Delaware
(State
or Other Jurisdiction
of
Incorporation or Organization)
|
6770
(Primary
Standard Industrial Classification Code Number)
3000
Sand Hill Road
Building
1, Suite 240
Menlo
Park, California 94025
(650)
926-7022
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive offices)
|
20-0996152
(I.R.S.
Employer
Identification
Number)
|
Humphrey
P. Polanen
3000
Sand Hill Road
Building
1, Suite 240
Menlo
Park, California 94025
(650)
926-7023
(Name,
address, including zip code, and telephone number,
including
area code, of Agent for service)
With
Copies To:
|
Gregory
J. Schmitt, Esq.
Jenkens
& Gilchrist, P.C.
1445
Ross Avenue
Suite
3700
Dallas,
Texas 75202
(214)
855-4500
|
Robert
G. Copeland, Esq.
P.
Blake Allen, Esq.
Duane
Morris LLP
101
West Broadway
Suite
900
San
Diego, California 92101
(619)
744-2200
|
Title
of Each Class of
Securities
to be Registered
|
Amount
to
be
Registered(1)
|
Proposed
Maximum
Offering
Price(2)
|
Proposed
Maximum
Aggregate Offering Price(2)
|
Amount
of Registration
Fee(3)(4)(5)
|
|||||||||
Common
Stock, par value $0.01 per share
|
9,972,757
|
$5.20
|
$51,858,336.40
|
$5,548.85
|
|||||||||
Options
and Warrants(3)
|
1,097,643
|
$5.20
|
$5,707,743.60
|
$610.73
|
|||||||||
Common
Stock, par value $0.01per share(4)
|
1,097,643
|
$5.20
|
$5,707,743.60
|
$610.73
|
(1)
|
Represents
a bona fide estimate of the maximum number of shares of Sand Hill
common
stock, par value $0.01 per share, that may be issued in connection
with
the merger described herein.
|
(2)
|
Estimated
solely for the purposes of calculating the registration fee in accordance
with Rule 457(c) under the Securities Act of 1933, as amended,
calculated based on the average of the bid and ask price for the
shares of
Sand Hill common stock on the NASD Over-the-Counter Bulletin Board
on
December 12, 2005, which was
$5.20.
|
(3)
|
Represents
options and warrants for 1,097,643 shares of common stock to be issued
as
replacement options and warrants to current holders of St. Bernard
options
and warrants.
|
(4)
|
Represents
1,097,643 shares of common stock which may be issued to St. Bernard
option
and warrant holders if all presently outstanding St. Bernard options
and
warrants are exercised prior to closing of the
merger.
|
(5)
|
$6,770.31
previously paid.
|
Sand
Hill IT Security
Acquisition
Corp.
|
St.
Bernard
Software,
Inc.
|
Sincerely,
/s/
Humphrey P. Polanen
Chairman
of the Board and
Chief
Executive Officer
Sand
Hill IT Security Acquisition Corp.
|
Sincerely,
/s/
John E. Jones
Chief
Executive Officer
St.
Bernard Software, Inc.
|
· |
to
adopt the Agreement and Plan of Merger, dated as of October 26, 2005,
among Sand Hill, Sand Hill Merger Corp., a wholly-owned subsidiary
of Sand
Hill, and St. Bernard, and the transactions contemplated by the merger
agreement, as amended;
|
· |
to
adopt the amended and restated certificate of incorporation of Sand
Hill
to change the name of Sand Hill to St. Bernard Software, Inc. and to
remove the protective provisions related to a business combination
that
were put in place as a result of our being a Targeted Acquisition
Corporation that, amongst other things, require stockholder approval
of a
business combination in all cases, provide for the conversion of
up to
19.9% of Sand Hill’s common stock for cash in the event of a business
combination and require Sand Hill to liquidate if a business combination
is not completed by July 27, 2006;
|
· |
to
adopt the St. Bernard Software, Inc. 1992 Stock Option Plan, the
St. Bernard Software, Inc. 2000 Stock Option Plan and the St. Bernard
Software, Inc. 2005 Stock Option Plan;
and
|
· |
to
consider and vote upon a proposal to adjourn the special meeting
to a
later date or dates, if necessary, to permit further solicitation
and vote
of proxies in the event there are not sufficient votes at the time
of the
special meeting to adopt the merger proposal, the amendment proposal
or
the stock option plans proposal.
|
· |
To
consider and vote upon a proposal to adopt the Agreement and Plan
of
Merger, dated as of October 26, 2005, among Sand Hill, Sand Hill
Merger
Corp., a wholly-owned subsidiary of Sand Hill, and St. Bernard Software,
Inc., and the transactions contemplated by the merger agreement,
as
amended;
|
· |
To
consider and vote upon a proposal to adopt the amended and restated
certificate of incorporation of Sand Hill to change the name of Sand
Hill
to St. Bernard Software, Inc. and to remove the preamble and Sections
A through E of Article Sixth of the certificate of incorporation
and to
redesignate Section F of Article Sixth as Article
Sixth;
|
· |
To
consider and vote upon a proposal to adopt the St. Bernard
Software, Inc. 1992 Stock Option Plan, the St. Bernard Software, Inc.
2000 Stock Option Plan and the St. Bernard Software, Inc. 2005 Stock
Option Plan; and
|
· |
To
consider and vote upon a proposal to adjourn the Sand Hill special
meeting
to a later date or dates, if necessary, to permit further solicitation
of
proxies in the event there are not sufficient votes at the time of
the
Sand Hill special meeting to approve the merger proposal, the amendment
proposal or the stock option plans
proposal.
|
· |
to
adopt the Agreement and Plan of Merger, dated as of October 26, 2005,
among Sand Hill, Sand Hill Merger Corp., a wholly-owned subsidiary
of Sand
Hill, and St. Bernard, and the transactions contemplated by the merger
agreement, as amended; and
|
· |
to
consider and vote upon a proposal to adjourn the special meeting
to a
later date or dates, if necessary, to permit further solicitation
and vote
of proxies in the event there are not sufficient votes at the time
of the
special meeting to adopt the merger
proposal.
|
· |
To
consider and vote upon a proposal to adopt the Agreement and Plan
of
Merger, dated as of October 26, 2005, among Sand Hill, Sand Hill
Merger
Corp., a wholly-owned subsidiary of Sand Hill, and St. Bernard Software,
Inc., and the transactions contemplated by the merger agreement,
as
amended; and
|
· |
To
consider and vote upon a proposal to adjourn the special meeting
to a
later date or dates, if necessary, to permit further solicitation
of
proxies in the event there are not sufficient votes at the time of
the
special meeting to approve the merger proposal or the stock option
plans
proposal.
|
QUESTIONS
AND ANSWERS ABOUT THE MERGER
|
1
|
|
SUMMARY
|
11
|
|
The
Companies
|
11
|
|
Sand
Hill’s Business Rationale for Merging with St. Bernard
|
12
|
|
St.
Bernard’s Business Rationale for Merging with Sand Hill
|
13
|
|
Security
Market Characteristics and Industry Background
|
13
|
|
The
Merger
|
14
|
|
Amended
and Restated Certificate of Incorporation
|
15
|
|
St.
Bernard Software, Inc. 1992 Stock Option Plan; St. Bernard Software,
Inc.
