As filed with the Securities and Exchange Commission on November 13, 2000
Registration No. 333-____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Registration Statement
Under The Securities Act of 1933
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0772104
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
224 South 108th Avenue
Omaha, Nebraska 68154
(402) 334-5101
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
David P. Stokes, General Counsel and Secretary
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, Nebraska 68154
(402) 334-5101
(Name, address, including Zip Code, and telephone number, including area code,
of agent for service)
Copy to:
Alan G. Harvey
Baker & McKenzie
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
(214) 978-3000
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c) 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================= ======================= ===================== ==================== ===============
Title of each Proposed maximum Proposed maximum
Class of Amount offering price aggregate Amount of
Securities to To be per unit (1) offering price (1) registration
be registered Registered fee
================================= ======================= ===================== ==================== ===============
Class A Common Stock, 3,157,500 shares $ 14.375 $45,389,063 $11,985
par value $0.005 per share
================================= ======================= ===================== ==================== ===============
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended. The price is based upon the average of the high and low prices of
Transaction Systems Architects, Inc. Class A Common Stock on November 10, 2000,
as reported on the Nasdaq National Market.
------------------------------------
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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion, dated November 13, 2000
Prospectus
3,157,500 Shares
Transaction Systems Architects, Inc.
Class A Common Stock
------------------------------------
The shares of TSA Class A Common Stock covered by this prospectus are
issuable upon exchange or redemption of TSA Exchangeco Limited exchangeable
shares. TSA Exchangeco is a wholly-owned subsidiary of TSA. TSA Exchangeco
issued the exchangeable shares in exchange for MessagingDirect Ltd. Class A
common shares in connection with the acquisition of MessagingDirect by TSA.
This prospectus is part of a registration statement that we filed
with the SEC using a shelf registration process. This means we may issue the
TSA Class A Common Stock covered by this prospectus from time to time when the
holders of TSA Exchangeco exchangeable shares present their securities for
exchange. Upon exchange, holders of exchangeable shares will receive for each
exchangeable share one share of TSA Class A Common Stock.
TSA Class A Common Stock is listed on the Nasdaq National Market
under the symbol "TSAI." The closing market price of the TSA Class A Common
Stock on November 10, 2000 was $13.875 per share. The principal executive
offices of TSA are located at 224 South 108th Avenue, Omaha, Nebraska 68154,
and its telephone number is (402) 334-5101.
------------------------------------
Consider carefully
the risk factors beginning on page 3.
------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
------------------------------------
The date of this prospectus is ________ __, 2000.
You should rely only on the information provided in this prospectus
or incorporated into it by reference. No person has been authorized to
provide you with different information. Transaction Systems Architects is
not making an offer of these securities in any state where the offer is not
permitted. Information is accurate only as of the date of the documents
containing the information, unless the information specifically indicates that
another date applies.
------------------------------------
TABLE OF CONTENTS
PAGE
RISK FACTORS........................................................... 3
THE COMPANY............................................................ 3
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE........ 3
FORWARD-LOOKING STATEMENTS............................................. 4
USE OF PROCEEDS........................................................ 5
DESCRIPTION OF TSA CAPITAL STOCK....................................... 5
PLAN OF DISTRIBUTION................................................... 7
INCOME TAX CONSIDERATIONS.............................................. 10
LEGAL MATTERS.......................................................... 16
EXPERTS................................................................ 16
RISK FACTORS
In addition to the other information in this prospectus and information
incorporated by reference, you should carefully consider the following factors,
in evaluating your decision to exchange TSA Exchangeco exchangeable shares for
shares of TSA common stock.
Exchange of exchangeable shares is taxable
The exchange of TSA Exchangeco exchangeable shares for shares of TSA
common stock is generally a taxable event under current law in Canada and, in
certain circumstances, the United States. See "Income Tax Considerations." A
holder's tax consequences can vary depending on a number of factors, including
the residency of the holder and the method of the exchange (retraction or
redemption by TSA Exchangeco or purchase by TSA or TSA Holdco).
Exchangeable shares are not qualified investments for some plans and funds
The TSA Exchangeco exchangeable shares will not be qualified
investments for trusts governed by Canadian retirement savings plans,
registered retirement income funds and deferred profit sharing plans. The
acquisition of TSA Exchangeco exchangeable shares by these plans and funds
will result in an income inclusion to the annuitant under these plans and
funds equal to the fair market value of the TSA Exchangeco exchangeable
shares, and these plans and funds will also be taxed on the income and gains
from the TSA Exchangeco exchangeable shares under the Income Tax Act (Canada).
Exchangeable shares and TSA common stock are foreign property for some
tax-exempt holders
The TSA Exchangeco exchangeable shares and the TSA common stock will
be foreign property for trusts governed by Canadian retirement savings plans,
registered retirement income funds, deferred profit sharing plans, registered
pension plans and for some other tax-exempt persons. These plans, funds and
tax-exempt persons have to limit their investment in TSA Exchangeco
exchangeable shares and TSA common stock or risk incurring penalties under the
Income Tax Act (Canada). The Canada Customs and Revenue Agency has stated
that the penalties will not be levied where the exchangeable shares are not
qualified investments for trusts governed by Canadian retirement savings
plans, registered retirement income funds and deferred profit sharing plans
and subject to the tax described in the preceding paragraph.
THE COMPANY
TSA develops, markets, installs and supports a broad line of software
products and services primarily focused on facilitating electronic payments
and electronic commerce. TSA's software products are used to process
transactions involving automated teller machines (ATM), point-of-sale (POS)
terminals, credit cards, debit cards, smart cards, checks, manned teller
devices, remote banking, wire transfers and automated clearing house (ACH)
functions. TSA's products and services assist customers in operating large,
complex networks performing such functions as transaction authorization,
transaction routing, debit and credit card management, transaction settlement
and reporting.
Additional information concerning TSA is included in TSA's documents
filed with the SEC, which are incorporated by reference into this document.
See "Where You Can Find More Information; Incorporation by Reference."
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read
and copy (upon the payment of fees prescribed by the SEC) any document that we
file with the SEC at its public reference rooms in Washington, D.C. (450 Fifth
Street, N.W. 20549), New York, New York (7 World Trade Center, Suite 1300
10048), and Chicago, Illinois (500 West Madison Street, Suite 1400 60661).
You may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our filings are also available to the public on the
internet, through the SEC's EDGAR database. You may access the EDGAR database
at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus
the information we file with it. This means that we can disclose important
business, financial and other information in our filings by referring you to
the documents containing this information. All information incorporated by
reference is part of this prospectus, unless and until that information is
updated and superseded by the information contained in this prospectus or any
information incorporated later. Any information that we subsequently file
with the SEC that is incorporated by reference will automatically update and
supersede any previous information that is part of this prospectus. We
incorporate into this prospectus by reference the following documents and any
subsequent filings we make with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934:
o Annual Report on Form 10-K for the fiscal year ended September 30,
1999;
o Quarterly Reports on Form 10-Q for the quarters ended December 31,
1999 and March 31, 2000 and the Quarterly Report on Form 10-Q/A for
the quarter ended June 30, 2000; and
o The description of our Class A Common Stock contained in our
registration statement on Form 8-A that we filed with the SEC on
January 11, 1995 under the Securities Exchange Act, including any
amendment or reports that we file for the purposes of updating this
description.
This prospectus is part of a registration statement on Form S-3 that we have
filed with the SEC relating to the shares of Transaction Systems Architect's
Class A Common Stock offered by this prospectus. As permitted by SEC rules,
this prospectus does not contain all the information contained in that
registration statement and its accompanying exhibits and schedules which we
have also filed with the SEC. You may refer to the registration statement,
the exhibits and schedules for more information about us and our shares. The
registration statement, exhibits and schedules are available at the SEC's
public reference rooms or through its EDGAR database on the internet.
