<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 15, 1997
SIMULATION SCIENCES INC.
(Exact name of registrant as specified in its charter)
Delaware 000-21283 95-2487793
- ------------------------------ ------------ -------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
601 Valencia Avenue, Suite 100
Brea, California 92823
(Address of principal executive offices)
(714) 579-0412
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective September 15, 1997, Simulation Sciences Inc. (the
"Registrant") acquired business planning software and obtained exclusive,
royalty-free licenses to on-line modeling and process control software from
Shell Oil Products Company ("Shell"), a Delaware corporation and subsidiary of
Shell Oil Company, for the purpose of developing and marketing an enterprise
optimization system for the process industry.
Under terms of the agreements, the Registrant will make a $1.5 million
payment to Shell for its business planning software, known internally to Shell
as PROFIT. In addition, the Registrant will make an initial $1 million payment
for certain exclusive worldwide marketing rights and the right to purchase
Shell's advanced multivariable process control tools, which include QDMC.
The Registrant has also acquired an irrevocable, perpetual, exclusive,
worldwide, fully paid up, royalty-free license to Shell's OPERA solver ("OPERA")
and MITRE modeling environment ("MITRE") for $6 million in cash and shares of
Common Stock of the Registrant to be paid as follows: (i) cash in the amount of
$1,500,000 on the date (the "Payment Date") that the Registrant ships the first
commercial version of ROMEO, the Registrant's product under development that
will integrate OPERA and MITRE and certain of Registrant's own software, which
shipment is expected in the first half of 1998, and (ii) the issuance of shares
of the Registrant's Common Stock with an aggregate value of $4,500,000, based on
a valuation over the ten day period ending seven days before the Payment Date.
Prior to this agreement, the Registrant and Shell were parties to a development
and license agreement relating to OPERA and MITRE, which agreement is superseded
by the new license agreement.
The Registrant's press release announcing the completion of these
agreements, the Software Marketing Agreement relating to QDMC, the Asset
Purchase Agreement relating to PROFIT, and the Software License Agreement
relating to OPERA and MITRE, are filed as exhibits to this current Report on
Form 8-K. This summary description of the transaction is qualified in its
entirety by reference to the documents filed as exhibits hereto.
The foregoing description of the acquisition and licenses of software
from Shell contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including the statement relating to the first
commercial version of ROMEO expected in the first half of 1998. The date of the
first commercial version of ROMEO has not yet been determined, and the
Company's ability to release such version during that time period is uncertain
and subject to a number of risks. These risks include risks of delays associated
with software "bugs" and/or defects, the potential for third-party infringement
claims, adverse changes in the Registrant's relationship with the employees or
consultants responsible for performing development work, and the other risks
described in the Registrant's most recent report on Form 10-Q and Form 10-K
filed with the Securities and Exchange Commission.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
10.1* Software License Agreement dated September 15, 1997
between Shell Oil Products Company, acting for itself
and as agent for Shell Oil Company, and the
Registrant.
10.2* Asset Purchase Agreement dated September 15, 1997
between Shell Oil Products Company, acting for itself
and as agent for Shell Oil Company, and the
Registrant.
10.3* Software Marketing Agreement dated September 15, 1997
between Shell Oil Products Company, acting for itself
and as agent for Shell Oil Company, and the
Registrant.
99.1 Press Release dated September 15, 1997.
- -----------------------------------------------------
* Confidential treatment has been requested as to portions of this Exhibit.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIMULATION SCIENCES INC.
Dated: September 29, 1997 By: /s/ Charles R. Harris
---------------------------------
Charles R. Harris
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.1
OPERA/MITRE SOFTWARE LICENSE AGREEMENT
This Software License Agreement ("the Agreement") is entered into on
this 15th day of September, 1997 (the "Effective Date") by and between Shell Oil
Products Company, a Delaware corporation, acting for itself and as agent for
Shell Oil Company, a Delaware corporation (collectively, "Shell"), and
Simulation Sciences, Inc., a Delaware corporation ("SIMSCI").