2000 Stock Option Plan; St. Bernard Software, Inc. 2005 Stock Option
Plan
|
15
|
|
Adjournment
Proposal
|
16
|
|
Sand
Hill’s Board of Directors’ Recommendations
|
16
|
|
Special
Meetings of Stockholders
|
16
|
|
Voting
Power; Record Date
|
16
|
|
Vote
Required to Adopt the Merger Proposal
|
17
|
|
Vote
Required to Adopt the Amended and Restated Certificate of
Incorporation
|
17
|
|
Vote
Required to Adopt the Stock Option Plans Proposal
|
17
|
|
Vote
Required to Adopt the Adjournment Proposal
|
17
|
|
Conditions
to Adoptions
|
17
|
|
Conversion
Rights
|
17
|
|
Appraisal
or Dissenters Rights
|
18
|
|
Voting
|
18
|
|
Stock
Ownership
|
18
|
|
Interests
of Sand Hill Directors and Officers in the Merger
|
19
|
|
Interests
of Officers and Directors of St. Bernard in the Merger
|
20
|
|
Conditions
to the Completion of the Merger
|
21
|
|
No
Solicitation
|
22
|
|
Termination
|
22
|
|
Termination
Fee; Expenses
|
24
|
|
Quotation
or Listing
|
24
|
|
Amendment
and Restatement of Sand Hill Certificate of Incorporation
|
24
|
|
Officers
and Directors After the Merger
|
24
|
|
Indemnification
and Stock Escrow Agreement
|
24
|
|
Material
United States Federal Income Tax Consequences of the
Merger
|
24
|
|
Accounting
Treatment
|
25
|
|
Regulatory
Matters
|
25
|
|
|
|
|
SELECTED
HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION
|
26
|
|
|
|
|
SELECTED
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
|
28
|
|
|
|
|
COMPARATIVE
PER SHARE INFORMATION
|
30
|
|
|
|
|
PER
SHARE MARKET PRICE INFORMATION
|
31
|
|
|
|
|
RISK
FACTORS
|
32
|
|
|
|
|
FORWARD-LOOKING
STATEMENTS
|
41
|
|
THE
SAND HILL SPECIAL MEETING
|
42
|
|
Sand
Hill Special Meeting
|
42
|
|
Date,
Time and Place
|
42
|
|
Purpose
of the Sand Hill Special Meeting
|
42
|
|
Recommendation
of the Sand Hill Board of Directors
|
42
|
|
Record
Date; Who is Entitled to Vote
|
42
|
|
Quorum
|
43
|
Voting
Your Shares
|
43
|
|
Who
Can Answer Your Questions About Voting Your Shares
|
43
|
|
No
Additional Matters May Be Presented at the Sand Hill Special
Meeting
|
43
|
|
Revoking
Your Proxy
|
43
|
|
Vote
Required
|
44
|
|
Conversion
Rights
|
44
|
|
Solicitation
Costs
|
44
|
|
Stock
Ownership
|
45
|
|
|
|
|
THE
ST. BERNARD SPECIAL MEETING
|
46
|
|
St.
Bernard Special Meeting
|
46
|
|
Date,
Time and Place
|
46
|
|
Purpose
of the St. Bernard Special Meeting
|
46
|
|
Recommendation
of the St. Bernard Board of Directors
|
46
|
|
Record
Date; Who is Entitled to Vote
|
46
|
|
Quorum
|
46
|
|
Voting
Your Shares
|
46
|
|
Who
Can Answer Your Questions About Voting Your Shares
|
47
|
|
No
Additional Matters May Be Presented at the St. Bernard Special
Meeting
|
47
|
|
Revoking
Your Proxy
|
47
|
|
Vote
Required
|
47
|
|
Solicitation
Costs
|
47
|
|
Stock
Ownership
|
48
|
|
|
|
|
THE
MERGER PROPOSAL
|
49
|
|
General
Description of the Merger
|
49
|
|
Background
of the Merger
|
49
|
|
Sand
Hill Reasons for the Merger
|
51
|
|
St.
Bernard’s Reasons for the Merger
|
60
|
|
Interests
of Sand Hill Directors and Officers in the Merger
|
60
|
|
Interests
of St. Bernard Directors and Officers in the Merger
|
61
|
|
Appraisal
or Dissenters Rights
|
61
|
|
Material
United States Federal Income Tax Consequences of the
Merger
|
64
|
|
Anticipated
Accounting Treatment
|
66
|
|
Regulatory
Matters
|
66
|
|
Consequences
if Merger Proposal is Not Approved
|
66
|
|
Vote
Required to Adopt the Merger Proposal
|
67
|
|
Recommendation
of the Sand Hill Board of Directors
|
67
|
|
Recommendation
of the St. Bernard Board of Directors
|
67
|
|
|
|
|
THE
MERGER AGREEMENT
|
68
|
|
Structure
of the Merger
|
68
|
|
Closing
and Effective Time of the Merger
|
68
|
|
Amendment
and Restatement of Sand Hill Certificate of Incorporation
|
68
|
|
Name;
Headquarters; Stock Symbol; Listing
|
68
|
|
Merger
Consideration
|
68
|
|
Exchange
of Certificates
|
69
|
|
Representations
and Warranties
|
69
|
|
Materiality
and Material Adverse Effect
|
70
|
|
Interim
Operations of Sand Hill and St. Bernard
|
71
|
|
No
Solicitation by St. Bernard
|
73
|
|
No
Solicitation by Sand Hill
|
74
|
|
Sand
Hill Stockholders’ Meeting
|
75
|
|
St.
Bernard Stockholders’ Meeting
|
75
|
|
Access
to Information; Confidentiality
|
75
|
|
Reasonable
Efforts; Notification
|
75
|
|
Fees
and Expenses
|
76
|
|
Public
Announcements
|
76
|
|
Quotation
or Listing
|
76
|
Tax
Treatment
|
76
|
|
Pre-Closing
Confirmation
|
76
|
|
Conditions
to the Completion of the Merger
|
76
|
|
Termination
|
78
|
|
Effect
of Termination
|
79
|
|
Termination
Fee and Expenses
|
80
|
|
Assignment
|
80
|
|
Amendment
|
80
|
|
Extension;
Waiver
|
80
|
|
|
|
|
Indemnification
|
81
|
|
Exclusive
Remedy
|
81
|
|
Survival
Period
|
81
|
|
Stockholders
Representative
|
81
|
|
|
|
|
Stock
Escrow Agreement
|
81
|
|
|
|
|
THE
AMENDMENT PROPOSAL
|
83
|
|
General
Description of the Amendment and Restatement of the Certificate
of
Incorporation of Sand Hill
|
83
|
|
Sand
Hill’s Reasons for the Amendment and Restatement of the Certificate
of
Incorporation and Recommendation of Sand Hill’s Board of
Directors
|
83
|
|
Consequences
if Amendment Proposal is Not Approved
|
83
|
|
Vote
Required to Adopt the Amendment Proposal
|
83
|
|
Sand
Hill’s Board of Directors’ Recommendation
|
84
|
|
|
|
|
THE
STOCK OPTION PLANS PROPOSAL
|
85
|
|
St.
Bernard 1992 Stock Option Plan
|
85
|
|
St.
Bernard 2000 Stock Option Plan
|
87
|
|
St.
Bernard 2005 Stock Option Plan
|
88
|
|
|
|
|
INFORMATION
ABOUT ST. BERNARD
|
92
|
|
Overview
|
92
|
|
Products
|
93
|
|
Marketing,
Sales and Distribution
|
94
|
|
Software
as a Service (SaaS) and Deferred Revenue
|
95
|
|
Maintenance
and Technical Support
|
95
|
|
Seasonality
|
95
|
|
Customers
|
96
|
|
Competition
|
96
|
|
Research
and Development
|
96
|
|
Intellectual
Property Rights
|
97
|
|
Employees
|
98
|
|
Other
Information
|
98
|
|
Properties
|
98
|
|
Legal
Proceedings
|
98
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF ST. BERNARD
|
99
|
|
Overview
|
99
|
|
Critical
Accounting Policies and Estimates
|
100
|
|
Recent
Accounting Pronouncements
|
114
|
|
Liquidity
and Capital Resources
|
114
|
|
Contractual
Commitments
|
115
|
|
Losses
from Operations - Liquidity
|
116
|
|
Off-Balance
Sheet Arrangements
|
116
|
|
|
|
|
INFORMATION
ABOUT SAND HILL
|
117
|
|
Business
of Sand Hill
|
117
|
|
Legal
Proceedings
|
119
|
Plan
of Operations
|
120
|
|
Off-Balance
Sheet Arrangements
|
121
|
|
|
|
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
122
|
|
|
|
|
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
|
129
|
|
|
|
|
DIRECTORS
AND MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE
MERGER
|
131
|
|
Independence
of Directors
|
133
|
|
Board
of Directors Committees
|
133
|
|
Director
and Officer Compensation
|
133
|
|
St.