You may obtain a copy of these filings, at no cost, by writing or
telephoning us at the following address:
David P. Stokes
General Counsel and Secretary
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, Nebraska 68154
(402) 334-5101
To ensure timely delivery of these materials, you should make any
request no later than five business days prior to the date on which you must
make your investment decision.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference may
contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, all of which are subject to risks,
uncertainties and assumptions. We wish to ensure that such statements are
accompanied by meaningful cautionary statements, so as to ensure to the
fullest extent possible the protections of the safe harbor established in the
Private Securities Litigation Reform Act. Statements other than statements of
existing or historical fact we make in this prospectus or the documents we
incorporate by reference are forward-looking. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," "forecasts,"
"projects," and similar expressions identify forward-looking statements.
However, the absence of these words does not mean a statement is not
forward-looking. Actual results may differ materially from those in
forward-looking statements due to many factors, including those set forth
above in "Risk Factors" or in documents we incorporate by reference. We
operate in a rapidly changing and evolving business involving electronic
commerce and payments, and new risk factors will likely emerge. We cannot
predict or identify all important risk factors.
USE OF PROCEEDS
Because the shares of TSA common stock will be issued on exchange or
redemption of the TSA Exchangeco exchangeable shares, TSA will receive no cash
proceeds on that issuance.
DESCRIPTION OF TSA CAPITAL STOCK
TSA's Amended and Restated Certificate of Incorporation provides that
TSA's authorized capital stock consists of 50,000,000 shares of Class A Common
Stock, par value $0.005 per share, 5,000,000 shares of Class B Common Stock,
par value $0.005 per share, and 5,450,000 shares of preferred stock, par
value of $0.01 per share.
Common Stock
The Class A Common Stock and Class B Common Stock have the same
rights except that holders of Class B Common Stock are not entitled to vote
except as provided by law. Holders of Class A Common Stock are entitled to
one vote per share on all matters to be voted on by the stockholders. Subject
to preferences that may be applicable to any preferred stock outstanding at
the time, holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available. In the event of a liquidation,
dissolution or winding up of TSA, holders of all Common Stock are entitled to
share ratably in all assets remaining after payment of TSA's liabilities and
the liquidation preference, if any, of any outstanding preferred stock.
Holders of Common Stock have no preemptive rights and no rights to convert
their Class A Common Stock into any other securities, and there are no
redemption provisions with respect to shares of Common Stock. All of the
outstanding shares of Common Stock are fully paid and non-assessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which TSA may designate and issue.
Preferred Stock
The Board of Directors has the authority, without any further vote or
action by the stockholders, to provide for the issuance of up to 5,450,000
shares of preferred stock from time to time in one or more series with such
designations, rights, preferences and limitations as the Board of Directors
may determine, including the consideration received therefor, the number of
shares comprising each series, dividend rates, redemption provisions,
liquidation preferences, sinking fund provisions, conversion rights and voting
rights, all without approval by the holders of Common Stock. Although it is
not possible to state the effect that any issuance of preferred stock might
have on the rights of holders of Common Stock, the issuance of preferred stock
may have one or more of the following effects:
(1) restrict Common Stock dividends if preferred stock dividends
have not been paid,
(2) dilute the voting power and equity interest of holders of
Common Stock, or
(3) prevent current holders of Common Stock from participating
in TSA's assets upon liquidation until any liquidation
preferences granted to holders of preferred stock are
satisfied.
In addition, the issuance of preferred stock may, under certain circumstances,
have the effect of discouraging a change in control of TSA by, for example,
granting voting rights to holders of preferred stock that require approval by
the separate vote of the holders of preferred stock for any amendment to TSA's
Amended and Restated Certificate of Incorporation or any reorganization,
consolidation, merger (or other similar transaction involving TSA). As a
result, the issuance of such preferred stock may discourage bids for the TSA's
Common Stock at a premium over the market price therefor and could have a
material adverse effect on the market value of the Common Stock. Except for
the one share of Special Preferred Voting Stock described below, no shares of
preferred stock are currently outstanding.
Special Preferred Voting Stock
The TSA Board of Directors has designated one share of Preferred
Stock as Special Preferred Voting Stock. The Special Preferred Voting Stock
was issued in connection with the acquisition of MessagingDirect by TSA. On
all matters presented to holders of TSA commons stock, the Special Preferred
Voting Stock is entitled to the number of votes equal to the number of
outstanding TSA Exchangeco exchangeable shares not held by TSA and its
affiliates. The Special Preferred Voting Stock is held by a trustee for and
on behalf of the holders of TSA Exchangeco exchangeable shares. For each TSA
Exchangeco exchangeable share held on the record date, the holder is entitled
to instruct the trustee as to the manner of voting one vote. The Special
Preferred Voting Stock and the TSA common stock vote together as a single
class. No dividend will be paid to the holder of Special Preferred Voting
Stock. The Special Preferred Voting Stock is not convertible. The holder of
the Special Preferred Voting Stock is not entitled to participate in any
payment or distribution upon any liquidation, dissolution or winding up of
TSA. Any share of Special Preferred Voting Stock purchased or otherwise
acquired by TSA will be canceled and may not be reissued. When the TSA
Exchangeco exchangeable shares are no longer outstanding, the Special
Preferred Voting Stock will automatically be cancelled.
Limitation of Liability
TSA's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
including gross negligence, except liability for (1) breach of the directors'
duty of loyalty, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (3) the unlawful
payment of a dividend or unlawful stock purchase or redemption and (4) any
transaction from which the director derives an improper personal benefit.
Delaware law does not permit a corporation to eliminate a director's duty of
care, and this provision of TSA's revised Restated Certificate of
Incorporation has no effect on the availability of equitable remedies, such as
injunction or rescission, based upon a director's breach of the duty of care.
TSA's Amended and Restated Certificate of Incorporation authorizes
TSA to purchase and maintain insurance for the purpose of indemnification.
Delaware Law
Under Section 203 of the Delaware General Corporation Law, certain
"business combinations" between a Delaware corporation whose stock generally is
publicly traded or held of record by more than 2,000 stockholders and an
"interested stockholder" are prohibited for a three-year period following the
date that such stockholder became an interested stockholder, unless:
(1) the corporation has elected in its original certificate of
incorporation not to be governed by Section 203 (TSA did not
make such an election),
(2) the business combination was approved by the board of
directors of the corporation before the other party to the
business combination became an interested stockholder,
(3) upon consummation of the transaction that made it an
interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding
at the commencement of the transaction (excluding voting
stock owned by directors who are also officers or held in
employee benefit plans in which the employees do not have a
confidential right to tender or vote stock held by the
plan), or
(4) the business combination was approved by the board of
directors of the corporation and ratified by two-thirds of
the voting stock which the interested stockholder did not
own.
The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement
or notification of certain extraordinary transactions involving the
corporation and a person who had not been an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of the majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations between
a Delaware corporation and an "interested stockholder," transactions with an
"interested stockholder" involving the assets or stock of the corporation or
its majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as a stockholder who, together with
affiliates and associates, owns (or, within three years prior, did own) 15% or
more of a Delaware corporation's voting stock. Section 203 could prohibit or
delay a merger, takeover or other change in control of TSA and therefore could
discourage attempts to acquire the TSA.
Transfer Agent and Registrar
The transfer agent and registrar of the Class A Common Stock is
Wells Fargo Bank Minnesota, N.A.