RECITALS
WHEREAS, SIMSCI is a software technology company delivering process
simulation and rigorous real time optimization solutions, serving in segments of
process industries; and
WHEREAS, Shell is in the business of, among other things, the
exploration and production, refining and marketing, and processing of
petrochemical products; and
WHEREAS, Shell has developed and is the owner of certain computer
software programs with applications in the field of on-line optimization,
including a solver (known internally to Shell as "OPERA") and a modeling
language system and architecture (known internally to Shell as "MITRE"); and
WHEREAS, The parties have previously entered into that certain Software
Development and Licensing Agreement dated February 22, 1996 (the "License
Agreement") pursuant to which Shell granted to SIMSCI certain rights in OPERA
and MITRE and SIMSCI (i) undertook to integrate OPERA and MITRE with certain of
its own software programs for online optimization for the purpose of licensing
such integrated solution ("ROMEO") to third parties and (ii) granted to Shell
certain rights to use ROMEO; and
WHEREAS, Shell desires to grant to SIMSCI, and SIMSCI desires to
receive from Shell, an exclusive license in the field of on-line optimization to
OPERA and MITRE, all on the terms and conditions set forth herein; and
WHEREAS, the parties have previously entered into that certain term
sheet dated May 29, 1997 (the "Term Sheet") concerning the subject matter hereof
and now desire to supersede the License Agreement and the Term Sheet by entering
into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree as follows:
[*] Confidential Treatment Requested
<PAGE> 2
AGREEMENT
1. DEFINITIONS Capitalized terms in this Agreement have the following meanings:
1.1 "Affiliated Entities" shall mean Affiliates and Subsidiaries of
Shell.
1.2 "Affiliates" shall mean [*], a company of [*], [*], an [*] company,
and any company (other than Shell) in whatever country organized, in which
either or both of said companies shall, at the time in question and directly or
indirectly through one or more intermediaries, [*] or more of the stock having
the [*] or, any company (other than Shell), in whatever country organized, in
which Shell, at the time in question and directly or indirectly through one or
more intermediaries, [*] or more of the stock with the [*].
1.3 "Copy" shall mean an embodiment of ROMEO used for on-line
optimization of a specific process Unit at a given site. ("Unit" means a single
major chemical processing operation such as crude distillation or catalytic
reforming and associated equipment and sub-processes necessary to perform that
sole function.) A Copy includes the use of such copy, whether centrally or
remotely, by those involved in implementing, supporting, evaluating, studying or
in any way dealing with that specific process Unit. Thus, for example, a Copy
may include several copies of the Software that are all used to support a single
Unit.
1.4 "Derivative Work" is a work that is based on an underlying work and
that would be a copyright infringement if prepared without the authorization of
the copyright owner(s) of the underlying work as described under United States
copyright laws. A Derivative Work is subject to the ownership rights and
licenses of a party or of others in the underlying work.
1.5 "Documentation" shall mean all technical documentation and
procedural and instructional manuals regarding the use of the Programs including
on-line help capabilities.
1.6 "Error" shall mean a substantial nonconformity of the Programs with
the corresponding documentation.
1.7 "Field" shall mean the field of online optimization systems and
technology including ancillary off-line uses. "Ancillary off-line uses" means
use of the software, whether centrally or remotely, by those involved in
implementing, supporting, evaluating, studying or in any way dealing with the
on-line use.
1.8 "Intellectual Property Rights" shall mean all current and future
worldwide patents and other patent rights, utility models, copyrights, mask work
rights, trade secrets, trademarks, service marks and other intellectual property
rights, including without limitation all applications, registrations and filings
with respect thereto.
[*] Confidential Treatment Requested
-2-
<PAGE> 3
1.9 "New Employee" shall mean those persons listed on Exhibit B who
accept an offer of employment by SIMSCI.
