoke with Mr. Hall regarding Ascential's
continued interest in a transaction with Mercator. Mr. Gyenes said that
Ascential would need to conduct additional due diligence in order to determine
whether to proceed.
On June 30, 2003, Mercator received proposals from Ascential and one other
third party seeking to enter into an exclusivity agreement and work toward
completing due diligence and signing a definitive agreement.
On July 1, 2003, following discussion between JPMorgan and Bear Stearns,
Ascential sent Mercator a non-binding letter of intent and attached a
preliminary term sheet outlining the structure of the transaction as a cash
tender offer, as well as the proposed offer price of $3.00 per share, assuming
no additional share issuances, and a 30-day exclusivity period beginning on
Mercator's acceptance of the letter, subject to due diligence and other
customary conditions.
On July 2, 2003, the Board met telephonically to consider Ascential's
proposal to acquire Mercator. At the meeting, representatives of JPMorgan
reviewed with the Board the financial terms and relative merits of the proposal,
as well as the proposal from the other third party, and representatives of
Jenkens & Gilchrist spoke about legal aspects of the proposals, as well as the
fiduciary duties of the Board under the circumstances. After discussion of the
two proposals, the meeting adjourned to provide the directors with an
opportunity to review them. Later in the day, the meeting re-convened, and the
Board determined that Ascential's proposal was superior and approved the letter
of intent from Ascential.
On July 4 and 5, 2003, the parties exchanged information on the data needed
for Ascential to conduct its review of Mercator.
During the week of July 7, 2003, Ascential began conducting its due
diligence review of Mercator. Members of senior management of both companies had
numerous conversations and meetings in Norwalk, Connecticut and Westborough,
Massachusetts. Ascential's due diligence continued during the week of July 14,
2003.
On July 18, 2003, Ascential sent Mercator a draft Merger Agreement
containing all of the proposed terms and conditions of the proposed transaction.
During the period from July 18, 2003 through July 30, 2003, representatives
of Mercator (including Messrs. Sisco and Stevens) and Ascential and their
respective counsels and financial advisors negotiated specific terms and
provisions of the Merger Agreement, including the conditions to closing of the
Offer, the interim covenants, the circumstances under which a break-up fee would
be payable, the non-solicitation provisions, the efforts required to seek
regulatory approvals, the circumstances in which the parties could terminate the
Merger Agreement and the circumstances in which Ascential could amend or extend
the Offer. During this time, Ascential management and senior members of
Mercator's management met to discuss future synergies and implementation plans
for the combined company. Mr. Gyenes also met with certain members of the Board
of Directors to explain Ascential's plans for the combined company.
On July 23, 2003, Ascential's senior management made a presentation to
Ascential's board of directors regarding the transaction. Representatives of
Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), Ascential's legal
counsel, and of Bear Stearns were present at the meeting.
8
On July 25, 2003, Ascential presented Mercator and certain key members of
its executive team with draft agreements and other arrangements for the
continued employment of such individuals by Ascential following the transaction
as well as non-competition and non-solicitation agreements to be executed by
each of the executive officers and certain other employees.
During the week of July 28, 2003, Ascential sent Mercator drafts of the
Stock Tender Agreement and Option Agreement. Purchaser was incorporated in the
State of Delaware during the same week.
On July 30, 2003, the Board met to consider Ascential's proposal and the
latest draft of the Merger Agreement. The Board received a detailed presentation
of the financial and legal aspects of the proposed transaction from members of
management, Jenkens & Gilchrist and JPMorgan. Messrs. Sisco and Stevens also
updated the Board. After discussion, the Board agreed that they would re-convene
on August 1, 2003 in order to formally consider the Merger Agreement and receive
a fairness presentation from JPMorgan.
From July 30, 2003 to August 1, 2003, representatives of Mercator and
Ascential and their respective counsels and financial advisors continued to
negotiate specific terms and provisions of the Merger Agreement.
Also on August 1, 2003, Mercator held a special meeting of the Board. After
discussion, which included review of all contacts between JPMorgan and
prospective bidders since April, updates regarding the financial and legal
aspects of the proposed transaction from members of Mercator's management and
from Jenkens & Gilchrist, JPMorgan delivered its oral opinion to the effect
that, as of that date, the consideration to be received by holders of Shares
pursuant to the Merger Agreement was fair, from a financial point of view, to
those holders, and the Board of Directors unanimously approved the Merger
Agreement and the transactions contemplated thereby (including the Offer and the
Merger) in all respects and recommended that Mercator's stockholders accept the
Offer and approve and adopt the Merger Agreement and the Merger.