Bernard Executive Officers
|
134
|
|
Sand
Hill Executive Officers
|
136
|
|
|
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
137
|
|
Sand
Hill
|
137
|
|
St.
Bernard
|
137
|
|
|
|
|
BENEFICIAL
OWNERSHIP OF SECURITIES
|
139
|
|
Security
Ownership of Certain Beneficial Owners and Officers and Directors
of Sand
Hill
|
141
|
|
|
|
|
PRICE
RANGE OF SECURITIES AND DIVIDENDS
|
142
|
|
Sand
Hill
|
142
|
|
Combined
Company
|
142
|
|
|
|
|
DESCRIPTION
OF SAND HILL’S SECURITIES FOLLOWING THE MERGER
|
143
|
|
General
|
143
|
|
Common
Stock
|
143
|
|
Preferred
Stock
|
143
|
|
Unissued
Shares of Capital Stock
|
143
|
|
Classified
Board of Directors, Vacancies and Removal of Directors
|
143
|
|
Business
Combination Under Delaware Law
|
144
|
|
Limitation
of Liability of Directors
|
144
|
|
Warrants
and Options
|
144
|
|
Quotation
or Listing
|
146
|
|
Transfer
Agent and Registrar
|
146
|
|
|
|
|
COMPARISON
OF RIGHTS OF SAND HILL AND ST. BERNARD STOCKHOLDERS
|
146
|
|
|
|
|
STOCKHOLDER
PROPOSALS
|
150
|
|
|
|
|
LEGAL
MATTERS
|
150
|
|
EXPERTS
|
150
|
|
|
|
|
CHANGE
IN ACCOUNTANTS
|
150
|
|
|
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
151
|
|
|
|
|
INDEX
TO FINANCIAL STATEMENTS
|
F-1
|
Q.
|
Who
is Sand Hill IT Security?
|
A.
|
Sand
Hill is a “Targeted Acquisition Corporation”, or TAC, based in Menlo Park,
California, organized to effect a merger, capital stock exchange
or other
similar business combination with an operating business in the
IT security
industry. Sand Hill’s goal is to enhance the value of Sand Hill by helping
this targeted business achieve its business objectives by providing
industry expertise, expansion capital for organic growth and the
ability
to issue shares in a public company as consideration for making
additional
targeted acquisitions.
|
|||
|
|
|
|
|||
Q.
|
Who
is St. Bernard Software?
|
A.
|
St. Bernard
is a recognized independent supplier of IT security software products
and
services, with a special emphasis on Secure Content Management,
or SCM,
including messaging security, with $28.7 million in gross billings
for
2005. St. Bernard’s products protect businesses, government organizations
and educational institutions from cyber attack, improve worker
productivity, reduce legal liability and assist in meeting regulatory
requirements for data/privacy protection. St. Bernard’s network-attached
security products are delivered as appliances that connect into
the data
path between the Internet gateway and a company’s local area network. St.
Bernard’s system security products consist of software that is installed
on workstations and servers. St. Bernard has approximately 8,000
customers
supporting over 3.5 million device licenses, primarily comprised
of small
to medium sized businesses, educational institutions and governmental
organizations. The products offered by St. Bernard include Open
File
Manager, a data protection product; UpdateEXPERT, a patch and settings
management product; iPrism, SCM, Internet access management product;
and
ePrism, SCM, messaging security e-mail filtering product. According
to
International Data Corporation, or IDC, in September 2005, St.
Bernard’s
iPrism product line was the leading Internet filtering appliance,
enabling
customers to manage and control employee access to millions of
web sites
that are updated continuously as part of St. Bernard’s fee-based Software
as a Service”, or a “SaaS”, business model subscription service. Other St.
Bernard products also have a subscription component that increases
deferred revenue thereby increasing revenue predictability.
St. Bernard’s revenue model includes revenue from appliance sales,
software license sales and multi-year subscription for software/database
updates. St. Bernard had revenues of $21.2 million in 2004 and
revenues of
$24.0 million in 2005. St. Bernard is a corporation that was founded
in
1984 as Emerald Systems, Inc. In 1995, the corporation sold substantially
all of its operating assets, changed its name to St. Bernard Software,
Inc., and began its current operations to take advantage of its
existing
personnel and infrastructure. The St. Bernard operations rapidly
moved
into the data protection and IT security market. St. Bernard
Software is a private company with headquarters in San Diego, California.
IDC is a global provider of market intelligence and advisory services
for
the information technology and telecommunications industries. In
September
of 2005, IDC released a report titled, “Worldwide Secure Content
Management 2005-2009 Forecast Update” from which the information that
references IDC in this document has been gathered. St. Bernard
subscribes
to IDC information technology reports. There is no other relationship
between IDC, St. Bernard or Sand Hill.
|
|||
|
|
|
|
Q.
|
Why
is Sand Hill proposing the merger with St.
Bernard?
|
A.
|
The
Sand Hill board of directors believes that the proposed merger
between
Sand Hill and St. Bernard is in the best interests of St. Bernard
and its
stockholders for the following primary reasons:
|
|||
|
|
|
|
|||
|
|
|
·
St.
Bernard is positioned in a portion of the IT security market known
as
Secure Content Management, or SCM, that has experienced rapid growth
and
the appliance portion of SCM, according to IDC, is expected to
continue to
grow at 47% per year for the next five years;
·
St.
Bernard reached $28.7 million in gross billings in 2005 and has
experienced solid growth in the past five years;
·
Sand
Hill believes that St. Bernard has an attractive SaaS, or Software as
a Service, business model, with a subscription revenue component
that
increases revenue renewals, and, therefore, predictability. In
2005
subscription revenue accounted for approximately 59% of St. Bernard’s
business;
·
St.
Bernard has approximately 8,000 active customers, with very high
retention
rates, on the order of 80% to 95%, resulting in strong subscription
renewals (i.e., repeat business) each year;
·
St.
Bernard, according to IDC in September 2005, had the number one
market
position in web-filtering appliances;
·
St.
Bernard targets small to medium size businesses, or the SME market,
with
50 to 1000 employees. The SME market for IT security products is
experiencing growth. AMI Partners projects greater than 15% of
all SME’s
will purchase IT security products in 2006 (Sources: AMI Partners,
2005-2006
U.S. Medium Business Overview and Comprehensive Market Opportunity
Assessment (September
2005) and 2005-2006
U.S. Small Business Overview and Comprehensive Market Opportunity
Assessment; available
at ask_ami@ami--partners.com);
·
Sand
Hill believes that St. Bernard has a strong management team;
and
·
Sand
hill believes that the revision to the merger agreement to provide
for
1,700,000 of the shares of Sand Hill common stock to be initially
issued
in the merger to be held by a stockholders' representative of St.
Bernard
pending their release if the combined company's stock reaches certain
price thresholds after the merger helps to adjust the timing of
the merger
consideration to take into account changes in public company comparables
and St. Bernard's first quarter revenue performance.
|
|||
|
|
|
|
|||
|
|
|
Given
the above, Sand Hill believes that a business combination with
St. Bernard
will provide Sand Hill stockholders with an opportunity to participate
in
a combined company in the IT security market with significant growth
potential. See
page 52.
|
|
|
|
|
|||
Q.
|
Why
is St. Bernard proposing the merger with Sand
Hill?
|
A.
|
The
St. Bernard board of directors believes that the proposed merger
between
Sand Hill and St. Bernard is in the best interests of St. Bernard
and its
stockholders for the following primary reasons:
|
|||
|
|
|
|
|||
|
|
|
·
As
of May 26, 2006, Sand Hill had $22,109,631 in escrow, representing
the net proceeds from its initial public offering. If the merger
is
consummated, at least 80% of the funds in the Sand Hill escrow
account,
less expenses of the merger, will be available for operations of
the
combined company. St. Bernard believes that because the combined
company
will have substantially greater capitalization than St. Bernard
alone, the
combined company will be in a better position than St. Bernard
alone, to
compete in the SCM marketplace.
·
St.