1.10 "New Releases" shall mean updates, bug fixes, upgrades, Error
corrections and enhancements to ROMEO provided to Shell during the term of this
Agreement, whether such changes are designated by a change in the number to the
left or right of the decimal point of the number appearing after the product
name.
1.11 "Programs" shall mean the Shell computer software programs listed
in Exhibit A and updates, bug fixes, upgrades, Error corrections and
enhancements thereto and Derivative Works thereof prepared by or for Shell.
1.12 "ROMEO" shall mean computer software, irrespective of the
marketing name used, developed by SIMSCI for use in the Field and incorporating
the Programs or Derivative Works thereof.
1.13 "Source Code" shall mean software in human-readable form,
including all related programmers' comments, data files and structures, header
files, include files, make files, macros, object libraries, programming tools
not commercially available, technical specifications, flowcharts and logic
diagrams, schematics, annotations and documentation reasonably necessary or
useful in enabling an independent third party programmer with reasonable
programming skills to create, operate, maintain, modify and improve the software
without the help of any other person. Data files containing Source Code must be
in standard ASCII format and be readable by a text editor.
1.14 A "Subsidiary" of Shell shall mean a corporation, company, or
other entity (other than Shell), in whatever country organized, in which, (i) as
of the Effective date, (x) Shell directly or indirectly through one or more
intermediaries has the [*] and (y) Shell or its Affiliates [*]; or (ii) after
the Effective Date, Shell or an Affiliate owns at least [*] of the outstanding
shares or securities (representing the right to vote for the election of
directors or other managing authority). With respect to a corporation, company
or other entity whose outstanding shares or securities (representing the right
to vote for the election of directors or other managing authority) become at
least [*] owned or controlled by Shell after the Effective Date during the term
of this Agreement, only such a corporation, company or other entity that is not
a competitor of SIMSCI shall be deemed to be a Subsidiary. For purposes of this
Section 1.14 "competitor of SIMSCI" shall mean an entity that is in the business
of developing and/or marketing and/or distributing for commercial purposes
computer software in the Field. Further, with respect to interests acquired
after the Effective Date, any such corporation, company, or other entity shall
be deemed to be a Subsidiary for only so long as such ownership or [*] exists.
[*] Confidential Treatment Requested
-3-
<PAGE> 4
2. LICENSE GRANTS
2.1 License to SIMSCI.
2.1.1 License. Shell hereby grants to SIMSCI an irrevocable,
perpetual, exclusive, worldwide, fully paid-up, royalty-free license within the
Field, including the right to grant and authorize the grant of sublicenses, to
use, reproduce, display, perform, prepare Derivative Works of, market, sell and
distribute, in any medium or distribution technology whatsoever (whether known
or unknown) the Programs (in both object code and Source Code formats) and the
Documentation.
2.1.2 Reservation of Rights. Shell expressly reserves all
right, title and interest in and to the Programs outside of the Field.
2.2 Derivative Works Created by Shell. The parties anticipate that
after the Effective Date Shell will cease to develop or create Derivative Works
of the Programs. However, in the event that Shell creates any Derivative Works
of the Programs, Shell will deliver to SIMSCI all such Derivative Works promptly
upon completion for SIMSCI's use in the Field pursuant to this Agreement.
2.3 License to Shell. SIMSCI hereby grants to Shell and the Affiliated
Entities a perpetual, non-exclusive, non-transferable, worldwide, royalty-free
license, without right of sublicense, to use, reproduce, display, perform and
prepare Derivative Works of the Programs (in object code and Source code format)
and the Documentation, as each exists as of the Effective Date, but only for
Shell's and the Affiliated Entities' internal processing purposes within the
Field. Shell shall not use the Programs and Documentation except as expressly
permitted herein.
2.4 ROMEO License.
2.4.1 Grant. SIMSCI hereby grants to Shell a perpetual,
non-exclusive, non-transferable, worldwide, royalty-free license during the term
of this Agreement, without right of sublicense, to use, display and perform
ROMEO version 1.0 and New Releases thereto, in object code format only, and
associated documentation, but only for Shell internal purposes and for use only
in the Field. Shell shall not use ROMEO and the associated documentation except
as expressly permitted herein.