PLAN OF DISTRIBUTION
Under the terms of a plan of arrangement and in connection with the
acquisition of MessagingDirect by TSA, TSA Exchangeco issued the TSA
Exchangeco exchangeable shares in exchange for MessagingDirect Ltd. Class A
common shares. Each holder of MessagingDirect Class A common shares who is
not a resident of the United States could elect to receive the exchangeable
shares or TSA common stock. Holders of MessagingDirect Class A Common shares
resident in the United States received TSA common stock. MessagingDirect
Class A common shareholders who properly exercised their dissent rights were
not issued any shares and have been or will be paid fair value for their
MessagingDirect Class A common shares. TSA common stock may be issued to
holders of TSA Exchangeco exchangeable shares through the holder's election,
TSA Exchangeco's redemption, or TSA Exchangeco's or TSA's liquidation.
Election Of Holders To Retract Exchangeable Shares
Holders of TSA Exchangeco exchangeable shares may elect at any time
to have any or all TSA Exchangeco exchangeable shares owned by them exchanged
for an equal number of shares of TSA common stock, plus an additional amount
equivalent to all declared and unpaid dividends on such TSA Exchangeco
exchangeable shares. The holder's exercise of this election right is called a
retraction. Holders of the TSA Exchangeco exchangeable shares may retract by
presenting to TSA Exchangeco or its transfer agent the certificates
representing the number of TSA Exchangeco exchangeable shares the holder
desires to retract, together with a signed notice of retraction specifying the
number of TSA Exchangeco exchangeable shares the holder wishes to retract and
the date the holder desires to receive the TSA common stock. This retraction
date must be between ten and fifteen business days after TSA Exchangeco
receives the notice of retraction. The transfer agent may require the holder
to submit additional documents to complete the retraction of the TSA
Exchangeco exchangeable shares.
Upon receipt of the TSA Exchangeco exchangeable shares certificates,
the notice of retraction and other required documentation from the holder, TSA
Exchangeco must immediately notify TSA of such retraction request. TSA will
then have five business days to decide to exercise its retraction call right
to purchase all of the TSA Exchangeco exchangeable shares submitted by the
holder. If TSA does not advise TSA Exchangeco within the five business day
period of its decision to exercise this retraction call right, TSA Exchangeco
will notify the holder as soon as possible thereafter that TSA will not
exercise this right. A holder may revoke his or her notice of retraction at
any time before the close of business on the business day before the
retraction date. If the holder does not revoke his or her notice of
retraction, on the retraction date either TSA will acquire the TSA Exchangeco
exchangeable shares that the holder has requested TSA Exchangeco to redeem
(assuming TSA exercises its retraction call right) or TSA Exchangeco will
redeem those shares. In each case the holder will receive one share of TSA
common stock for each TSA Exchangeco exchangeable share retracted, plus an
additional amount equivalent to all declared and unpaid dividends on such TSA
Exchangeco exchangeable shares. TSA or TSA Exchangeco, as the case may be, is
entitled to sell some of the TSA common stock otherwise deliverable to the
holder to fund any withholding tax obligation.
Redemption Of TSA Exchangeco Exchangeable Shares
Subject to the redemption call right of TSA described below, TSA
Exchangeco must redeem all of the then outstanding TSA Exchangeco exchangeable
shares in exchange for an equal number of shares of TSA common stock, plus an
additional amount equivalent to all declared and unpaid dividends on such TSA
Exchangeco exchangeable shares on the redemption date. The redemption date
will be (1) the fifth anniversary of the closing of the acquisition of
MessagingDirect by TSA or (2) an earlier date set by the TSA Exchangeco board
of directors if any of the following occurs:
- less than one-third of the TSA Exchangeco exchangeable
shares issued to MessagingDirect shareholders are
outstanding;
- a change of control of TSA and the TSA Exchangeco board of
directors determines that it is not reasonably practicable
to replicate the terms of the exchangeable shares in
connection with the change of control transaction and that
the redemption of all of the outstanding exchangeable shares
is necessary to enable the completion of the change of
control transaction in accordance with its terms;
- the proposal of an event in respect of which holders of TSA
Exchangeco exchangeable shares are entitled to vote (other
than a change in the rights of holders of exchangeable
shares where approval of the holders of exchangeable shares
would be necessary to maintain equivalence of the
exchangeable shares and TSA common stock);
- the proposal of a change in the rights of holders of
exchangeable shares where approval of the holders of
exchangeable shares would be necessary to maintain
equivalence of the exchangeable shares and TSA common stock,
and the holders of the exchangeable shares (other than TSA
and its affiliates) fail to take the necessary action to
approve or disapprove the proposal; or
- the TSA board of directors resolves to distribute shares of
any TSA affiliate, other than TSA Exchangeco, to holders of
TSA common stock or the TSA board of directors determines
that failure to redeem the exchangeable shares may create a
risk of adversely impacting the U.S. federal income tax
treatment of such a distribution.
TSA has a redemption call right to purchase on the redemption date
all of the outstanding TSA Exchangeco exchangeable shares for a per share
purchase price equal to one share of TSA common stock plus an additional
amount equivalent to all declared and unpaid dividends on the TSA Exchangeco
exchangeable share. TSA Exchangeco will provide the registered holders of TSA
Exchangeco exchangeable shares with written notice of its proposed redemption
or TSA's purchase of the TSA Exchangeco exchangeable shares. TSA or TSA
Exchangeco, as the case may be, is entitled to liquidate some of the TSA
common stock otherwise deliverable to the holder to fund any withholding tax
obligation.
Liquidation of TSA Exchangeco
If TSA Exchangeco liquidates, dissolves or winds up its affairs,
holders of the TSA Exchangeco exchangeable shares have preferential rights to
receive one share of TSA common stock for each TSA Exchangeco exchangeable
share they hold, plus an additional amount equivalent to all declared and
unpaid dividends on the holder's TSA Exchangeco exchangeable shares. If TSA
Exchangeco proposes to liquidate, dissolve or wind up its affairs, TSA has the
liquidation call right to purchase all of the outstanding TSA Exchangeco
exchangeable shares from the holders thereof on the last business day prior to
the effective time of any such event. TSA, as the owner of all of the
outstanding voting shares of TSA Exchangeco, has agreed not to vote to
initiate the voluntary liquidation, dissolution or winding up of TSA
Exchangeco or to take any action or omit to take any action that is designed
to result in the liquidation, dissolution or winding up of TSA Exchangeco,
other than a reorganization of TSA Exchangeco which results in TSA or its
affiliates assuming the rights and obligations of TSA Exchangeco.
On or promptly after the effective time of any TSA Exchangeco
liquidation, dissolution or winding up, holders of the TSA Exchangeco
exchangeable shares must surrender their certificates representing those
shares, together with any other documents required by the transfer agent, to
TSA Exchangeco's registered office or transfer agent. If TSA exercises its
purchase rights, the delivery must be made to the transfer agent. In either
case, upon receipt of the certificates and other required documents, the
holders will be entitled to receive one share of TSA common stock for each
outstanding TSA Exchangeco exchangeable share, plus an additional amount
equivalent to all declared and unpaid dividends on the TSA Exchangeco
exchangeable shares. TSA Exchangeco may require the holder to pick up the TSA
common stock at TSA Exchangeco's registered office. TSA or TSA Exchangeco, as
the case may be, is entitled to sell some of the TSA common stock otherwise
deliverable to the holder to fund any withholding tax obligation.
As an alternative to the exchange described in the preceding
paragraph, a holder of TSA Exchangeco exchangeable shares may exercise its
exchange right and require TSA to purchase the TSA Exchangeco exchangeable
shares. In this case, the holder must deliver to the trustee the
certificates, endorsed in blank, a completed form of notice of exercise of the
exchange right, which is contained on the reverse of, or attached to, the TSA
Exchangeco exchangeable share certificates and any other required documents.