On August 1, 2003, Ascential's senior management presented the transaction
to Ascential's board of directors, including a summary of the terms of the
transaction. Representatives of Skadden Arps and Bear Stearns were present at
the meeting. Ascential's board unanimously approved the Merger Agreement and the
transactions contemplated thereby, subject to management's approval of the final
drafts of the agreements. Purchaser's board also approved the Merger Agreement
and the transactions contemplated thereby.
Following the meeting, representatives of Mercator and Ascential and their
respective counsels negotiated specific terms and provisions of the Merger
Agreement and had several conversations to finalize the terms of the Merger
Agreement, the Option Agreement and the Stock Tender Agreement. Thereafter,
management met telephonically with Messrs. Sisco and Stevens, as well as
representatives of Jenkens & Gilchrist, to review the final documents and
confirm their final terms. JPMorgan then delivered its written opinion to the
effect that, as of August 2, 2003, the consideration to be received by holders
of Shares was fair, from a financial point of view, to those holders and
Mercator and Ascential executed the Merger Agreement.
On August 4, 2003, the parties publicly announced the transaction.
(II) REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS
In making the determinations and recommendations set forth above, the Board
considered a number of factors, including, without limitation, the following:
1. FINANCIAL TERMS OF THE TRANSACTION. The $3.00 Offer represents an
approximately 21% premium over the $2.46 closing price of the Shares on
Nasdaq on July 31, 2003 (the last trading day prior to the Board meeting
at which the Board approved the Merger Agreement), an approximately 53%
premium over the $1.96 average closing price for the one month trading
period ending on July 31, 2003 and an approximately 79% premium over the
$1.68 average closing price for the three month trading period ending on
July 31, 2003. The Board also considered the form of consideration to be
paid to holders of Shares in the Offer and the Merger, and the certainty
of value of such cash consideration compared to a continued investment
in Mercator Common Stock. The Board was aware that the consideration to
be received by the holders of Shares in the Offer and the Merger would
be taxable to such holders for federal income tax purposes.
9
2. STRATEGIC ALTERNATIVES. The Board considered Mercator's prospects if it
were to remain independent, and the risks and benefits inherent in
remaining independent, including the risk arising from the increasing
investment required to compete.
3. ALTERNATIVE TRANSACTIONS. The Board considered inquiries made by
Mercator and JPMorgan to 17 companies, including major companies in the
software industry, with respect to the possible acquisition of Mercator
and the attendant uncertainty of reaching an agreement with any such
party.
4. COMPETITIVE LANDSCAPE. The Board considered information with regard to
the financial condition, results of operations, business and prospects
of Mercator, as well as current economic and market conditions
(including current conditions in the industry in which Mercator
competes).
5. JPMORGAN'S FAIRNESS OPINION. The Board considered the opinion of
JPMorgan to the effect that, as of such date, and based upon and subject
to certain qualifications, assumptions and limitations stated in such
opinion, the consideration to be received by holders of the Shares
(other than Ascential and its affiliates) in the Offer and the Merger,
taken together as a whole and not separately, was fair, from a financial
point of view, to such holders and the presentation made by JPMorgan to
the Board relating to the financial analysis performed by JPMorgan in
connection with such opinion. The full text of JPMorgan's written
opinion, dated August 2, 2003, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by JPMorgan,
is set forth in Annex A hereto. JPMorgan's opinion is limited to the
fairness, from a financial point of view, of the consideration to be
received in the Offer and the Merger, taken together as a whole and not
separately, by the holders of the Shares (other than Ascential and its
affiliates) and does not constitute a recommendation as to whether any
stockholder should tender the Shares pursuant to the Offer or how such
stockholder should vote with respect to the Merger. Holders of the
Shares are urged to read such opinion carefully in its entirety. The
Board was aware that JPMorgan becomes entitled to certain fees described
in Item 5 upon consummation of the Offer.