2.4.2 Affiliated Entities. SIMSCI agrees to extend the same
rights as granted in Section 2.4.1 to Affiliated Entities provided that such
Affiliated Entities have executed agreements with SIMSCI pursuant to which
SIMSCI grants such Affiliated Entities a license to use SIMSCI's computer
software product know as "PRO II" (with Provision). The parties agree that that
certain license agreement between SIMSCI and [*] (Contract [*] together with
amendments and modifications) is such an agreement. Notwithstanding the
foregoing, no copy of ROMEO shall be provided by SIMSCI to an Affiliated Entity
except
[*] Confidential Treatment Requested
-4-
<PAGE> 5
pursuant to a written licensing agreement between SIMSCI and such Affiliated
Entity with respect to ROMEO containing terms and conditions consistent with the
terms and conditions hereof.
2.4.3 Certain Refineries. Notwithstanding Section 2.4.2 above,
with respect to the extension of the rights granted in Section 2.4.1 to certain
refineries in which Shell may acquire an ownership interest pursuant to a
significant joint venture or similar transaction which may be completed within
the next six months, such rights shall not be royalty free but shall be subject
to a royalty as set forth in a separate written agreement.
2.4.4 Transition Period In Event of Acquisition or
Divestiture. In the event Shell or an Affiliated Entity either acquires or
divests itself of ownership interest in an entity or facility that is using or
has a potential need to use ROMEO (in any case, a "Transition Transaction"),
then, (i) for a period of twelve (12) months from the effect date of the
Transition Transaction (the "Transitional Period"), use of ROMEO by such entity
or facility shall be considered use for Shell's internal purposes under this
Section 2.4; and (ii) in the event that a Transition Transaction is an
acquisition, during the Transition Period the parties hereto will discuss
whether a contractual relationship other than this Agreement shall govern the
continued use of ROMEO by such newly acquired entity or facility. As used in
this Section 2.4.4, "acquisition" shall mean any business transaction wherein
Shell or an Affiliated Entity obtain rights of ownership in an entity or
facility through any business venture, including but not limited to, any
purchase, joint venture or partnership.
2.4.5 Indemnity. SIMSCI agrees to indemnify and hold harmless
Shell, and any Affiliated Entity that enters into a ROMEO license agreement
pursuant to Section 2.4.2, from any third party claim, suit or proceeding (a
"Claim") against it based on any allegation that ROMEO when used within the
scope of the license granted in this Section 2.4 infringes any United States
patent, copyright, trade secret or other proprietary right and to pay any
damages, settlement amounts and costs (including reasonable attorneys' fees and
court costs) relating to such a Claim provided that the foregoing shall not
apply to, and SIMSCI shall have no obligation with respect to, any Claim to the
extent such Claim relates to the Programs. SIMSCI's obligation is subject to
Shell promptly providing to SIMSCI notice of any Claim, and cooperating with and
allowing SIMSCI to control the defense of any Claim and any settlement
negotiations. Shell may participate in the proceedings at its option and
expense.
2.4.6 Continued Commercialization. So long as SIMSCI makes
ROMEO commercially available, SIMSCI shall use commercially reasonable efforts
to provide New Releases of ROMEO such that it remains competitive with other
Software of similar functionality in the Field.
2.5 Marks. Shell grants to SIMSCI a worldwide, non-exclusive,
non-transferable license to use the terms "Shell Oil Company" and "Shell Oil
Products Company" ("Marks") solely to indicate that the Programs and
Documentation owe their origin, at least in part, to inventions and/or works of
authorship belonging to Shell. No other use of trademarks owned or claimed by
Shell shall be included within the term Marks.