Liquidation Of TSA
Upon the occurrence of a TSA liquidation event (as described below),
in order for the holders of the TSA Exchangeco exchangeable shares to
participate on a pro rata basis with the holders of TSA common stock, each
holder of TSA Exchangeco exchangeable shares will automatically receive in
exchange therefor an equivalent number of shares of TSA common stock, plus an
additional amount equivalent to all declared and unpaid dividends on such TSA
Exchangeco exchangeable shares. A TSA liquidation event means:
(1) any determination by TSA's board of directors to
institute voluntary liquidation, dissolution, or winding-up
proceedings with respect to TSA or to effect any other distribution
of assets of TSA among its stockholders for the purpose of winding up
its affairs; or
(2) as soon as practicable following the earlier of
receipt by TSA of notice of, and TSA becoming aware of any threatened
or instituted claim, suit or proceedings with respect to the
involuntary liquidation, dissolution or winding-up of TSA or to
effect any other distribution of assets of TSA among its stockholders
for the purpose of winding up its affairs, in either case where TSA
has failed to contest in good faith any of these proceeding within 30
days of becoming aware of it.
To effect the automatic exchange of TSA Exchangeco exchangeable shares for
shares of TSA common stock, TSA will purchase each TSA Exchangeco exchangeable
share outstanding immediately prior to the TSA liquidation event. Upon a
holder's request and surrender of TSA Exchangeco exchangeable share
certificates, endorsed in blank and accompanied by such instruments of
transfer as TSA may reasonably require, TSA will deliver to that holder,
certificates representing an equivalent number of shares of TSA common stock,
plus an additional amount equivalent to all declared and unpaid dividends on
the holder's TSA Exchangeco exchangeable shares and, to the extent not paid by
TSA Exchangeco, dividends declared on TSA common stock that have not been
declared on the TSA Exchangeco exchangeable shares as required under the terms
of the TSA Exchangeco exchangeable shares. TSA is entitled to sell some of
the TSA common stock otherwise deliverable to the holder to fund any
withholding tax obligation.
Subject to limitations with respect TSA Exchangeco exchangeable
shares held in Canadian Registered Retirement Savings Plans, TSA may assign
the retraction call right, redemption call right and liquidation call right
described above to Transaction Systems Architects Nova Scotia Company, which
we refer to as TSA Holdco. TSA Holdco is a wholly-owned subsidiary of TSA.
INCOME TAX CONSIDERATIONS
Canadian Federal Income Tax Considerations To Former MessagingDirect
Shareholders
Subject to the qualifications and assumptions contained herein, in
the opinion of Baker & McKenzie, Canadian tax counsel to TSA, the following is
a summary of the principal Canadian federal income tax considerations, as of
the date of this prospectus generally applicable to former MessagingDirect
shareholders who at all relevant times, for purposes of the Canadian Tax Act,
hold their TSA Exchangeco exchangeable shares and shares of TSA common stock
as capital property and deal at arm's length with, and are not affiliated
with, MessagingDirect or TSA. This discussion does not apply to a holder with
respect to whom TSA is a foreign affiliate within the meaning of the Canadian
Tax Act. It is assumed that a former MessagingDirect shareholder who
exchanged MessagingDirect common shares for TSA Exchangeco exchangeable shares
received no other consideration for the MessagingDirect common shares, except
for cash in lieu of a fraction of a TSA Exchangeco exchangeable share. The
rights described below under the heading Voting Rights and Exchange Rights
will be received by former MessagingDirect shareholders from TSA. No
assurance can be given that these rights will not be regarded as non-share
consideration received for the MessagingDirect common shares.
All former MessagingDirect shareholders should consult their own tax
advisors as to whether, as a matter of fact, they hold their TSA Exchangeco
exchangeable shares and shares of TSA common stock as capital property for the
purposes of the Canadian Tax Act. The "mark-to-market" rules of the Canadian
Tax Act relating to financial institutions (including financial institutions,
registered securities dealers and corporations controlled by one or more of
the foregoing) will preclude those financial institutions from treating their
TSA Exchangeco exchangeable shares and shares of TSA common stock as capital
property for purposes of the Canadian Tax Act. This discussion does not take
into account the mark-to-market rules, and former MessagingDirect shareholders
that are financial institutions for the purposes of these rules should consult
their own tax advisors to determine the tax consequences to them of the
combination.
This discussion is based on the current provisions of the Canadian
Tax Act and the regulations thereunder, the current provisions of the
Canada-United States Income Tax Convention, and counsel's understanding of the
current published administrative practices of the Canada Customs and Revenue
Agency, all of which are subject to change. This discussion takes into account
all specific proposals to amend the Canadian Tax Act and the regulations
thereunder that have been publicly announced by or on behalf of the Canadian
Minister of Finance before the date hereof. No assurances can be given that the
proposed amendments will be enacted in the form proposed, if at all.
Except for the foregoing, this discussion does not take into account
or anticipate any changes in law, whether by legislative, administrative or
judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations which may
differ from the Canadian federal income tax considerations described herein.
This discussion is of a general nature only. Therefore, former
MessagingDirect shareholders should consult their own tax advisors with
respect to their particular circumstances. No advance income tax ruling has
been obtained from the Canada Customs and Revenue Agency to confirm the tax
consequences of any of the transactions described herein.
Conversion from U.S. Dollars to Canadian Dollars. For purposes of
the Canadian Tax Act, all amounts relating to the acquisition, holding or
disposition of shares of TSA common stock, including dividends, adjusted cost
base and proceeds of disposition, must be converted into Canadian dollars
based on the prevailing United States dollar exchange rate at the time such
amounts arise. In computing a shareholder's liability for tax under the
Canadian Tax Act, any cash amounts received by a shareholder in United States
dollars must be converted into the Canadian dollar equivalent, and the amount
of any non-share consideration received by a shareholder must be expressed in
Canadian dollars at the time the consideration is received.
Shareholders Resident in Canada
The following portion of this discussion is generally applicable to
holders of TSA Exchangeco exchangeable shares who, for the purposes of the
Canadian Tax Act and any applicable income tax treaty or convention, are
resident or deemed to be resident in Canada at all relevant times. Certain of
these persons to whom the former MessagingDirect common shares might not
constitute capital property may elect, in certain circumstances, to have the
property treated as capital property by making the irrevocable election
permitted by subsection 39(4) of the Canadian Tax Act.
Retraction of TSA Exchangeco Exchangeable Shares with TSA Exchangeco;
Redemption of TSA Exchangeco Exchangeable Shares by TSA Exchangeco. On the
retraction or redemption of a TSA Exchangeco exchangeable share with or by TSA
Exchangeco, the holder of a TSA Exchangeco exchangeable share will be deemed
to have received a dividend equal to the amount, if any, by which the proceeds
exceed the paid-up capital at the time of the TSA Exchangeco exchangeable
share redemption. For these purposes, the proceeds will be the fair market
value at the time of the retraction or redemption, of the shares of TSA common
stock received from TSA Exchangeco plus the amount, if any, of all accrued but
unpaid dividends on the TSA Exchangeco exchangeable shares paid on the
retraction or redemption. The amount of the deemed dividend generally will be
subject to the same tax treatment accorded to dividends on the TSA Exchangeco
exchangeable shares as described below. On the retraction or redemption, the
holder of a TSA Exchangeco exchangeable share will also be considered to have
disposed of the TSA Exchangeco exchangeable share, but the amount of the
deemed dividend will be excluded in computing the shareholder's proceeds of
disposition for purposes of computing any capital gain or capital loss arising
on the disposition. In the case of a shareholder that is a corporation, in
some circumstances, the amount of any such deemed dividend may be treated as
proceeds of disposition and not as a dividend.