Bernard believes that the skills and expertise of the officers
and
directors of Sand Hill, their collective access to acquisition
opportunities and ideas, their contacts, and, in particular, Mr.
Polanen’s
and Mr. Broomfield’s expertise in the IT security market, will provide the
combined company with increased opportunities for future acquisitions
and
growth.
|
|||
|
|
|
|
|||
Q.
|
What
is being voted on at the Sand Hill special
meeting?
|
A.
|
There
are four proposals that stockholders of Sand Hill are being asked
to vote
on at the Sand Hill special meeting. The first proposal is to adopt
the
merger agreement and the transactions contemplated by the merger
agreement. This proposal is referred to as the merger proposal.
The second
proposal is to adopt the amended and restated certificate of incorporation
of Sand Hill to change the name of Sand Hill to St. Bernard
Software, Inc. and to remove certain provisions related to a business
combination that were put in place as a result of Sand Hill being
a
Targeted Acquisition Corporation. This proposal is referred to
as the
amendment proposal. The third proposal is to adopt the St. Bernard
Software, Inc. 1992 Stock Option Plan, the St. Bernard Software,
Inc. 2000
Stock Option Plan and the St. Bernard Software, Inc. 2005 Stock
Option
Plan for non-employee directors, officers and other key employees.
This
proposal is referred to as the stock option plans proposal. The
fourth
proposal allows the adjournment of the Sand Hill special meeting
to a
later date if necessary to permit further solicitation of proxies
in the
event that there are not sufficient votes at the time of the Sand
Hill
special meeting to approve the merger proposal, the amendment proposal
or
the stock option plans proposal. This proposal is referred to as
the
adjournment proposal.
|
|||
|
|
|
|
|||
Q.
|
What
is being voted on at the St. Bernard special
meeting?
|
A.
|
There
are two proposals that stockholders of St. Bernard are being asked
to vote
on at the St. Bernard meeting. The first proposal is to adopt the
merger
agreement and the transactions contemplated by the merger agreement.
We
refer to this proposal as the merger proposal. The second proposal
allows
the adjournment of the St. Bernard special meeting to a later date
if
necessary to permit further solicitation of proxies in the event
that
there are not sufficient votes at the time of the St. Bernard special
meeting to approve the merger proposal. We refer to this proposal
as the
adjournment proposal.
|
Q.
|
Does
the Sand Hill board of directors recommend voting in favor of the
merger
proposal, the amendment proposal, the stock option plans proposal
and the
adjournment proposal?
|
A.
|
Yes.
After careful consideration, Sand Hill’s board of directors has determined
unanimously that the merger proposal, the amendment proposal, the
stock
option plans proposal and the adjournment proposal are fair to,
and in the
best interests of, Sand Hill and its stockholders. The board of
directors
of Sand Hill did not obtain a fairness opinion in connection with
making
these determinations. Sand Hill’s board recommends that Sand Hill
stockholders vote or instruct your vote to be cast “FOR”
the adoption of the merger agreement, the amendment proposal, the
stock
option plans proposal and the adjournment proposal. Please see
“The
Merger Proposal - Sand Hill Reasons for the Merger”
on page 52.
|
|||
Q.
|
Does
the St. Bernard board of directors recommend voting in favor of
the merger
proposal and the adjournment proposal?
|
A.
|
Yes.
After careful consideration, St. Bernard’s board of directors has
determined unanimously that the merger proposal and the adjournment
proposal are fair to, and in the best interests of, St. Bernard and its
stockholders. St. Bernard’s board recommends that St. Bernard stockholders
vote or instruct your vote to be cast “FOR”
the adoption of the merger agreement and the adjournment proposal.
Please
see “The
Merger Proposal - St. Bernard Reasons for the Merger”
on page 60.
|
|||
|
|
|
|
|||
Q.
|
What
vote is required in order to adopt the merger proposal at the Sand
Hill
special meeting?
|
A.
|
The
adoption of the merger agreement and the transactions contemplated
by the
merger agreement by the Sand Hill stockholders will require the
affirmative vote of a majority of the outstanding shares of Sand
Hill’s
common stock on the Sand Hill record date. Sand Hill’s initial
stockholders, who purchased their shares of common stock prior
to its
initial public offering and presently own an aggregate of approximately
19.6% of the outstanding shares of Sand Hill common stock, have
agreed to
vote their shares of Sand Hill common stock purchased prior to
the initial
public offering on the merger proposal in the same manner as how
the
majority of the shares of common stock held by all other Sand Hill
stockholders are voted on the merger proposal. However, if the
holders of
20% or more of the shares of common stock issued in Sand Hill’s initial
public offering vote against the merger and demand that Sand Hill
convert
their shares into a pro rata portion of the trust account, then,
pursuant
to the terms of Sand Hill’s certificate of incorporation, the merger will
not be consummated. No vote of the holders of any warrants issued
by Sand
Hill is necessary to adopt the merger proposal, and Sand Hill is
not
asking the warrant holders to vote on the merger proposal.
|
|||
Q.
|
What
vote is required in order to adopt the amendment proposal at the
Sand Hill
special meeting?
|
A.
|
The
adoption of the amendment proposal by the Sand Hill stockholders
will
require the affirmative vote of a majority of the outstanding shares
of
Sand Hill’s common stock on the Sand Hill record date.
|
|||
|
|
|
|
|||
Q.
|
What
vote is required in order to adopt the stock option plans proposal
at the
Sand Hill special meeting?
|
A.
|
The
adoption of the stock option plans proposal by the Sand Hill stockholders
will require the affirmative vote of a majority of the shares of
Sand
Hill’s common stock present in person or represented by proxy at the
Sand
Hill special meeting.
|
|||
|
|
|
|
|||
Q.
|
What
vote is required in order to adopt the adjournment proposal at
the Sand
Hill special meeting?
|
A.
|
The
adoption of the adjournment proposal by the Sand Hill stockholders
will
require the affirmative vote of the majority of the shares of Sand
Hill’s
common stock present in person or represented by proxy at the Sand
Hill
special meeting.
|
|||
|
|
|
|
|||
Q.
|
Are
the proposals of the Sand Hill special meeting conditioned on each
other?
|
A.
|
The
adoption of the merger proposal is conditioned on the adoption
of the
amendment proposal and the adoption of the amendment proposal is
conditioned on the adoption of the merger proposal. The adoption
of
neither the merger proposal nor the amendment proposal is conditioned
on
the adoption of the stock option plans proposal or the adjournment
proposal. The adoption of the stock option plans proposal, however,
is
conditioned upon the adoption of the merger proposal and the amendment
proposal.
|
|
|
|
|
|||
Q.
|
What
vote is required in order to adopt the merger proposal at the St.
Bernard
special meeting?
|
A.
|
The
adoption of the merger proposal by the St. Bernard stockholders
will
require the affirmative vote of a majority of the outstanding shares
of
St. Bernard’s common stock on the St. Bernard record date. No vote of the
holders of any warrants or options issued by St. Bernard is necessary
to
adopt the merger proposal, and St. Bernard is not asking the warrant
holders or option holders to vote on the merger
proposal.
|
|||
|
|
|
|
|||
Q.
|
What
vote is required in order to adopt the adjournment proposal at
the St.
Bernard special meeting?
|
A.
|
The
adoption of the adjournment proposal by the St. Bernard stockholders
will
require the affirmative vote of the majority of the shares of St.
Bernard’s common stock present in person or represented by proxy at the
St. Bernard special meeting. The adoption of the adjournment proposal
is
not conditioned on the adoption of the merger proposal.
|
|||
|
|
|
|
|||
Q. | What will Sand Hill security holders receive in the merger? |
A.
|
Sand
Hill security holders will continue to hold the Sand Hill securities
they
currently own, and will not receive any of the shares of common
stock,
replacement options or replacement warrants issued in connection
with the
merger. The stockholders of St. Bernard will receive all of the
shares of
common stock, replacement options and replacement warrants being
issued by
Sand Hill in the merger.
|
|||
Q.
|
What
will St. Bernard stockholders, option holders and warrant holders
receive in the merger?
|
A.
|
It
is expected that holders of St. Bernard common stock will hold
approximately 65.7% of the outstanding shares of Sand Hill common
stock
immediately following the closing of the merger, based on the number
of
shares of Sand Hill and St. Bernard common stock outstanding as of
May 26, 2006. In the merger, Sand Hill will issue a combination
of shares
of common stock, replacement options and replacement warrants to
holders
of St. Bernard common stock, options and warrants. The total amount
of
shares of Sand Hill common stock to be issued or that will underlie
replacement options and replacement warrants is 10,880,000. 1,700,000
of
these shares will be issued to a stockholders’ representative that will
hold these shares on behalf of the persons who held shares of St.