-5-
<PAGE> 6
2.5.1 Conformance to Shell Standards. SIMSCI agrees that the
nature and quality of all services rendered by SIMSCI in connection with the
Marks; all goods sold or licensed by SIMSCI under the Marks; and all related
advertising, promotional and other related use of the Marks by SIMSCI shall be
consistent with reasonable standards set by Shell. SIMSCI shall use the Marks
only in the form and manner and with appropriate legends as prescribed from time
to time by Shell.
2.5.2 Inspection. With respect to use of the Marks, SIMSCI
shall cooperate with Shell in facilitating Shell's program to attain and
maintain high standards of such nature and quality, will permit reasonable
inspection of SIMSCI's operation, and will supply Shell with specimens of all
uses of the Marks upon request. SIMSCI shall use reasonable efforts to comply
with all applicable laws and regulations and obtain all appropriate government
approvals pertaining to the sale, distribution, and advertising of goods and
services bearing the Marks.
2.5.3 Enforcement. SIMSCI shall promptly notify Shell of any
unauthorized use of the Marks (or materials exhibiting such Marks) by others
promptly as it comes to SIMSCI's attention. Shell shall have the sole right and
discretion to bring infringement, unfair competition proceedings or any other
claims involving the Marks.
2.6 ROMEO Product Warranty. Except with respect to the Programs, SIMSCI
warrants that (ii) each Copy of ROMEO will substantially conform to its
then-current specifications for a period of ninety (90) days from delivery of
such Copy and (ii) that to the best of SIMSCI's knowledge, ROMEO does not
infringe the intellectual property rights of any third party; provided, however,
in each case that the software is properly used in full compliance with the
documentation and instruction provided by SIMSCI and the software is not
modified or altered by the LICENSEE. SIMSCI will make commercially reasonable
efforts to correct Errors in ROMEO. SIMSCI does not warrant that any or all
failures or errors will be corrected or warrant that the functions contained in
the software will meet LICENSEE's requirements or will operate in the
combinations selected by the LICENSEE. EXCEPT AND TO THE EXTENT EXPRESSLY
PROVIDED ABOVE SIMSCI MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR
PARTICULAR PURPOSE.
3. DISTRIBUTION; MARKETING
3.1 Certain License Provisions. SIMSCI shall use commercially
reasonable efforts to include in agreements relating to distribution and use of
the Programs, to the extent customary in the industry and permitted by the law
of the jurisdiction in which the agreement is likely to be interpreted or
enforced, terms which:
3.1.1 provide a disclaimer of the implied warranties of
merchantability and fitness for a particular purpose with respect to the
Programs;
-6-
<PAGE> 7
3.1.2 provide an exclusion of SIMSCI's licensors' liability
for incidental, consequential and indirect damages;
3.1.3 provide a limitation of SIMSCI's licensors' maximum
liability to the amount that a licensee has paid in licensing fees or
royalties;
3.1.4 proscribe or limit decompilation, reverse engineering,
or other surreptitious accessing of the Programs to reveal any trade secrets or
other proprietary know-how embodied therein to which the sublicensee is not
granted rights; and
3.1.5 protect Shell's Intellectual Property Rights in the
Programs to substantially the same degree as SIMSCI protects its own
Intellectual Property Rights in ROMEO.
Notwithstanding the foregoing, it is understood that such provisions may not be
enforceable in a particular jurisdiction or with respect to a particular
agreement, and that it may not be commercially feasible for SIMSCI to negotiate
successfully the inclusion of such provisions in a particular agreement.
3.2 Notices. SIMSCI shall ensure that all copies of ROMEO containing
the Programs or any Documentation which are distributed to any third party bear
all of the legends, marks, and notices as follows in an appropriate manner to be
mutually agreed upon:
3.2.1 the words "CONTAINS LICENSED PROPRIETARY MATERIAL OF
SHELL OIL COMPANY" or a copyright notice,
3.2.2 a restricted-rights legend conforming to the Federal
Acquisition Regulations (FARs) then in effect that apply to software
developed entirely at private expense, and
3.2.3 indicators of trademark claim or registration wherever
any Shell trademark appears.