Exchange of TSA Exchangeco Exchangeable Shares with TSA or TSA
Holdco. Because of TSA's or TSA Holdco's retraction call right and redemption
call right, an exchange with TSA or TSA Holdco results in TSA's or TSA
Holdco's purchase of the TSA Exchangeco exchangeable shares. The holder will
generally realize a capital gain (or a capital loss) equal to the amount by
which the proceeds of disposition of the TSA Exchangeco exchangeable shares,
net of any reasonable costs of disposition, exceed (or are less than) the
adjusted cost base to the holder of the TSA Exchangeco exchangeable shares
immediately before the exchange. For these purposes, the proceeds of
disposition will be the fair market value at the time of exchange of the
shares of TSA common stock plus any other amount received by the holder from
TSA or TSA Holdco as part of the exchange consideration.
In the Canadian federal budget of October 18, 2000, the Canadian
government announced its intention to develop a rollover rule which will allow
a Canadian resident shareholder to exchange shares of a Canadian corporation
for shares of a non-Canadian corporation on a tax-deferred basis where the
Canadian resident shareholder receives only share consideration on the
exchange. Any rollover rule will not take effect before the release of draft
legislation for public discussion. No assurance can be given that this
proposed rollover rule will ever be enacted. This analysis assumes that no such
rollover rule will be available to holders of TSA Exchangeco exchangeable
shares.
Because of the existence of TSA's or TSA Holdco's retraction call
right, a holder exercising the right of retraction in respect of TSA
Exchangeco exchangeable shares cannot control whether the holder will receive
shares of TSA common stock by way of redemption of the TSA Exchangeco
exchangeable shares by TSA Exchangeco or by the way of purchase of the TSA
Exchangeco exchangeable shares by TSA or TSA Holdco. As described above, the
Canadian federal income tax consequences of a redemption differ from those of
a purchase.
Taxation of Capital Gains and Capital Losses. Three-quarters of any
capital gain ("taxable capital gain") must be included in a shareholder's
income for the year of disposition. Three-quarters of any capital loss
("allowable capital loss") generally must be deducted by the holder from
taxable capital gains for the year of disposition. Any allowable capital
losses in excess of taxable capital gains for the year of disposition
generally may be carried back up to three taxation years or carried forward
indefinitely and deducted against net taxable capital gains (taxable capital
gains less allowable capital losses) in those other years to the extent and
under the circumstances described in the Canadian Tax Act. The Canadian
federal budgets of February 28, 2000 and October 18, 2000 propose to reduce
the inclusion rates for capital gains from three-quarters to two-thirds and
one-half in respect of capital gains realized after February 27, 2000 and
October 17, 2000, respectively. Where a taxpayer has capital gains or losses
in more than one of three periods in 2000 (January 1 to February 27, February
28 to October 17, and October 18 to December 31), the effective inclusion rate
for the 2000 year is determined in accordance with a formula. No assurance can
be given that this proposal will be enacted.
Capital gains realized by an individual or trust, other than other
certain specified trusts, may give rise to alternative minimum tax under the
Canadian Tax Act.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation" (as defined in the Canadian Tax Act)
may be liable to pay an additional refundable tax of 6 2/3% on its "aggregate
investment income" for the year which will include an amount in respect to
taxable capital gains.
If the holder of a TSA Exchangeco exchangeable share is a
corporation, the amount of any capital loss arising from a disposition or
deemed disposition of the share may be reduced by the amount of dividends
received or deemed to have been received by it on the share to the extent and
under circumstances prescribed by the Canadian Tax Act. Similar rules may
apply where a corporation is a member of a partnership or a beneficiary of a
trust that owns TSA Exchangeco exchangeable shares or where a trust or
partnership of which a corporation is a beneficiary or a member is a member of
a partnership or a beneficiary of a trust that owns TSA Exchangeco
exchangeable shares. Shareholders to whom these rules may be relevant should
consult their own tax advisors.
Dividends on TSA Exchangeco Exchangeable Shares. In the case of a
shareholder who is an individual, dividends received or deemed to be received
on the TSA Exchangeco exchangeable shares will be included in computing the
shareholder's income, and will be subject to the gross-up and dividend tax
credit rules normally applicable to taxable dividends received from taxable
Canadian corporations.
In the case of a shareholder that is a corporation other than a
"specified financial institution" (as defined in the Canadian Tax Act),
dividends received or deemed to be received on the TSA Exchangeco exchangeable
shares normally will be included in the corporation's income and deductible in
computing its taxable income.
A shareholder that is a "private corporation" (as defined in the
Canadian Tax Act) or any other corporation resident in Canada and controlled
or deemed to be controlled by or for the benefit of an individual or a related
group of individuals may be liable under Part IV of the Canadian Tax Act to
pay a refundable tax of 33 1/3% of dividends received or deemed to be received
on the TSA Exchangeco exchangeable shares to the extent that the dividends are
deductible in computing the shareholder's taxable income.
The TSA Exchangeco exchangeable shares will be "term preferred
shares" as defined in the Canadian Tax Act. Consequently, in the case of a
shareholder that is a specified financial institution, such a dividend will be
deductible in computing its taxable income only if:
(1) the specified financial institution did not acquire
the TSA Exchangeco exchangeable shares in the ordinary course of the
business carried on by the institution; or
(2) in any case, at the time the dividend is received
by the specified financial institution, the TSA Exchangeco
exchangeable shares are listed on a prescribed stock exchange in
Canada and the specified financial institution, either alone or
together with persons with whom it does not deal at arm's length,
does not receive (or is not deemed to receive) dividends in respect
of more than 10% of the issued and outstanding TSA Exchangeco
exchangeable shares. However, the TSA Exchangeco exchangeable shares
are not listed on any stock exchange and there are no plans to list
the TSA Exchangeco exchangeable shares on any stock exchange.
In addition, to the extent that a deemed dividend arises on the
redemption of the TSA Exchangeco exchangeable shares by TSA Exchangeco, a
portion of the dividend may not be subject to the denial of dividend deduction
applicable in respect of term preferred shares in accordance with the
exceptions outlined above. Specified financial institutions should consult
their own tax advisors.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation" (as defined in the Canadian Tax Act)
may be liable to pay an additional refundable tax of 6 2/3% on its "aggregate
investment income" for the year which will include dividends or deemed
dividends that are not deductible in computing taxable income.
The TSA Exchangeco exchangeable shares will be "taxable preferred
shares" and "short-term preferred shares" for purpose of the Canadian Tax
Act. Accordingly, TSA Exchangeco will be subject to a 66 2/3% tax under Part
VI.1 of the Canadian Tax Act on dividends (other than "excluded dividends" as
defined in the Canadian Tax Act) paid or deemed to be paid on the TSA
Exchangeco exchangeable shares and will be entitled to deduct an amount equal
to 9/4 of the tax so payable in computing its taxable income for purposes of
the Canadian Tax Act. Dividends received or deemed to be received on the TSA
Exchangeco exchangeable shares will not be subject to the 10% tax under Part
IV.1 of the Canadian Tax Act applicable to certain corporations.