Bernard
common stock as of the closing of the merger. These
shares will be released, pro rata, to the persons who held shares
of St.
Bernard common stock as of the closing of the merger, if, after
the
merger, the price of the combined company’s common stock closes at $8.50
or more per share for 20 trading days during any 30-day trading
period
prior to July 25, 2009 or the consideration to be received by the
combined
company or its stockholders in a sale of the majority of the ownership
or
business of the combined company prior to July 25, 2009 equals or
exceeds $8.50 per share, excluding the dilutive effects of the
exercise of
any of the Sand Hill warrants issued in its initial public offering.
If,
after the merger, neither of these thresholds are achieved prior
to July
25, 2009, then the 1,700,000 shares will be returned to the combined
company for no consideration and will be cancelled. Holders
of St. Bernard common stock, options and warrants are entitled
to receive
their pro rata portion of this 10,880,000 figure, subject to the
potential
return of the 1,700,000 shares to be issued to the stockholders’
representative. This results in an exchange ratio of 0.421419 shares
of
Sand Hill common stock, replacement options or replacement warrants
for
each share of St. Bernard common stock or options or warrants to
purchase
St. Bernard common stock outstanding. Based upon the number of
shares of
St. Bernard common stock outstanding and the number of shares issuable
for
St. Bernard common stock pursuant to outstanding options and warrants
as
of May 26, 2006, Sand Hill will issue approximately 9,782,357 shares
of
common stock at the close of the merger. The holders of options
and
warrants to purchase shares of the common stock of St. Bernard will
receive, in exchange for those options and warrants, replacement
options
and replacement warrants to purchase approximately 1,097,643 shares
of
Sand Hill common stock. To the extent that outstanding St. Bernard
options
or warrants are exercised prior to the closing of the merger, the
number
of shares of Sand Hill common stock that would be issued at the
closing of
the merger would increase and the number of the shares of Sand
Hill common
stock that would be subject to replacement options or replacement
warrants
to be issued at the closing of the merger would decrease by a like
amount.
For a complete description of the post-closing fully diluted
capitalization of Sand Hill please see “Beneficial Ownership of
Securities.”
|
Q.
|
What
is the structure of the merger?
|
A.
|
Under
the merger agreement, St. Bernard and Sand Hill Merger Corp., a
wholly-owned subsidiary of Sand Hill, will merge, with St. Bernard
surviving as a wholly-owned subsidiary of Sand Hill (referred to
as the
merger). The merger will be accounted for as an equity recapitalization
of
St. Bernard for financial reporting purposes.
|
||
|
|
|
|
||
Q.
|
How
much of the combined company will existing Sand Hill stockholders
own?
|
A.
|
After
completion of the merger, if no holders of Sand Hill common stock
demand
that Sand Hill convert their shares into a pro rata portion of
the trust
account holding a substantial portion of the net proceeds of Sand
Hill’s
initial public offering, then Sand Hill’s stockholders will own
approximately 34.3% of the combined company’s issued and outstanding
shares of common stock. If one or more of Sand Hill’s stockholders vote
against the merger proposal and demand that Sand Hill convert their
shares
into a pro rata portion of the trust account, then Sand Hill’s
stockholders will own less than approximately 34.3% of the combined
company’s issued and outstanding shares of common stock after completion
of the merger. In either case, the balance of the issued and outstanding
shares of Sand Hill’s common stock will be owned by the stockholders of
St. Bernard, subject to the potential return of the 1,700,000 shares
to be
issued to the stockholders’ representative.
|
||
|
|
|
|
||
Q.
|
Why
is Sand Hill proposing the stock option plans?
|
A.
|
Sand
Hill is proposing the stock option plans because it has agreed
to assume
the outstanding options of St. Bernard at the closing of the merger
and
the plans need to remain outstanding under which such options were
issued
as those plans govern the terms of the options. The adoption of
the 2005
Stock Option Plan will also enable the combined company to offer
non-employee directors, officers, other key employees and consultants
equity-based incentives, thereby helping to attract, retain and
reward
these participants and create value for the combined company’s
stockholders.
|
||
|
|
|
|
||
Q.
|
What
will the name of the combined company be after the
merger?
|
A.
|
Sand
Hill will change its name following completion of the merger to
St.
Bernard Software, Inc.
|
||
|
|
|
|
||
Q.
|
How
much cash does Sand Hill hold in escrow?
|
A.
|
As
of May 26, 2006, Sand Hill had $22,109,631 in escrow, which would
equate to $5.38 per share of outstanding Sand Hill common stock
to
participate in the funds held in escrow.
|
||
|
|
|
|
Q.
|
Do
stockholders of Sand Hill have conversion rights?
|
A.
|
If
you hold shares of common stock issued in Sand Hill’s initial public
offering, then you have the right to vote against the merger proposal
and
demand that Sand Hill convert these shares into a pro rata portion
of the
trust account in which a substantial portion of the net proceeds
of Sand
Hill’s initial public offering are held. We sometimes refer to these
rights to vote against the merger and demand conversion of the
shares into
a pro rata portion of the trust account as conversion
rights.
|
||
|
|
|
|
||
Q.
|
If
stockholders of Sand Hill have conversion rights, how do they exercise
them?
|
A.
|
If
you wish to exercise your conversion rights, you must vote against
the
merger and at the same time demand that Sand Hill convert your
shares into
cash. If, notwithstanding your vote, the merger is completed, then
you
will be entitled to receive a pro rata portion of the trust account
in
which a substantial portion of the net proceeds of Sand Hill’s initial
public offering are held, including any interest earned thereon
through
the date of the Sand Hill special meeting. Based on the amount
of cash
that was held in the trust account on May 26, 2006, you will be
entitled to convert each share of Sand Hill common stock that you
hold
into approximately $5.38. If you exercise your conversion rights,
then you
will be exchanging your shares of Sand Hill common stock for cash
and will
no longer own these shares. You will only be entitled to receive
cash for
these shares if you continue to hold these shares through the effective
time of the merger and then tender your stock certificate to the
combined
company. If the merger is not completed, then your shares will
not be
converted to cash at this time, even if you so elected. See
page 44.
|
||
|
|
|
|
||
Q.
|
What
happens to the funds deposited in the trust account after consummation
of
the merger?
|
A.
|
Upon
consummation of the merger:
|
||
|
|
|
·
the
Sand Hill stockholders electing to exercise their conversion rights
will
receive their pro rata portion of the funds deposited in the trust
account; and
|
||
|
|
|
|
||
|
|
|
·
the
remaining funds will be released to the combined company, which
intends to
use its existing cash resources, along with funds released from
the Sand
Hill trust, to (1) enhance its SCM product offering, (2) further
develop
its products, (3) increase its international presence, and (4)
improve its
VAR and indirect sales channels, in addition to using its cash
resources
for working capital and for general corporate purposes.
|
||
|
|
|
|
||
Q.
|
What
are the expected United States federal income tax consequences
to the
merger?
|
A.
|
It
is the opinion of Duane Morris LLP, counsel to St. Bernard, that the
merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
A
St. Bernard stockholder’s receipt of Sand Hill common stock in the merger
will be tax-free for United States federal income tax purposes.
The
receipt in the merger of warrants or options to purchase common
stock of
Sand Hill by a holder of St. Bernard warrants or options to purchase
St.