4. DELIVERY AND PAYMENT
4.1 Delivery. Within thirty (30) days of the Effective Date, Shell
agrees, at Shell's expense, to deliver to SIMSCI the Programs (on such media as
may be mutually agreed by the parties) and Source Code for the Programs. Shell
shall deliver at least two (2) electronic and hard copies of the Documentation
and at least two (2) electronic and hard copies of any marketing and
demonstration materials, should any such materials exist.
4.2 License Fee. In consideration of the rights and licenses granted
herein and the performance by Shell hereunder, SIMSCI shall pay to Shell a
one-time fee of Seven Million Two Hundred Fifty Thousand Dollars ($7,250,000)
(the "License Fee"). SIMSCI shall not be obligated to pay to Shell any other fee
or royalty for the licenses and rights granted herein.
-7-
<PAGE> 8
4.3 Payment. Shell hereby acknowledges that under the License Agreement
Shell has received from SIMSCI One Million Two Hundred Fifty Thousand Dollars
($1,250,000) of the License Fee set forth in Section 4.2 above. SIMSCI shall pay
to Shell the remaining Six Million Dollars ($6,000,000) of the License Fee in a
combination of cash (by check or wire transfer) and stock as follows: (i) Cash
in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) will be
delivered by SIMSCI to Shell upon the date on which SIMSCI ships to a customer
other than Shell the first commercial release of ROMEO (the "Payment Date").
With respect to the first commercial release of ROMEO, SIMSCI shall use its
diligent efforts to complete such commercial release by [*], and SIMSCI will
notify Shell in the event SIMSCI comes to expect any delay in the completion of
such commercial release. In the event that the first commercial release of ROMEO
is not complete by such date, then within thirty (30) days of such date SIMSCI
shall pay to Shell such One Million Five Hundred Thousand Dollars ($1,500,000)
(the date of such payment becoming the "Payment Date"), and (ii) deliver and
issue Shares of SIMSCI Common Stock ("Shares") valued at Four Million Five
Hundred Thousand Dollars ($4,500,000) (calculated based on the average closing
price for the ten (10) trading days seven days prior to the Payment Date). The
Shares will be issued to Shell, as follows: [*] of the total Shares will be
delivered on the Payment Date and the remaining [*] of the total Shares will on
the Payment Date be placed in an escrow account with a mutually agreed upon
third party escrow agent (the "Escrow Agent") and, subject to the terms of the
applicable escrow agreement by and among Shell, SIMSCI and the Escrow Agent,
distributed to Shell by the Escrow Agent in accordance with the applicable
escrow agreement substantially in the form of Exhibit F and in accordance with
the following schedule: (i) [*] of the total Shares will be delivered on the [*]
annual anniversary of the Payment Date, (ii) [*] of the total Shares will be
delivered on the [*] annual anniversary of the Payment Date, and (iii) [*] of
the total Shares will be delivered on the [*] annual anniversary of the Payment
Date. Shares remaining in the escrow account are referred to as the "Escrowed
Shares". The Shares delivered on the Payment Date and the Shares released from
escrow shall have the registration rights set forth in Exhibit D.
4.4 Early Release of Escrow. If there is a Market Price Decline of (i)
more than fifty percent (50%) and less than seventy percent (70%), then fifty
percent (50%) of the remaining Escrowed Shares to which Shell is entitled shall
be released promptly to Shell upon Shell's written request, and (ii) seventy
percent (70%) or more, then eighty percent (80%) of the remaining Escrowed
Shares to which Shell is entitled shall be released promptly to Shell upon
Shell's written request. "Market Price Decline" shall mean that the value per
share of SIMSCI's Common Stock in the Nasdaq National Market, adjusted for stock
splits, dividends and the like, as measured by the average closing price for any
ten (10) consecutive trading days, is lower than the closing price of the
SIMSCI's stock on the Payment Date.