6. TERMS OF THE MERGER AGREEMENT. The Board considered the terms of the
Merger Agreement, including the parties' representations, warranties and
covenants, the conditions to their respective obligations and the fact
that the transactions contemplated by the Merger Agreement are not
subject to any financing contingencies.
7. TIMING OF COMPLETION. The Board considered the anticipated timing of
consummation of the transactions contemplated by the Merger Agreement,
including the structure of the transactions as a tender offer for all of
the Shares, which should allow stockholders to receive the transaction
consideration earlier than an alternative form of transaction, followed
by the Merger in which stockholders will receive the same consideration
as received by stockholders who tender their Shares in the Offer.
8. POTENTIAL CONFLICTS OF INTEREST. The Board considered the potential
conflicts of interest between Mercator, on the one hand, and Mercator's
officers, directors and affiliates in the Offer and the Merger, all as
described above in Item 3.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive, but includes the material factors
considered by the Board. In view of the variety of factors considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the above factors or determine that any factor was of particular
importance. Rather, the Board viewed its position and recommendations as being
based on the totality of the information presented to and considered by it. In
addition, it is possible that different members of the Board assigned different
weights to the various factors described above.
(III) OPINION OF J.P. MORGAN SECURITIES INC.
In an engagement letter dated April 1, 2003, Mercator engaged JPMorgan on
an exclusive basis to provide it with financial advisory services and a fairness
opinion, from a financial point of view, in connection with the Offer and the
Merger. The Board selected JPMorgan based on JPMorgan's qualifications,
expertise
10
and reputation and its knowledge of the business and affairs of Mercator. At the
meeting of the Board on August 1, 2003, JPMorgan rendered its oral opinion,
subsequently confirmed in writing, that, as of August 2, 2003, and based on and
subject to the considerations in its opinion, the consideration to be received
by the holders of the Shares pursuant to the Merger Agreement is fair from a
financial point of view to those holders.
THE FULL TEXT OF JPMORGAN'S OPINION DATED AUGUST 2, 2003, WHICH SETS FORTH,
AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY JPMORGAN IN RENDERING ITS
OPINION, IS ATTACHED AS ANNEX A TO THIS STATEMENT AND INCORPORATED IN THIS
STATEMENT BY REFERENCE. WE URGE YOU TO READ THIS OPINION CAREFULLY AND IN ITS
ENTIRETY. JPMORGAN'S OPINION IS DIRECTED TO THE BOARD, ADDRESSES ONLY THE
FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF THE SHARES
PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL POINT OF VIEW TO THOSE HOLDERS
AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER OR THE MERGER OR
CONSTITUTE A RECOMMENDATION AS TO WHETHER HOLDERS OF THE SHARES SHOULD TENDER
THEIR SHARES IN THE OFFER OR AS TO HOW HOLDERS OF THE SHARES SHOULD VOTE AT ANY
STOCKHOLDERS' MEETING HELD IN CONNECTION WITH THE MERGER. THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
(C) INTENT TO TENDER
Ascential and Purchaser have entered into a Stock Tender Agreement, dated
as of the date of the Merger Agreement, with each of Ernest E. Keet, Roy C.
King, Constance F. Galley, James P. Schadt, Dennis G. Sisco, Mark C. Stevens,
Michael E. Lehman, Kenneth J. Hall, David S. Linthicum, Mark W. Register, Thracy
P. Varvoglis, Jill M. Donohoe, Michael J. Collins, David L. Goret, Ronald R.
Smith and Greg O'Brien, as stockholders and option holders of Mercator (each a
"Stockholder" and collectively, the "Stockholders"). Pursuant to the Stock
Tender Agreement, each Stockholder has: (i) agreed to tender such Stockholder's
Individual Shares (as defined in the Stock Tender Agreement) promptly after
Purchaser commences the Offer; and (ii) appointed Peter Fiore, Scott Semel and
Robert McBride, as officers of Purchaser, an irrevocable proxy (A) to vote the
Stockholders' Individual Shares in favor of the Merger and the Merger Agreement
and (B) vote against any action or agreement that is contrary to the Merger
Agreement or the Stock Tender Agreement, or that would materially change
Mercator's corporate structure or business. The Stock Tender Agreement also
gives Ascential an option to acquire all the Individual Shares at a purchase
price per share equal to the Offer Price (or such higher price as may be offered
by Purchaser in the Offer), exercisable only if the Stockholders fail to comply
with the Stock Tender Agreement, or if the Stockholders withdraw their tender of
Shares made pursuant to the Offer.