Dividends on TSA Common Stock. Dividends on shares of TSA common
stock will be included in the recipient's income for the purposes of the
Canadian Tax Act. These dividends received by an individual shareholder will
not be subject to the gross-up and dividend tax credit rules in the Canadian
Tax Act. A shareholder that is a corporation will include these dividends in
computing its income and generally will not be entitled to deduct the amount
of the dividends in computing its taxable income. A shareholder that is
throughout the relevant taxation year a "Canadian-controlled private
corporation" (as defined in the Canadian Tax Act) may be liable to pay an
additional refundable tax of 6 2/3% on its "aggregate investment income" for
the year which will include the dividends. United States non-resident
withholding tax on the dividends will be eligible for foreign tax credit or
deduction treatment, where applicable, under the Canadian Tax Act. See
"United States Federal Income Tax Considerations to Former MessagingDirect
Shareholders -- Shareholders Not Resident in or Citizens of the United
States." The Canadian federal budget of October 18, 2000 proposes a tax
deferral on an elective basis in respect of certain distributions by U.S.
corporations of "spin-off" shares to Canadian resident shareholders. No
assurance can be given that this proposal will be enacted.
Disposition of Shares of TSA Common Stock. The cost of a share of
TSA common stock received on a retraction, redemption or exchange of a TSA
Exchangeco exchangeable share will be equal to the fair market value of the
share at the time of that event. The adjusted cost base to a holder of shares
of TSA common stock acquired on a retraction, redemption or exchange of a TSA
Exchangeco exchangeable share will be determined by averaging the cost of the
share with the adjusted cost base of all other shares of TSA common stock held
by the holder as capital property immediately before the retraction,
redemption or exchange, as the case may be. A disposition or deemed
disposition of a share of TSA common stock by a holder will generally result
in a capital gain (or a capital loss) equal to the amount by which the
proceeds of disposition, net of any reasonable costs of disposition, exceed
(or are less than) the adjusted cost base to the holder of the share
immediately before the disposition.
Foreign Property Information Reporting. A holder of shares of TSA
common stock, who is a "specified Canadian entity" for a taxation year or
fiscal period and whose total cost amount of "specified foreign property,"
including such shares, at any time in the year or fiscal period exceeds
Cdn$100,000 will be required to file an information return for the year or
period disclosing prescribed information, including the shareholder's cost
amount, any dividends received in the year, and any gains or losses realized
in the year, in respect of that property. Trusts governed by registered
retirement savings plans, registered retirement income funds, deferred profit
sharing plans and registered pension plans will not be specified Canadian
entities. With some exceptions, other taxpayers resident in Canada in the year
will be specified Canadian entities. A holder of TSA common stock should consult
its own advisors about whether it must comply with these rules.
TSA Exchangeco Exchangeable Shares - Eligibility for Investment. The
TSA Exchangeco exchangeable shares will be foreign property under the Canadian
Tax Act for trusts governed by registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans, for registered
pension plans or for certain other persons to whom Part XI of the Canadian Tax
Act applies. These plans, funds and tax-exempt persons have to limit their
investment in TSA Exchangeco exchangeable shares and TSA common stock or risk
incurring penalties under the Canadian Tax Act. The Canada Customs and
Revenue Agency has stated that the penalties will not be levied where the
shares are not qualified investments for trusts governed by Canadian
retirement savings plans, registered retirement income funds and deferred
profit sharing plans and subject to the taxes described in the following
paragraph.
The TSA Exchangeco exchangeable shares will not be qualified
investments under the Canadian Tax Act for trusts governed by registered
retirement savings plans, registered retirement income funds and deferred
profit sharing plans. The acquisition of TSA Exchangeco exchangeable shares
by these plans and funds will result in an income inclusion to the annuitant
under these plans and funds equal to the fair market value of the TSA
Exchangeco exchangeable shares, and these plans and funds will also be taxed
on the income and gains from the TSA Exchangeco exchangeable shares under the
Canadian Tax Act.
Voting Rights and Exchange Rights. The rights of the holders of TSA
Exchangeco exchangeable shares to direct the voting of the one share of
MessagingDirect special preferred voting stock held by a trustee and the
rights granted to the trustee to exchange TSA Exchangeco exchangeable shares
for TSA common stock in certain circumstances will not be qualified
investments and will be foreign property under the Canadian Tax Act.
TSA Common Stock. The TSA common stock will be a qualified
investment under the Canadian Tax Act for trusts governed by registered
retirement savings plans, registered retirement income funds and deferred
profit sharing plans provided that the shares remain listed on the Nasdaq
National Market or a prescribed stock exchange. The TSA common stock will be
foreign property under the Canadian Tax Act.
Shareholders Not Resident in Canada
The following portion of the discussion is applicable to former
MessagingDirect shareholders who, for purposes of the Canadian Tax Act and any
applicable tax treaty or convention, have not been and will not be resident or
deemed to be resident in Canada at any time.
Generally, the TSA Exchangeco exchangeable shares will be taxable
Canadian property to a non-resident of Canada since TSA Exchangeco is a
corporation resident in Canada and the TSA Exchangeco exchangeable shares are
not listed on a prescribed stock exchange. It is not anticipated that the TSA
Exchangeco exchangeable shares will ever be listed on any stock exchange.
A non-resident of Canada is subject to tax on any gain on the
exchange of TSA Exchangeco exchangeable shares for shares of TSA common stock
(except to the extent the exchange gives rise to a deemed dividend discussed
below), or on the sale or other disposition of a TSA Exchangeco exchangeable
share. Canada's tax treaties will generally exempt any gain from tax in
Canada. However, a holder who is a non-resident will generally be required to
obtain a clearance certificate under Section 116 of the Canadian Tax Act in
respect of a disposition of taxable Canadian property even where a treaty
exemption applies, failing which TSA Exchangeco, TSA or TSA Holdco, as the
case may be, will be entitled to withhold a portion of the proceeds under the
Canadian Tax Act.
Dividends paid or deemed to be paid on the TSA Exchangeco
exchangeable shares are subject to non-resident withholding tax under the
Canadian Tax Act at the rate of 25%, although this rate may be reduced under
the provisions of an applicable income tax treaty or convention. For example,
under the Canada-United States Income Tax Convention, the rate is generally
reduced to 15% in respect of dividends paid to a person who is the beneficial
owner thereof and who is resident in the United States for purposes of the
Canada-United States Income Tax Convention.
A holder whose TSA Exchangeco exchangeable shares are redeemed by TSA
Exchangeco (either under TSA Exchangeco's redemption right or pursuant to the
holder's retraction rights) will be deemed to receive a dividend as described
above under "-- Shareholders Resident in Canada -- Retraction of TSA
Exchangeco Exchangeable Shares with TSA Exchangeco; Redemption of TSA
Exchangeco Exchangeable Shares by TSA Exchangeco." Any such deemed dividend
will be subject to withholding tax as described above. Holders of TSA
Exchangeco exchangeable shares cannot control whether they will realize a
deemed dividend or proceeds of disposition on an exchange of the TSA
Exchangeco exchangeable shares for shares of TSA common stock.
The TSA common stock will not be taxable Canadian property to a non-
resident of Canada since TSA is not a corporation resident in Canada. Therefore,
any gain on the sale of TSA common stock by a non-resident of Canada will not be
taxable in Canada.
United States Federal Income Tax Considerations - Former MessagingDirect
Shareholders Not Resident In, Or Citizens Of, The United States
The following summary applies to former holders of MessagingDirect
common shares that are not United States holders. For purposes of this
summary, United States holders are individual United States citizens or
residents (including certain former citizens and residents), corporations or
partnerships organized in the United States or under the laws of the United
States or any state thereof, any estate subject to United States federal
income tax on its income regardless of source, and any trust if a United
States court is able to exercise primary supervision over the administration
of the trust and one or more United States persons have authority to control
all substantial decisions of the trust.
Under the Plan of Arrangement, United States holders are not entitled
to receive TSA Exchangeco exchangeable shares, and holders of TSA Exchangeco
exchangeable shares are prohibited from transferring their exchangeable shares
except to surrender them to TSA.