4.5 Survival of Payment Obligation. Notwithstanding the fact that this
Agreement supersedes the License Agreement, the parties agree that any payment
obligation under Section 2.4 of the License Agreement, a copy of which is
attached hereto as Exhibit E, shall survive.
5. MAINTENANCE AND SUPPORT; HIRING OF EMPLOYEES
[*] Confidential Treatment Requested
-8-
<PAGE> 9
5.1 Maintenance and Support Obligations of SIMSCI. SIMSCI shall make
the following standard maintenance and support services for the then-current
version of ROMEO available to Shell and any Affiliated Entities which have
obtained a license to ROMEO so long as Shell and any such Affiliated Entities
are current in the payment of maintenance fees under Section 5.2 below:
(a) telephone support regarding the operation of ROMEO at
substantially all times from 9:00 a.m. until 5:00 p.m. central time
each business day;
(b) Error correction, but only to the extent that such
services can be reasonably provided, and further provided that Shell
first provides SIMSCI with a report of an Error to be corrected in
sufficient detail to enable a reasonably skilled programmer in the
Field to understand it and such that SIMSCI is able to reproduce the
Error in the applicable operating environment and such Error can be
reasonably verified as residing in ROMEO and not elsewhere,
(c) where SIMSCI is not able to provide an Error correction
and an Error is identified by Shell, SIMSCI will either provide Shell
with a workaround sufficient to alleviate any material adverse effect
of the Error or provide Shell with a written response describing
SIMSCI's then-existing diagnosis of the Error and an outline of a plan
and timetable for correcting it, and
(d) make available New Releases upon commercial release by
SIMSCI.
Any additional services requested by Shell shall be at SIMSCI's then-current
rates for such services. Within thirty (30) days of the Effective Date the
parties shall enter into a mutually agreeable source code escrow agreement with
a mutually agreeable third party.
5.2 Maintenance Fees. In consideration of the maintenance services
provided under Section 5.1, Shell (or any Affiliated Entity, as applicable)
shall pay an annual maintenance fee in advance of $[*] per Copy per year for
each Copy then licensed by Shell or Affiliated Entity, as applicable, for the
first [*] years from delivery of such Copy. Thereafter during the term such
services shall be provided at no charge with respect to such Copies. In
addition, if an installation is canceled by Shell prior to being commissioned
then a pro rata refund of the advance maintenance fees paid will be made to
Shell as follows:
Amount refunded = D x $[*]
where C = ([*])
D = [*]
[*] Confidential Treatment Requested
-9-
<PAGE> 10
and no further payment shall be due from Shell with respect to that Copy. No
such refund shall be made if a cancellation occurs more than twelve (12) months
after the date of delivery of such Copy.
For purposes of clarification, it is understood that the annual
maintenance fees due will vary on a rolling basis depending on the number of
Copies in use in a given year which continue to carry an annual maintenance fee.
For example, Copies delivered in year [*] will carry a maintenance fee in years
[*]. Copies delivered in year [*] will carry a maintenance fee in years [*] and
so on.
At the beginning of the each year during the term of this Agreement,
the arithmetic average of the aggregate of all annual maintenance fees payable
for each year during the preceding [*] years will be calculated ("AA[*]Y", which
average shall include the immediately preceding year but shall not include the
additional payments calculated as due hereunder for any preceding year). During
each of the first four years of the term of this Agreement AA[*]Y shall be
calculated as the arithmetic average for the actual number of years since
inception. If the AA[*]Y calculated at the beginning of a year is larger than
the amount of the immediately preceding year's aggregate maintenance fees
payable, then the difference between AA[*]Y and the immediately preceding year's
aggregate maintenance fees will be due to SIMSCI from Shell in addition to the
annual maintenance fees due for the then-current year.