Additionally, the Stockholders have agreed to: (i) not transfer, or enter
into any agreement to transfer, Individual Shares to any other person or entity
except pursuant to the Stock Tender Agreement; (ii) not take any action in
violation of any warranty or representation made by the Stockholders under the
Stock Tender Agreement, or that would result in a breach by Mercator of its
obligations under the Merger Agreement; (iii) not solicit an Alternative
Proposal or engage in any negotiations regarding an Alternative Proposal (other
than an action taken by a stockholder in his or her capacity as a director or
executive officer of Mercator and in compliance with the non-solicitation
provisions of the Merger Agreement); (iv) waive all appraisal or dissenting
rights; and (v) waive claims against Mercator, Ascential or Purchaser including
claims arising from ownership of Shares, stockholder status, conduct of
business, and the consummation of the transactions contemplated by the Merger
Agreement or Merger.
The parties to the Stock Tender Agreement have each made certain
representations and warranties. The Stockholders' representations and warranties
include that they are the holder of record and have valid and marketable title
to the Individual Shares, that they beneficially own the Individual Shares, that
the Stock Tender Agreement covers all of the Shares owned by each Stockholder
(including any options exercised by the Shareholder prior to the Offer), and
that no conflicts with other agreements will result. Ascential and Purchaser's
representations and warranties include that each is a duly organized corporation
with the power to perform its obligations.
As of July 31, 2003, Mercator's directors and executive officers owned an
aggregate of 2,107,706 Shares representing approximately 6% of Mercator's
currently outstanding shares and beneficially owned (determined
11
in accordance with Rule 13d-3 under the Exchange Act) an aggregate of 5,952,837
shares of Mercator Common Stock, representing approximately 15.7% of Mercator's
shares assuming the exercise of all of their options that are exercisable within
60 days of August 1, 2003.
The summary of the Stock Tender Agreement is qualified in its entirety by
reference to the Stock Tender Agreement, which was filed as Exhibit (e)(4)
hereto and is incorporated herein by reference.
ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
Pursuant to the terms of JPMorgan's engagement, Mercator has agreed to pay
JPMorgan for its services, including the fairness opinion, an aggregate
financial advisory fee equal to approximately $2.0 million payable upon
consummation of the Offer. The fee to be paid for provision of the fairness
opinion is not contingent on the consummation of the Offer or the Merger.
Mercator also has agreed to reimburse JPMorgan for other reasonable
out-of-pocket expenses including travel costs, document production and other
similar expenses, and reasonable fees of counsel, up to a maximum aggregate
amount for all such costs and expenses not to exceed $50,000 without the prior
written consent of Mercator and to indemnify JPMorgan and certain related
parties against certain liabilities, including liabilities under the federal
securities laws, arising out of JPMorgan's engagement.
Except as described above, neither Mercator nor anyone acting on its behalf
has employed, retained or compensated, or currently intends to employ, retain or
compensate, any person to make solicitations or recommendations to the
stockholders of Mercator on its behalf with respect to the Offer or the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
No transactions in the Shares have been effected during the past 60 days by
Mercator or any subsidiary of Mercator or, to the best of Mercator's knowledge,
by any executive officer, director or affiliate of Mercator.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Except for Mercator's obligations pursuant to the Merger Agreement,
Mercator is not undertaking or engaged in any negotiations in response to the
Offer that relate to:
- a tender offer for or other acquisition of Mercator's securities by
Mercator, any of its subsidiaries, or any other person;
- any extraordinary transaction, such as a merger, reorganization or
liquidation, involving Mercator or any of its subsidiaries;
- any purchase, sale or transfer of a material amount of assets of Mercator
or any of its subsidiaries; or
- any material change in the present dividend rate or policy, or
indebtedness or capitalization, of Mercator.
