HP to Acquire Australian Tower Software

HP and Tower Software today announced that they have signed a pre-bid agreement for HP to acquire Tower, a document and records management software company based in Canberra, Australia.

The deal will enable HP to expand its offerings in the fast-growing electronic discovery and compliance software market.

The acquisition of Tower will add electronic records management to HP Software’s existing e-discovery and compliance capabilities in information collection and retention. This includes both records management and identification, which have become increasingly important for organizations due to rules and regulations such as the Federal Rules of Civil Procedure, the Sarbanes-Oxley Act and the Data Protection and Freedom of Information Acts.

Under an existing alliance between the companies, Tower TRIM Context has been integrated with the HP Integrated Archive Platform to provide customers with a combined records management and compliance archiving solution.

Combining HP’s and Tower’s overall software capabilities will enable customers to rapidly identify electronic business records from general business communication, collect those business records in a scalable and high-performance archive platform and preserve them for long-term future use in legal discovery or compliance activities.

"In reaction to increased business regulation, electronic records management has moved from a back-office task to a business-critical function," said Robin Purohit, vice president and general manager, Information Management, Software, HP. "The combination of the HP and Tower software portfolios is expected to be hugely beneficial to the legal and IT organizations of businesses all over the world."

The addition of Tower also is expected to enable HP Software to address the growing Microsoft SharePoint compliance and e-discovery opportunities. Content stored in Microsoft SharePoint is coming under increased scrutiny from litigators, legal counsels and compliance officers involved in legal discovery, corporate governance or regulatory compliance.

Tower has more than 22 years of paper and electronic records management experience and serves approximately 1,000 customers with more than 780,000 users in 32 countries.

"The combination of HP and Tower will allow us to scale and provide our customers with a comprehensive portfolio of enterprise information and IT management software solutions," said Martin Harwood, chief executive officer, Tower Software. "We have partnered with HP for years, so today’s news is exciting because we will now be able to enhance how we serve our joint customers and partners."

The board of directors of Tower has unanimously approved the transaction and recommends that Tower shareholders accept HP’s offer in the absence of a higher third-party offer.

Additionally, the three largest shareholders of Tower, Quadrant Private Equity, Brand Hoff and Martin Harwood, have advised Tower that they and their associated interests intend to accept HP’s offer in the absence of a higher third-party offer. Between them, Quadrant Private Equity, Brand Hoff and Martin Harwood have an interest in more than 90 percent of Tower shares.

"When I founded Tower more than 20 years ago, we set out to develop the world’s best records and document management software. By joining forces with HP – one of the world’s largest technology companies – we expect to take TRIM Context to the broader global market," said Brand Hoff, founder, Tower Software. "This will mark a new era for Tower’s customers, employees and partners. I am pleased to fully support this transaction and encourage our Tower shareholders to accept HP’s offer, in the absence of a higher third-party offer."

The acquisition will be conducted by means of an off-market takeover bid for all of the outstanding shares of Tower. The takeover offer is subject to a number of conditions, including regulatory approvals, and is expected to close in the second quarter of calendar year 2008.

Tower was founded in 1985 and is headquartered in Canberra,
Australia, with additional offices in Australia, North America and
Europe. Tower has 240 employees. Tower develops and markets enterprise
content management software and solutions, primarily for regulated and
government industries. Tower’s software products include electronic
document and records management, business process automation, web
content management, document capture and assembly, collaboration and
information management solutions.

Appendix – Offer Details

Offer Price

HP (via an indirect wholly owned subsidiary) is making a cash offer to acquire all Tower Software shares at Aus$3.39 per share.

Offer Conditions

The Offer will be subject to the fulfillment of a number of conditions. A brief summary of these conditions is set out below.

(1) Minimum acceptance condition of no less than 90% of the Tower shares

(2) Foreign Investment Review Board approval

(3) No regulatory action in relation to the takeover bid before the end of the Offer period

(4) No material adverse change in respect of Tower before the end of the Offer period

(5) No material breach of a Tower warranty before the end of the Offer period

(6) No prescribed occurrences between the date of the pre-bid agreement and the end of the Offer period

(7) No material breach of the pre-bid agreement before the end of the Offer period

(8) Specified key employees not resigning or otherwise seeking to terminate their employment with Tower or HP before the end of the Offer period

(9) At least 85% of all employees other than the identified key employees who receive an offer of employment from HP accept those offers and do not subsequently resign or otherwise seek to terminate their employment with Tower or HP before the end of the Offer period

(10) Specified holders of Tower options having entered into option realization deeds with Tower

(11) The major shareholders have not terminated, or taken any step to terminate, the Key Shareholder Deeds before the end of the Offer period.

Break-Up Fee

HP is entitled to a break fee of Aus$1.2 million to compensate it for the substantial costs it has incurred in pursuing the takeover bid and entering into the pre-bid agreement.

In summary terms, this break-up fee will be payable if the takeover bid made by HP does not proceed because:

(1) HP has not received acceptances of at least 90% of the Tower shares by the end of the Offer period;

(2) Any Tower director recommends a competing takeover bid or otherwise withdraws his support for the takeover bid;

(3) Tower solicits a competing takeover proposal; or

(4) HP terminates the pre-bid agreement because the conditions of the Offer have not been fulfilled, Tower is in breach of the Tower warranties, a member of the Tower board has recommended a competing takeover proposal or the Key Shareholder Deeds have been terminated.

Call Option

Quadrant has granted HP a call option to acquire Tower shares equal to 19.9% of all Tower shares in the event that a competing takeover proposal is made or announced.

Tower Software

HP