Bernard common stock will be tax-free for United States federal
income tax
purposes. However, a St. Bernard stockholder who exercises his
or her
appraisal rights and who receives cash in exchange for his or her
shares
of St. Bernard common stock generally will recognize gain or loss
measured
by the difference between the amount of cash received and the tax
basis of
such stockholder’s shares of St. Bernard common stock.
A
stockholder of Sand Hill who exercises conversion rights and effects
a
termination of the stockholder’s interest in Sand Hill will generally be
required to recognize capital gain or loss upon the exchange of
that
stockholder’s shares of common stock of Sand Hill for cash, if such shares
were held as a capital asset on the date of the merger. Such gain
or loss
will be measured by the difference between the amount of cash received
and
the tax basis of that stockholder’s shares of Sand Hill common stock. No
gain or loss will be recognized by non-converting stockholders
of Sand
Hill.
.
|
No
gain or loss will be recognized by Sand Hill or St. Bernard as
a result of
the merger. For a description of the material federal income tax
consequences of the merger, please see the information set forth
in
“Material
Federal Income Tax Consequences of the Merger”
on page 64.
|
|||||
Q.
|
Who
will manage the combined company?
|
A.
|
The
combined company will be managed by the current management of St.
Bernard.
John E. Jones, who is currently the President and Chief Executive
Officer
of St. Bernard, will become the President and Chief Executive Officer
of the combined company. Alfred Riedler, who is currently the Chief
Financial Officer of St. Bernard, will become the Chief Financial
Officer of the combined company. Bart van Hedel, who is currently
on the
board of directors of St. Bernard, will continue as a board member
of the
combined company. Humphrey P. Polanen, who is currently the Chairman
of the Board and Chief Executive Officer of Sand Hill, will continue
as
Chairman of the Board of the combined company. Scott R. Broomfield,
who is currently the Executive Vice President of Corporate Development
and
on the board of directors of Sand Hill, will continue as a board
member of
the combined company.
|
||
|
|
|
|
||
Q.
|
What
happens to Sand Hill if the merger is not
consummated?
|
A.
|
If
the merger is not consummated Sand Hill will be liquidated. Upon
such a
liquidation, the net proceeds of Sand Hill’s initial public offering held
in the trust account, plus any interest earned thereon, will be
distributed pro rata to Sand Hill’s common stockholders, excluding Sand
Hill’s initial stockholders who purchased their shares of common stock
prior to its initial public offering.
|
||
|
|
|
|
||
Q.
|
What
happens to St. Bernard if the merger is not
consummated?
|
A.
|
If
the merger is not consummated, St. Bernard will continue to operate
as a
private company.
|
||
|
|
|
|
||
Q.
|
When
do you expect the merger to be completed?
|
A.
|
It
is currently anticipated that the merger will be completed promptly
following the special meetings of Sand Hill and St.
Bernard.
|
||
|
|
|
|
||
Q.
|
Do
I have appraisal rights?
|
A.
|
Sand
Hill’s stockholders do not have appraisal or dissenters rights in
connection with the merger.
Holders
of St. Bernard capital stock who hold their shares of St. Bernard
capital
stock of record and continue to own those shares through the effective
time of the merger and who properly demand appraisal of their shares
in
writing on or before ____________, 2006 in accordance with the
requirements of Section 262 of the General Corporation Law of the
State of
Delaware, or the DGCL, are entitled to appraisal rights as set
forth in
Section 262. A copy of Section 262 of the DGCL is attached to this
proxy
statement/prospectus as Annex
F.
Under
Section 262, St. Bernard stockholders who comply with the procedures
set
forth in Section 262 will be entitled to have their shares appraised
by
the Delaware Court of Chancery and to receive cash payment of the
fair
value of the shares, exclusive of any element of the value arising
from
the accomplishment or expectation of the merger, together with
a fair rate
of interest, if any, as determined by the court. St. Bernard will
send
notice pursuant to Section 262 of the DGCL to the St. Bernard stockholders
who are entitled to appraisal rights when St. Bernard mails this
prospectus to the St. Bernard stockholders. See “The
Merger Proposal - Appraisal or
Dissenters Rights”
on page 61.
|
||
Q.
|
If
I am not going to attend the Sand Hill special meeting in person,
should I
return my proxy card instead?
|
A.
|
Yes.
After carefully reading and considering the information contained
in this
document, please fill out and sign your proxy card. Then return
the
enclosed proxy card in the return envelope as soon as possible,
so that
your shares may be represented at the Sand Hill special
meeting.
|
||
|
|
|
|
||
Q.
|
What
will happen if I abstain from voting or fail to vote at the Sand
Hill
special meeting?
|
A.
|
Sand
Hill will count a properly executed proxy marked ABSTAIN with respect
to a
particular proposal as present for purposes of determining whether
a
quorum is present. For purposes of approval, an abstention or failure
to
vote will have the same effect as a vote against the merger proposal,
the
amendment proposal, the stock options plan proposal and the adjournment
proposal. However, if you want to convert your shares into a pro
rata
portion of the trust account in which a substantial portion of
the net
proceeds of Sand Hill’s initial public offering are held, you must vote
against the merger and make an affirmative election to convert
your shares
of common stock on the proxy card. An abstention will have the
same effect
as a vote against the stock option plans proposal and the adjournment
proposal, but a failure to vote will have no effect on the stock
option
plans proposal and the adjournment proposal, assuming that a quorum
for
the special meeting is present. Shares that are not voted or are
broker
non-voted or where the stockholder abstains from voting shall not
be
eligible to be converted into cash upon completion of the
merger.
|
||
|
|
|
|
||
Q.
|
What
do I do if I want to change my vote prior to the Sand Hill special
meeting?
|
A.
|
Send
a later-dated, signed proxy card to Sand Hill prior to the date
of the
Sand Hill special meeting or attend the special meeting in person
and
vote. Your attendance alone will not revoke your proxy. You also
may
revoke your proxy by sending a notice of revocation to Sand Hill
at the
address of Sand Hill’s corporate headquarters, on or before ____________,
2006.
|
||
|
|
|
|
||
Q.
|
If
I am not going to attend the St. Bernard special meeting in person,
should
I return my proxy card instead?
|
A.
|
Yes.
After carefully reading and considering the information contained
in this
document, please fill out and sign your proxy card. Then return
the
enclosed proxy card in the return envelope as soon as possible,
so that
your shares may be represented at the St. Bernard special
meeting.
|
||
|
|
|
|
||
Q.
|
What
will happen if I abstain from voting or fail to vote at the St.
Bernard
special meeting?
|
A.
|
St.
Bernard will count a properly executed proxy marked ABSTAIN with
respect
to the merger proposal as present for purposes of determining whether
a
quorum is present. For purposes of approval, an abstention or failure
to
vote will have the same effect as a vote against the merger
proposal.
|
||
Q.
|
What
do I do if I want to change my vote prior to the St. Bernard special
meeting?
|
A.
|
Send
a later-dated, signed proxy card to St. Bernard prior to the date
of the
St. Bernard special meeting or attend the St. Bernard special meeting
in
person and vote. Your attendance alone will not revoke your proxy.
You
also may revoke your proxy by sending a notice of revocation to
St.
Bernard at the address of St. Bernard’s corporate headquarters, on or
before _________, 2006
|
||
|
|
|
|
||
Q.
|
If
my shares of Sand Hill stock are held in “street name” by my broker, will
my broker vote my shares for me?
|
A.
|
No.
Your broker can vote your shares only if you provide instructions
on how
to vote. You should instruct your broker to vote your shares, following
the directions provided by your broker.
|
||
|
|
|
|
||
Q.
|
Who
is soliciting my proxy?
|
A.
|
Proxies
are being solicited by the Sand Hill board of directors for the
Sand Hill
special meeting and by the St. Bernard board of directors for the
St.
Bernard special meeting.
|
||
|
|
|
|
||
Q.
|
Who
can help answer my questions?
|
A.
|
If
you are a Sand Hill stockholder and have questions about the merger,
you
may write or call Sand Hill IT Security Acquisition Corp., 3000
Sand Hill
Road, Building 1, Suite 240, Menlo Park, California 94025, (650)
926-7022,
Attn: Humphrey P. Polanen.