There are no transactions, board resolutions, agreements in principle or
signed contracts entered into in response to the Offer that relate to one or
more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION
(A) DESIGNATION BY ASCENTIAL OF PERSONS TO BE ELECTED TO THE BOARD
The Merger Agreement provides that, effective upon the acceptance for
payment by Purchaser of any Shares, Purchaser will be entitled to designate the
number of directors, rounded up to the next whole number, to the Mercator Board
(the "Ascential Designees") that equals the product of (i) the total number of
directors on the Mercator Board (giving effect to the election of any additional
directors pursuant to Section 1.3 of the Merger Agreement or the resignation of
any individuals who are directors on the date hereof) and (ii) the percentage
obtained by dividing the number of Shares beneficially owned (within the
12
meaning of Rule 13d-3 under the Exchange Act of 1934, as amended) by Ascential
and its subsidiaries by the total number of Shares then outstanding. Mercator is
required to:
- take all action necessary to cause Ascential's designees to be elected or
appointed to the Mercator Board, including amending Mercator's bylaws,
increasing the number of directors on the Mercator Board and obtaining
resignations of a number of incumbent directors;
- use its best efforts to cause the vacancies created by any such increase
in the number of directors or resignation of incumbent directors to be
filled by designees of Ascential; and
- take all action necessary to cause the persons designated by Ascential to
serve in equal proportion on each committee of the Mercator Board, each
board of each subsidiary of Mercator and each committee of the board of
each such subsidiary.
Notwithstanding the foregoing, following consummation of the Offer and
until the effective time of the Merger, Mercator's Board will have two members
who are not stockholders or affiliates of Ascential or Purchaser and are
considered independent directors within the meaning of the rules of The Nasdaq
Stock Market, Inc. ("Nasdaq"). If the number of independent directors is reduced
below two (or such other number as may be required by the rules of Nasdaq) for
any reason, the remaining independent directors are entitled to fill the
vacancies or, if no independent directors remain, the other directors will be
entitled to designate two individuals (or such other number as may be required
by the rules of Nasdaq) to fill such vacancies. The independent directors are
required to form a committee that, during the period from the time Shares are
purchased pursuant to the Offer until the effective time of the Merger, will
have the power and authority to:
- amend the Merger Agreement;
- exercise or waive any of Mercator's rights, benefits or remedies under
the Merger Agreement; or
- take any other action under or in connection with the Merger Agreement if
such action materially and adversely affects the holders of Shares (other
than Ascential or Purchaser).
(B) MERGER PROVISIONS
Under the DGCL, if Ascential acquires, pursuant to the Offer or otherwise,
at least 90% of the outstanding Shares, Ascential will be able to effect the
Merger after consummation of the Offer without convening a meeting of
stockholders. However, if Ascential does not acquire at least 90% of the Shares
pursuant to the Offer or otherwise and a vote of Mercator's stockholders is
required under Delaware law, a significantly longer period of time will be
required to effect the Merger. Ascential and Purchaser have each agreed to cause
all of the Shares owned by them to be voted in favor of the approval and
adoption of the Merger Agreement and the Merger, so stockholder approval of the
Merger is assured if the Offer is completed.
(C) ANTITRUST
The purchase of Shares pursuant to the Offer is subject to review by the
Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") to
determine whether it is in compliance with antitrust laws. Under the provisions
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the
Offer may not be consummated until the waiting period requirements of that Act
have been satisfied or terminated. Ascential and Mercator will file notification
reports, together with requests for early termination for the waiting period,
with the DOJ and the FTC; and, unless the waiting period is extended or Mercator
or Ascential receives a request for additional information and documentary
material, the waiting period will expire before September 8, 2003.
The DOJ and the FTC frequently scrutinize the legality under the antitrust
laws of transactions such as the Offer or the Merger. At any time before or
after the Offer or the Merger, the DOJ or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Offer or the Merger or seeking divestiture of
substantial assets of Ascential or Mercator or their subsidiaries. Private
parties and state attorneys general may also bring an action under the antitrust
laws under
13
certain circumstances. There can be no assurance that a challenge to the Merger
on antitrust grounds will not be made or, if such a challenge is made, of the
result.
FOREIGN APPROVALS. Ascential and Mercator conduct operations in a number
of jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the Offer or the Merger.
Ascential and Mercator may also be requested to make filings with and or seek
approval of the Merger with governmental agencies in foreign countries.
(D) OFFER TO PURCHASE, LETTER OF TRANSMITTAL AND RELATED DOCUMENTS
Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal, form of letter to brokers, dealers, commercial banks, trust
companies and other nominees and form of letter to clients which are filed as
Exhibits (a)(1), (a)(2), (a)(5) and (a)(6) hereto, respectively, and are
incorporated herein by reference in their entirety.