This summary is based on United States Federal income tax law in
effect on the date of this prospectus. No statutory, judicial, or
administrative authority directly addresses some of the United States Federal
income tax consequences of the issuance and ownership of instruments and
rights comparable to the TSA Exchangeco exchangeable shares and the related
rights. Consequently, some aspects of the United States federal income tax
treatment of the transactions, including the ownership of TSA Exchangeco
exchangeable shares and the exchange of TSA Exchangeco exchangeable shares for
shares of TSA common stock, are not certain. No advance income tax ruling has
been sought or obtained from the United States Internal Revenue Service
regarding the tax consequences of any of the transactions described herein.
This summary does not address aspects of United States taxation other
than United States Federal income taxation. We note as a general matter,
however, that United States income tax treaties do not apply to state and
local taxes. In addition, this summary does not address either (1) the United
States state or local tax consequences or (2) the foreign tax consequences of
the combination of MessagingDirect, TSA Exchangeco and TSA.
A non-United States holder generally should not be subject to United
State federal income tax on gain (if any) recognized on the exchange of TSA
Exchangeco exchangeable shares for shares of TSA common stock or on gain (if
any) on the sale of shares of TSA common stock. Either gain could be taxable,
however, in two very limited circumstances.
First, the gain could be taxed by the United States if (1) the
non-United States holder has an office or fixed place of business in the
United States; (2) that office materially participates in the sale of the
stock; and (3) the non-United States holder is either a dealer in stock or
engaged in the active conduct of a banking, finance, or similar business. If
these conditions are met, the gain could be taxed as effectively connected
income provided that certain other criteria are also met. This tax might be
avoided (depending on whether the non-United States holder is a dealer or is
engaged in a banking, finance, or similar business) if the non-United States
holder is a qualified resident of a country with which the United States has a
bilateral income tax treaty that changes the application of the normal source
of income rules in the Internal Revenue Code.
Second, gain recognized by an individual could be taxed by the United
States if the individual is present in the United States for 183 days or more
in the taxable year in which the gain is recognized and has a "tax home," as
defined in the United States Internal Revenue Code, during that year. The
gain would be taxable only if the non-United States holder has a U.S. office
and certain other narrow criteria are satisfied. This tax could be avoided if
the individual is a qualified resident of a country with which the United
States has a bilateral income tax treaty, and the individual is a resident of
the other country under the Residence article of the treaty.
Non-United States holders might also be subject to tax if the United
States rules regarding investments in United States real property interests
were to apply. TSA has represented, however, that it is expected that no
corporation relevant to this determination will be a United States real
property holding company, so these rules should not apply.
Dividends received by a non-United States holder with respect to TSA
common stock received in exchange for TSA Exchangeco exchangeable shares
generally will be subject to United States Federal withholding tax at a rate
of 30 percent. This rate could be reduced if non-United States holder is a
qualified resident of a country with which the United States has a bilateral
income tax treaty. A qualified resident of Canada under the United
States-Canada income tax treaty should be eligible for a reduced treaty rate
of 15% or 5%, depending on the size of the shareholding.
LEGAL MATTERS
The validity of the Class A Common Stock offered pursuant to this
prospectus will be passed upon for TSA by Baker & McKenzie, Dallas, Texas.
EXPERTS
The financial statements and schedule incorporated by reference in
this prospectus to TSA's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports. Reference is made to said report on the financial
statements, which includes an explanatory paragraph with respect to TSA
changing its method of accounting for software license fees revenue upon
adoption of American Institute of Certified Public Accountants Statement of
Position 97-2, "Software Revenue Recognition" effective October 1, 1998, as
discussed in Note 2 to the financial statements.
Future financial statements and schedules of TSA and the reports
thereon of TSA's independent public accountants also will be incorporated by
reference in this prospectus in reliance upon the authority of those
independent public accountants as experts in giving those reports to the
extent said firm has audited those financial statements and consented to the
use of their reports thereon.
-----------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale of the securities being registered
hereby. All amounts are estimates except the registration fee.
Registration fee . . . . . . . . . . . . . . . . . . . . . . $11,985
Legal fees and expenses . . . . . . . . . . . . . . . . . . 15,000
Accounting fees and expenses. . . . . . . . . . . . . . . . 25,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 1,015
Total . . . . . . . . . . . . . . . . . . . . . . . . . $53,000
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification by a corporation of certain officers, directors,
employees and agents. Consistent therewith, Article Tenth of the Amended
and Restated Certificate of Incorporation of TSA provides that TSA, to the
fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits TSA
to provide broader indemnification rights than such law permitted TSA to
provide prior to such amendment), to indemnify a director or officer of TSA
or a person who is or was serving at the request of TSA as director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
an employee benefit plan, who was or is made (or threatened to be made) a
party to a civil, criminal, administrative or investigative proceeding (an
"indemnified person"). Article Tenth also provides that expenses incurred
by an indemnified person will be paid in advance by TSA; provided,
however, that, if the General Corporation Law of the State of Delaware
requires, an advancement of expenses incurred by an indemnified person
incurred in his or her capacity as a director or officer will be made only
if TSA receives an undertaking by or on behalf of the indemnified person to
repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal that such
indemnified person is not entitled to be indemnified for such expenses.
The Amended and Restated Certificate of Incorporation also authorizes
TSA to maintain officer and director liability insurance, and such a
policy is currently in effect.
TSA entered into Severance Compensation Agreements with each of its
executive officers and certain other employees. Under the Agreements, TSA
agrees to indemnify the employee to the fullest extent permitted by law if
the employee is a party or threatened to be made a party to any action,
suit or proceeding in which the employee is involved by reason of the fact
that the employee is or was a director or officer of TSA, by reason of any
action taken by him or of any action on his part while acting as director
or officer of TSA, or by reason of the fact that he is or was serving at
the request of TSA as a director, officer, employee or agent of another
enterprise. TSA also agrees to obtain and maintain a directors' and
officers' liability insurance policy covering the employee.
Under a registration rights agreement between TSA and certain of its
stockholders, TSA agreed to indemnify each stockholder selling his or her
shares thereunder in connection with any losses, claims, damages or
liabilities arising out of certain acts or omissions of TSA. Under an
agreement with the purchasers of TSA's Senior Convertible Preferred Stock
and warrants, TSA indemnified the purchasers with respect to any
misrepresentation or breach of any representation or warranty or
noncompliance with any conditions or other agreements given or made in
connection with the agreement or the transactions contemplated therein.
Item 16. Exhibits
Exhibit
Number Description
3.01(1) Amended and Restated Certificate of Incorporation of TSA, and
amendments thereto
3.02(2) Amended and Restated Bylaws of TSA
4.01(1) Form of Common Stock Certificate
5.01 Opinion of Baker & McKenzie
8.01 Opinion of Baker & McKenzie regarding tax matters
8.02 Opinion of Arthur Andersen LLP regarding tax matters
23.01 Consent of Arthur Andersen LLP
23.02 Consent of Baker & McKenzie (included in opinion filed as
Exhibit 5.01)
23.03 Consent of Baker & McKenzie (included in opinion filed as
Exhibit 8.01)
23.04 Consent of Arthur Andersen LLP (included in opinion filed as
Exhibit 8.02)
24.01 Power of Attorney (contained in Signature Page)
(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Registration Statement No. 33-88292 on Form S-1.
(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose 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) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act 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
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.
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act
of 1933, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Omaha, State of Nebraska, on this 13th day of November, 2000.
TRANSACTION SYSTEMS ARCHITECTS, INC.