If
you are a St. Bernard stockholder and have questions about the
merger, you
may write or call St. Bernard Software, Inc., 15015 Avenue of Science,
San
Diego, California 92128, (858) 676-2277, Attn: John E.
Jones.
|
· |
escalating
volume of Internet attacks on business, industry and governments,
reaching
over 140,000 attacks in 2004;
|
· |
increasing
sophistication of attacks and increasing cost per
attack;
|
· |
material
loss in employee productivity due to unauthorized Internet usage
during
working hours;
|
· |
significant
recent increases in government and regulatory requirements specifically
targeting security, including but not limited to, Sarbanes-Oxley
(SOX),
HIPPA, BASEL II, Gramm-Leach-Bliley, GISRA,
etc.;
|
· |
increases
in customer demand for integrated, full solution product suites;
and
|
· |
a
strong preference in SME for easy to install and easy to use security
appliances.
|
· |
Sand
Hill’s and St. Bernard’s stockholders have adopted the merger
agreement;
|
· |
holders
of less than 20% of the shares of common stock issued in Sand Hill’s
initial public offering vote against the merger proposal and demand
conversion of their shares of common stock into cash;
and
|
· |
the
other conditions specified in the merger agreement have been satisfied
or
waived.
|
· |
To
vote in person, come to the Sand Hill special meeting, and you will
be
given a ballot when you arrive.
|
· |
To
vote by proxy, simply complete, sign and date the enclosed proxy
card and
return it promptly in the envelope provided. If you return your signed
proxy card before the Sand Hill special meeting, your shares will
be voted
as you direct.
|
· |
If
you are a registered stockholder (that is, if you hold your stock
in
certificate form), you may vote by telephone or electronically through
the
Internet by following the instructions included with your proxy card.
If
your shares are held in “street name,” please check your proxy card or
contact your broker or nominee to determine whether you will be able
to
vote by telephone or electronically. The deadline for voting by telephone
or electronically is 11:59 p.m., Eastern Standard Time, on
____________, 2006.
|
· |
To
vote in person, come to the St. Bernard special meeting, and you
will be
given a ballot when you arrive.
|
· |
To
vote by proxy, simply complete, sign and date the enclosed proxy
card and
return it promptly in the envelope provided. If you return your signed
proxy card before the St. Bernard special meeting, your shares will
be
voted as you direct.
|
STOCK
OPTIONS ISSUED TO OFFICERS AND DIRECTORS
OF
ST. BERNARD SOFTWARE(1)
|
||||||||||
Name
|
Number
of
Options
Held
|
Number
of
Options
Vested
|
Number
of
Unvested
Options
Held
|
|||||||
Mr.
John E. Jones,
Chief Executive Officer, President and Director
|
170,000
|
170,000
|
—
|
|||||||
Mr.
Bart A.M. van Hedel, Director
|
95,000
|
88,889
|
6,111
|
|||||||
Mr.
Robert G. Copeland, Director
|
95,000
|
88,889
|
6,111
|
|||||||
Mr.
Mel Lavitt, Director
|
34,723
|
28,612
|
6,111
|
|||||||
Mr.
Al Riedler, Chief
Financial Officer
|
90,167
|
67,504
|
22,663
|
|||||||
(Dollars
in thousands except share information)
|
|
|
|
||||||||||
|
(unaudited)
Three
Months Ended
March
31,
|
Period
from
April
15, 2004 (inception) to March 31, 2006
|
Period
from
April
15, 2004 (inception) to December 31,
|
Period
from
April
15, 2004 (inception) to December 31,
|
|||||||||
Consolidated
Statement of Operations Data:
|
2006
|
|
2005
|
2004
|
|||||||||
Net
revenue
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||
Operating
income (loss)
|
$
|
(171
|
)
|
$
|
(1,469
|
)
|
$
|
(1,299
|
)
|
$
|
(192
|
)
|
|
Interest
income
|
$
|
222
|
$
|
1,003
|
$
|
780
|
$
|
142
|
|||||
Net
(loss) income
|
$
|
51
|
$
|
(467
|
)
|
$
|
(518
|
)
|
$
|
(50
|
)
|
||
Net
(loss) income per share - basic
|
$
|
0.01
|
$
|
(0.10
|
)
|
$
|
(0.12
|
)
|
$
|
(0.01
|
)
|
||
Net income (loss) per share - diluted | $ | 0.01 | $ | (0.10 | ) | $ | (0.12 | ) | $ | (0.01 | ) | ||
Shares
used - basic
|
5,110,000
|
4,518,884
|
4,433,893
|
3,468,786
|
|||||||||
Shares used - diluted | 5,528,172 | 4,518,884 | 4,433,893 | 3,468,786 |
Consolidated
Balance Sheet Data:
|
(unaudited)
March
31,
2006
|
December
31,
2005
|
December
31,
2004
|
|||||||
Cash
and cash equivalents
|
$
|
21,953
|
$
|
21,804
|
$
|
21,884
|
||||
Working
capital
|
$
|
21,619
|
$
|
21,561
|
$
|
22,000
|
||||
Total
assets
|
$
|
21,964
|
$
|
21,816
|
$
|
22,016
|
||||
Common
stock subject to possible conversion
|
$
|
4,369
|
$
|
4,344
|
$
|
4,218
|
||||
Stockholder
equity
|
$
|
17,251
|
$
|
17,217
|
$
|
17,782
|
||||
Common
stock issued and outstanding
|
$
|
5,110,000
|
$
|
5,110,000
|
$
|
5,110,000
|
||||
Book
value per common share
|
$
|
3.38
|
$
|
3.37
|
$
|
3.48
|
|
(unaudited)
Three
Months Ended
|
Year
Ended December 31,
|
|||||||||||||||||
|
|
March
31,
|
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
||||||
Consolidated
Statement of Operations Data:
|
2006
|
2005
|
2004
|
2003
|
2002(1)
|
2001
|
|||||||||||||
Net
revenue
|
$
|
5,269
|
$
|
23,985
|
$
|
21,174
|
$
|
19,790
|
$
|
14,351
|
$
|
11,287
|
|||||||
Operating
loss
|
$
|
(1,172
|
)
|
$
|
(2,670
|
)
|
$
|
(7,774
|
)
|
$
|
(530
|
)
|
$
|
(868
|
)
|
$
|
(1,913
|
)
|
|
Interest
expense
|
$
|
(79
|
)
|
$
|
263
|
$
|
240
|
$
|
285
|
$
|
301
|
$
|
111
|
||||||
Net
loss
|
$
|
(1,251
|
)
|
$
|
(2,961
|
)
|
$
|
(7,962
|
)
|
$
|
(309
|
)
|
$
|
(1,277
|
)
|
$
|
(1,772
|
)
|
|
Net
loss per share - basic and diluted
|
$
|
(0.05
|
)
|
$
|
(0.13
|
)
|
$
|
(0.39
|
)
|
$
|
(0.02
|
)
|
$
|
(0.07
|
)
|
$
|
(0.10
|
)
|
|
Weighted
average shares outstanding
|
22,231
|
22,157
|
20,503
|
19,434
|
18,316
|
18,206
|
|||||||||||||
Common
stock issued and outstanding
|
23,251
|
23,197
|
20,860
|
19,434
|
19,432
|
18,205
|
|||||||||||||
Book
value per common share
|
$
|
(0.42
|
)
|
$
|
(0.37
|
)
|
$
|
(0.33
|
)
|
$
|
0.03
|
$
|
0.06
|
$
|
0.13
|
|
(unaudited)
|
As
of December 31,
|
|||||||||||||||||
March
31,
|
(unaudited)
|
(unaudited)
|
|||||||||||||||||
Consolidated
Balance Sheet Data:
|
2006
|
2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||||
Cash
and equivalents
|
$
|
2
|
$
|
9
|
$
|
557
|
$
|
1,111
|
$
|
5
|
$
|
51
|
|||||||
Working
capital (deficit)
|
$
|
(11,081
|
)
|
$
|
(9,700
|
)
|
$
|
(9,420
|
)
|
$
|
(2,556
|
)
|
$
|
(1,320
|
)
|
$
|
(784
|
)
|
|
Total
assets
|
$
|
11,031
|
$
|
12,192
|
$
|
11,454
|
$
|
11,481
|
$
|
8,015
|
$
|
7,663
|
|||||||
Deferred
revenue
|
$
|
15,620
|
$
|
16,071
|
$
|
13,200
|
$
|
8,479
|
$
|
4,370
|
$
|
2,965
|
|||||||
Long
term obligation less current portion
|
$
|
0
|
$
|
5
|
$
|
40
|
$
|
33
|
$
|
0
|
$
|
300
|
|||||||
Stockholder
equity (deficit)
|
$
|
(9,793
|
)
|
$
|
(8,555
|
)
|
$
|
(6,812
|
)
|
$
|
650
|
$
|
1,136
|
$
|
2,274
|
||||
(1)
Effective January 1, 2002, St. Bernard adopted the provisions of
SFAS No.