14
ITEM 9. EXHIBITS
The following Exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
----------- -----------
(a)(1) Offer to Purchase dated August 8, 2003 (incorporated by
reference to the Offer to Purchase included in the Tender
Offer Statement on Schedule TO as Exhibit (a)(1)(A) filed by
Ascential on August 8, 2003 (the "Schedule TO"))
(a)(2) Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(1)(B) to the Schedule TO)
(a)(3) Letter dated August 8, 2003 from the Chairman of Mercator to
Mercator's stockholders*
(a)(4) Press Release dated August 4, 2003 (incorporated by
reference to the Schedule 14D-9 (preliminary communications
made before commencement of the tender offer filed by
Mercator on August 4, 2003)
(a)(5) Form of Notice of Guaranteed Delivery (incorporated by
reference to Exhibit(a)(1)(C) to the Schedule TO)
(a)(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees (incorporated by reference to
Exhibit (a)(1)(D) to the Schedule TO)
(a)(7) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other
Nominees(incorporated by reference to Exhibit (a)(1)(E) to
the Schedule TO)
(a)(8) Opinion of JPMorgan dated August 2, 2003 (included as Annex
A to this Schedule 14D-9)
(a)(9) Sections 11 and 14 of the Offer to Purchase dated August 8,
2003 (incorporated by reference to Exhibit (a)(1)(A) to the
Schedule TO)
(a)(10) Guidelines For Certification of Taxpayer Identification
Number on Substitute Form W-9 (incorporated by reference to
Exhibit (a)(1)(F) to the Schedule TO)
(e)(1) Agreement and Plan of Merger dated as of August 2, 2003
among Mercator, Ascential and Purchaser (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K
filed by Mercator on August 5, 2003)
(e)(2) Common Stock Option Agreement dated as of August 2, 2003
among Mercator, Ascential and Purchaser (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K
filed by Mercator on August 5, 2003)
(e)(3) Non-Disclosure Agreement dated as of April 28, 2003 among
Mercator, Ascential and JPMorgan
(e)(4) Stock Tender Agreement dated as of August 2, 2003 among
Ascential, Purchaser and directors, executive officers and
officers of Mercator (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed by Mercator on
August 5, 2003)
(e)(5) Key Employee Agreement dated as of August 1, 2003 between
Ascential and Mark W. Register; and Non-Competition,
Non-Disclosure and Developments Agreement dated as of August
1, 2003 among Ascential, Mercator and Mark W. Register
(e)(6) Key Employee Agreement dated as of July 31, 2003 between
Ascential and Thracy P. Varvoglis; and Non-Competition,
Non-Disclosure and Developments Agreement dated as of July
31, 2003 among Ascential, Mercator and Thracy P. Varvoglis
(e)(7) Form of Retention Agreement among Ascential and Mercator, on
the one hand, and Mark W. Register or Thracy P. Varvoglis,
on the other hand
(e)(8) Form of Continuity Agreement between Mercator and certain of
Mercator's executive officers
15
EXHIBIT NO. DESCRIPTION
----------- -----------
(e)(9) Form of Executive Non-Competition, Non-Solicitation and
Developments Agreement among Ascential, Mercator and certain
of Mercator's executive officers
(e)(10) Continuity Agreement dated as of August 1, 2003 between
Mercator and Jill M. Donohoe
(e)(11) Continuity Agreement dated as of August 7, 2003 between
Mercator and Kenneth J. Hall
(e)(12) Continuity Agreement dated as of August 1, 2003 between
Mercator and David S. Linthicum
(e)(13) Amendment to Executive Non-Competition, Non-Solicitation and
Developments Agreement among Ascential, Mercator and David
S. Linthicum
(e)(14) Executive Non-Competition, Non-Solicitation and Developments
Agreement dated as of August 1, 2003 among Ascential,
Mercator and Kenneth J. Hall
---------------
* Included with the Statement mailed to stockholders.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
MERCATOR SOFTWARE, INC.
By: /s/ Roy C. King
------------------------------------
Roy C. King
Chairman of the Board of Directors,
Chief Executive Officer and
President
Dated: August 8, 2003
16
ANNEX A
(JPMORGAN LOGO)
Confidential
August 2, 2003
The Board of Directors
Mercator Software, Inc.