By:/s/ William E. Fisher
---------------------------------
William E. Fisher,
Chairman, Chief Executive
Officer and Director
POWER OF ATTORNEY
We, the undersigned officers and directors of Transaction Systems
Architects, Inc., hereby severally and individually constitute and appoint
William E. Fisher, David P. Stokes and Dwight G. Hanson, and each of them, the
true and lawful attorneys and agents of each of us to execute in the name,
place and stead of each of us (individually and in any capacity stated below)
any and all amendments to this Registration Statement on Form S-3, including
any post-effective amendments, and any additional Registration Statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and all instruments
necessary or advisable in connection therewith, with the Securities and
Exchange Commission, each of said attorneys and agents to have power to act
with or without the other and to have full power and authority to do and
perform in the name and on behalf of each of the undersigned every act
whatsoever necessary or advisable to be done in the premises as fully and to
all intents and purposes as any of the undersigned might or could do in
person, and we hereby ratify and confirm our signatures as they may be signed
by our said attorneys and agents and each of them to any and all such
amendment and amendments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
/s/ William E. Fisher Chairman, Chief Executive November 13, 2000
- --------------------- Officer and Director
William E. Fisher (Principal Executive Officer)
/s/ Dwight G. Hanson Chief Financial Officer and November 13, 2000
- -------------------- Senior Vice President
Dwight G. Hanson (Principal Financial Officer)
/s/ Edward Fuxa Controller November 13, 2000
- --------------- (Principal Accounting Officer)
Edward Fuxa
/s/ Charles E. Noell, III Director November 13, 2000
- -------------------------
Charles E. Noell, III
/s/ Jim D. Kever Director November 13, 2000
- ----------------
Jim D. Kever
/s/ Larry G. Fendley Director November 13, 2000
- --------------------
Larry G. Fendley
/s/ Roger K. Alexander Director November 13, 2000
- ----------------------
Roger K. Alexander
/s/ Gregory J. Duman Director November 13, 2000
- --------------------
Gregory J. Duman
EXHIBIT INDEX
Exhibit
Number Description
3.01(1) Amended and Restated Certificate of Incorporation of TSA, and
amendments thereto
3.02(2) Amended and Restated Bylaws of TSA
4.01(1) Form of Common Stock Certificate
5.01 Opinion of Baker & McKenzie
8.01 Opinion of Baker & McKenzie regarding tax matters
8.02 Opinion of Arthur Andersen LLP regarding tax matters
23.01 Consent of Arthur Andersen LLP
23.02 Consent of Baker & McKenzie (included in opinion filed as
Exhibit 5.01)
23.03 Consent of Baker & McKenzie (included in opinion filed as
Exhibit 8.01)
23.04 Consent of Arthur Andersen LLP (included in opinion filed as
Exhibit 8.02)
24.01 Power of Attorney (contained in Signature Page)
(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Registration Statement No. 33-88292 on Form S-1.
(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
BAKER & McKENZIE
Attorneys at Law
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
November 13, 2000
Board of Directors
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, Nebraska 68154
Re: Transaction Systems Architects, Inc. (the "Company")
Gentlemen:
We have acted as your counsel in connection with the registration, on
a Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended, of 3,157,500 shares of the Company's Class
A Common Stock, $.005 par value per share (the "Stock"), to be issued by the
Company at various times upon the exchange of exchangeable shares of TSA
Exchangeco Limited, a Nova Scotia limited company, as described in the
Registration Statement. We have reviewed the Registration Statement, the
charter and by-laws of the Company, corporate proceedings of the Board of
Directors relating to the issuance of the shares of Stock, and such other
documents, corporate records and questions of law as we have deemed necessary
to the rendering of the opinions expressed below.
In all examinations of documents, instruments and other papers, we
have assumed the genuineness of all signatures on original and certified
documents and the conformity to original and certified documents of all copies
submitted to us as conformed, photostatic or other copies. As to matters of
fact which have not been independently established, we have relied upon
representations of officers of the Company.
Based upon the foregoing, we are of the opinion that the 3,157,500
shares of Stock to be issued by the Company as described in the Registration
Statement when issued and paid for in the manner contemplated in the
Registration Statement, will be legally issued, fully paid and non-assessable
shares of Class A Common Stock of the Company.
The opinion expressed above is limited to the General Corporation Law
of the State of Delaware and the federal laws of the United States of America.
This opinion letter may be filed as an exhibit to the Registration
Statement. Consent is also given to the reference to this firm under the
caption "Legal Matters" in the prospectus contained in the Registration
Statement. In giving this consent, this firm does not thereby admit that it
comes within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
BAKER & McKENZIE
November 13, 2000
Transaction Systems Architects, Inc.
224 South 108 Avenue
Omaha, Nebraska
68154
Dear Sir/Madam:
Re: Registration Statement On Form S-3
We have acted as your counsel in connection with the registration, on a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended, of 3,157,500 shares of the Company's Class A
Common Stock, $.005 par value per share, to be issued by the Company at various
times upon the exchange of exchangeable shares of TSA Exchangeco Limited, a Nova
Scotia limited company, as described in the Registration Statement.
We have aided in the preparation of the Registration Statement, including,
in particular the discussion under the heading "INCOME TAX CONSIDERATIONS -
Canadian Federal Income Tax Considerations to Former MessagingDirect
Shareholders" (the "Tax Summary").
We hereby confirm that, as of the date hereof, the Tax Summary is a fair
and accurate summary, in all material respects, of the matters addressed
therein, based upon the assumptions stated or referred to therein. It is
possible that contrary positions may be taken by the Canada Customs and Revenue
Agency and that a court may agree with such contrary positions.
This opinion is furnished to you solely for your benefit and the benefit of
the holders of the TSA Exchangeco exchangeable shares in connection with the
filing of the Registration Statement and, except as set forth below, is not to
be used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person for any purpose without our prior written
consent. We also consent to the use of our name in the Registration Statement
and to the filing of this opinion with the Commission as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended or the rules and regulations of the
Commission promulgated thereunder.
Yours very truly,
BAKER & McKENZIE
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, Nebraska 68154
November 13, 2000
Ladies and Gentlemen,
We have provided tax advice to Transaction Systems Architects, Inc. ("TSA"), a
Delaware corporation, in connection with the offer of 3,157,500 shares of TSA
Common Stock issuable upon exchange or redemption of TSA Exchangeco Limited
exchangeable shares, pursuant to a Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 on November 13, 2000. In
connection therewith, we have participated in the preparation of the discussion
set forth under the subcaption "United States Federal Income Tax Considerations
- - Former MessagingDirect Shareholders Not Resident In, Or Citizens Of, The
United States") (the "Discussion") in the Registration Statement. Capitalized
terms used and not otherwise defined herein are used as defined in the
Registration Statement.
The Discussion, subject to the qualifications stated therein, reflects our
opinion as to the material United States Federal income tax considerations for a
non-United States holder in regard to the receipt of shares of TSA common stock
in exchange for a non-United States holder's TSA Exchangeco exchangeable shares
and for a non-United States holder in regard to the sale of shares of TSA common
stock. These considerations include the taxation of dividends received with
respect to the TSA shares received on surrender of the exchangeable shares.
This opinion is furnished to you solely for your benefit and the benefit of the
holders of the TSA Exchangeco exchangeable shares in connection with the filing
of the Registration Statement and, except as set forth below, is not to be used,
circulated, quoted or otherwise referred to for any other purpose or relied upon
by any other person for any purpose without our prior written consent.
We hereby consent to the use of our name in the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement. However,
this consent does not constitute an admission that we are "experts" within the
meaning of such term as used in the Securities Act of 1933, or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
Arthur Andersen LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated October 28, 1999,
included in Transaction Systems Architects, Inc.'s Annual Report on Form 10-K
for the fiscal year ended September 30, 1999, and to all references to our Firm
included in this registration statement.
Omaha, Nebraska,
November 8, 2000