142.
|
|
|
Pro
Forma Condensed
|
|
|
|
|||||
Consolidated
Statement of Operations Data:
|
|
|
|
|||||
Dollars
and shares in thousands
|
|
|
|
|||||
|
Three
Months Ended March 31, 2006
|
Year
Ended December 31, 2005
|
||||||
Assumes
no conversions (1)
|
|
|
|
|||||
Net
revenue
|
$
|
5,269
|
$
|
23,985
|
|
|||
Operating
loss
|
$
|
(1,343
|
)
|
$
|
(3,776
|
)
|
||
Interest
expense
|
$
|
(79
|
)
|
$
|
(263
|
)
|
||
Net
loss
|
$
|
(1,200
|
)
|
$
|
(3,430
|
)
|
||
Net
loss per share - basic
|
$
|
(0.08
|
)
|
$
|
(0.23
|
)
|
||
Shares
used - basic and diluted
|
14,892
|
|
14,867
|
|
||||
Pro
Forma Condensed
|
|
|
|
|||||
Consolidated
Balance Sheet Data:
|
|
|
|
|||||
Dollars
in thousands
|
|
|
|
|||||
|
|
|
||||||
March
31, 2006
|
||||||||
Cash
and cash equivalents
|
$
|
19,431
|
|
|||||
Working
capital
|
$
|
8,014
|
|
|||||
Total
assets
|
$
|
30,470
|
|
|||||
Deferred
Revenue
|
$
|
15,620
|
|
|||||
Long-term
obligations less current portion
|
$
|
—
|
|
|||||
Stockholder
equity
|
$
|
9,302
|
|
Three
months ended
March
31, 2006
|
Year
ended
December
31, 2005
|
||||||||||||
|
Assuming
No
Conversions
(1)
|
Assuming
Maximum
Conversions
(2)
|
Assuming
No
Conversions
(1)
|
Assuming
Maximum
Conversions
(2)
|
|||||||||
|
(In
thousands)
|
(In
thousands)
|
|||||||||||
|
|
|
|||||||||||
Revenue
|
$
|
5,269
|
5,269
|
$
|
23,985
|
$
|
23,985
|
||||||
Net
loss
|
(1,200
|
)
|
(1,295
|
)
|
(3,430
|
)
|
(3,517
|
)
|
|||||
Net
loss per share
|
(0.08
|
)
|
(0.09
|
)
|
(0.23
|
)
|
(0.25
|
)
|
|||||
Shares
used basic and diluted
|
14,892
|
14,074
|
14,867
|
14,049
|
|
March
31, 2006
|
||||||
|
Assuming
No
Conversions
(1)
|
Assuming
Maximum
Conversions
(2)
|
|||||
|
(in
thousands)
|
||||||
|
|||||||
Total
assets
|
$
|
30,470
|
$
|
26,101
|
|||
Total
liabilities
|
21,168
|
21,168
|
|||||
Stockholders’
equity
|
9,302
|
4,933
|
(1) |
Assumes
that no Sand Hill stockholders seek conversion of their Sand Hill
stock
into their pro rata share of the trust
fund.
|
(2) |
Assumes
that 19.9% shares of Sand Hill common stock were redeemed into their
pro
rata share of the trust fund.
|
Number
of shares of common stock
outstanding
upon consummation of the merger:
|
St.
Bernard
|
Sand
Hill(1)
|
|
Combined
Company
|
|||||||||
|
|
|
|
|
|||||||||
Assuming
no conversions
|
9,782,357
|
5,110,000
|
14,892,357
|
||||||||||
|
65.7
|
%
|
34.3
|
%
|
100
|
%
|
|||||||
Assuming
maximum conversions
|
9,782,357
|
4,292,110
|
14,074,467
|
||||||||||
|
69.5
|
%
|
30.5
|
%
|
100
|
%
|
|||||||
Net
loss per share—historical:
|
|||||||||||||
Year
ended December 31, 2005:
|
$
|
(0.13
|
)
|
$
|
(0.09
|
)
|
(2
|
)
|
|||||
Book
value per share— Historical December 31, 2005
|
$
|
(0.37
|
)
|
$
|
4.22
|
(4
|
)
|
||||||
Net
loss per share—pro forma: (2)
|
|||||||||||||
Year
ended December 31, 2005:
|
|||||||||||||
No
conversions
|
$
|
(0.23
|
)
|
||||||||||
Maximum
conversions (3)
|
$
|
(0.25
|
)
|
||||||||||
Book
value per share—pro forma December 31, 2005
|
|||||||||||||
No
conversions
|
$
|
0.76
|
|||||||||||
Maximum
conversions (3)
|
$
|
0.51
|
|||||||||||
Three
Months Ended March 31, 2006:
|
|||||||||||||
No
conversions
|
$
|
(0.08
|
)
|
||||||||||
Maximum
conversions (3)
|
$
|
(0.09
|
)
|
||||||||||
Book
value per share—pro forma March 31, 2006
|
|||||||||||||
No
conversions
|
$
|
0.62
|
|||||||||||
Maximum
conversions (3)
|
$
|
0.35
|
(1)
|
Operations
of Sand Hill for 2005 are for the period from April 15, 2004 (inception)
to December 31, 2005 and April 15, 2004 (inception) to March 31,
2006.
|
(2)
|
Consolidated
pro forma per share amounts for Sand Hill and St. Bernard were determined
based upon the assumed number of shares to be outstanding under the
two
different levels of conversion
rights.
|
(3)
|
This
calculation includes shares of common stock subject to conversion
only in
the event that minimum approval of the merger is
obtained.
|
(4) |
Historical
book value per share for Sand Hill was computed based on the book
value of
Sand Hill at December 31, 2005 $17,217,036 plus common stock, subject
to
possible conversion $4,343,935 divided by the 5,110,000 issued and
outstanding shares of Sand Hill common stock at December 31,
2005.
|
|
Common
Stock
|
Warrants
|
Units
|
||||||||||||||||
Quarter
Ended
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
December
31, 2004
|
$
|
4.95
|
$
|
4.55
|
$
|
0.70
|
$
|
0.43
|
$
|
6.20
|
$
|
5.42
|
|||||||
|
|||||||||||||||||||
March
31, 2005
|
$
|
5.25
|
$
|
4.80
|
$
|
0.95
|
$
|
0.55
|
$
|
7.25
|
$
|
6.00
|
|||||||
|
|||||||||||||||||||
June
30, 2005
|
$
|
5.47
|
$
|
4.91
|
$
|
0.96
|
$
|
0.56
|
$
|
7.25
|
$
|
6.00
|
|||||||
|
|||||||||||||||||||
September
30, 2005
|
$
|
5.50
|
$
|
5.10
|
$
|
1.60
|
$
|
0.75
|
$
|
8.51
|
$
|
6.45
|
|||||||
|
|||||||||||||||||||
December
31, 2005
|
$
|
5.50
|
$
|
5.10
|
$
|
1.70
|
$
|
0.77
|
$
|
8.80
|
$
|
6.60
|
|||||||
|
|||||||||||||||||||
March
31, 2006
|
$
|
5.35
|
$
|
5.19
|
$
|
1.17
|
$
|