45 Danbury Road
Wilton, CT 06897
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $0.01 per share (the "Company
Common Stock"), of Mercator Software, Inc. (the "Company") of the Consideration
(as defined below) to be received by such holders in the proposed Transaction
(as defined below). Pursuant to the Agreement and Plan of Merger (the
"Agreement") by and among the Company, Ascential Software Corporation (the
"Merger Partner") and a subsidiary of the Merger Partner ("Merger Sub"), the
Merger Sub will commence a tender offer (the "Offer") to purchase all
outstanding shares of Company Common Stock, including the associated preferred
stock purchase rights, at a purchase price of $3.00 per share in cash (the
"Consideration") and, following the consummation of the Offer, the Company will
merge (the "Merger" and together with the Offer, the "Transaction") with Merger
Sub and become a wholly-owned subsidiary of the Merger Partner, and each issued
and outstanding share of Company Common Stock (together with any associated
preferred stock or other rights), other than shares of Company Common Stock in
treasury or owned by the Company or any subsidiary of the Company, the Merger
Partner or any subsidiary of the Merger Partner, and other than dissenting
shares, will be converted into the right to receive the Consideration.
In arriving at our opinion, we have (i) reviewed a draft dated August 2, 2003 of
the Agreement; (ii) reviewed certain publicly available business and financial
information concerning the Company and the industries in which it operates;
(iii) compared the proposed financial terms of the Transaction with the publicly
available financial terms of certain transactions involving companies we deemed
relevant and the consideration received for such companies; (iv) compared the
financial and operating performance of the Company with publicly available
information concerning certain other companies we deemed relevant and reviewed
the current and historical market prices of the Company Common Stock and certain
publicly traded securities of such other companies; (v) reviewed certain
internal financial analyses and forecasts prepared by the management of the
Company relating to its business; and (vi) performed such other financial
studies and analyses and considered such other information as we deemed
appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of
the Company and the Merger Partner with respect to certain aspects of the
Transaction, and the past and current business operations of the Company, the
financial condition and future prospects and operations of the Company, and
certain other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or the Merger Partner or
otherwise reviewed by us, and we have not assumed any responsibility or
liability therefor. We have not conducted any valuation or appraisal of any
assets or liabilities, nor have any such valuations or appraisals been provided
to us. In relying on financial analyses and forecasts provided to us, we have
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of the Company to
which such analyses or forecasts relate. We have also assumed that the
Transaction will be consummated as described in the Agreement and that the
definitive Agreement will not differ in any material
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respects from the draft thereof furnished to us. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
Our opinion is limited to the fairness, from a financial point of view, of the
Consideration to be received by the holders of the Company Common Stock in the
proposed Transaction and we express no opinion as to the relative merits of the
Transaction as compared to other business strategies that might be available to
the Company or the underlying decision by the Company to engage in the
Transaction.
We have acted as financial advisor to the Company with respect to the proposed
Transaction and will receive a fee from the Company for our services, which
include the rendering of this opinion. We will also receive an additional fee if
the proposed Transaction is consummated. We and our affiliates may in the future
provide, in the ordinary course of business, commercial and investment banking
services to the Company, the Merger Partner and their respective affiliates, in
each case for customary compensation. In the ordinary course of our businesses,
we and our affiliates may actively trade the debt and equity securities of the
Company or the Merger Partner for our own account or for the accounts of
customers and, accordingly, we may at any time hold long or short positions in
such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the Consideration to be received by the holders of the Company
Common Stock in the proposed Transaction is fair, from a financial point of
view, to such holders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Transaction. This opinion
does not constitute a recommendation to any shareholder of the Company as to
whether or not such shareholder should tender shares of Company Common Stock
pursuant to the Offer or as to how such shareholder should vote with respect to
the Merger or any other matter. This opinion may not be disclosed, referred to,
or communicated (in whole or in part) to any third party for any purpose
whatsoever except with our prior written approval. This opinion may be
reproduced in full and referred to in any proxy, information or
solicitation/recommendation statement filed with the Securities and Exchange
Commission and/or mailed to shareholders of the Company but may not otherwise be
disclosed publicly in any manner without our prior written approval.
Very truly yours,
J.P. MORGAN SECURITIES INC.
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