5.3 Provision of Consulting Services. SIMSCI wishes to utilize the
skills of certain employees of Shell and Shell Services Company on a consulting
basis ("Consulting Services"). SIMSCI agrees to estimate the amount of effort
needed and Shell agrees to use its best efforts with respect to each such
request to cause appropriately skilled individuals employed by Shell to be made
available to SIMSCI to perform such Consulting Services. Shell further agrees to
use its best efforts to cause its Affiliates, including Shell Services Company,
to negotiate consulting agreements with SIMSCI for Consulting Services and, in
particular, for the services of those individuals named on Exhibit C. Any
invention, idea, design, works of authorship or intellectual property created by
any Shell employee that is (i) related to the Consulting Services, SIMSCI
products or the Programs, (ii) the result of work performed directly for SIMSCI
and (iii) created during the term of the Consulting Services shall be the sole
property of SIMSCI and Shell hereby assigns to SIMSCI all Shell's right, title
and interest thereto including all Intellectual Property Rights therein. Shell
warrants that each such individual shall be an employee of Shell and shall have
signed an invention assignment agreement assigning to Shell all rights in works
created by such individual in the performance of his or her services.
5.4 Hiring of Employees.
5.4.1 Employee Arrangements. SIMSCI intends to offer
employment to those current employees of Shell named on Exhibit B. Shell shall
use its best efforts to encourage such employees to accept employment with
SIMSCI. With respect to employees who do not accept an offer of employment by
SIMSCI but remain employed by Shell, upon SIMSCI's request, Shell shall make
such employees available to provide Consulting Services pursuant to Section 5.3.
Within
[*] Confidential Treatment Requested
-10-
<PAGE> 11
thirty (30) days of the first commercial shipment of ROMEO, Shell shall reassign
such employees from their current assignments. None of the New Employees is
subject to any agreement or other arrangement that would in any manner hinder or
obstruct the employment by SIMSCI of such individual, or result in any payments
by SIMSCI in connection with such employment. Shell has not engaged in (and for
a period of three (3) years following the Effective Date will not engage in) the
solicitation, encouragement or any other action intended to (i) induce any New
Employee to terminate his or her employment with SIMSCI after the Effective
Date, (ii) interfere in any manner with the employment relationship between
SIMSCI and the New Employees after the Effective Date,
-11-
<PAGE> 12
or (iii) rehire any of the New Employees within three (3) years from the
Effective Date, unless such employees are terminated by SIMSCI. Nothing
contained in this Section is intended or shall be deemed to confer upon any
employee of Shell, past, present, or future, any rights of employment of any
nature other than as contemplated by any agreement entered into by SIMSCI and
each New Employee, it being understood and agreed that the provisions of this
Section are intended to set forth an agreement among SIMSCI and Shell, and are
not intended to benefit any persons not party to this Agreement, including such
New Employees.
5.4.2 No Claims. Subject to Section 5.4.1 above, neither party
shall bring, directly or indirectly, any action, claim or proceeding against the
other party (the "Hiring Party") as a result of the Hiring Party hiring its the
employees of the other party so long as the Hiring Party did not actively
solicit such employees.
6. CONFIDENTIALITY
6.1 Definition. "Confidential Information" means information of a
proprietary or confidential nature disclosed by either party to the other party,
whether directly or indirectly, and whether in writing, orally or by inspection
of tangible objects, which is designated as "Confidential," "Proprietary" or
some similar designation. Information communicated orally shall be considered
Confidential Information if such information is designated as being confidential
or proprietary at the time of disclosure. Confidential Information shall not,
however, include any information which (i) was publicly known and made generally
available in the public domain prior to the time of disclosure by the disclosing
party; (ii) becomes publicly known and made generally available after disclosure
by the disclosing party to the receiving party through no action or inaction of
the receiving party; (iii) is already in the possession of the receiving party
at the time of disclosure by the disclosing party as shown by the receiving
party's files and records immediately prior to the time of disclosure; (iv) is
obtained by the receiving party from a third party without a breach of such
third party's obligations of confidentiality; (v) is independently developed by
the receiving party without use of or reference to the disclosing party's
Confidential Information, as shown by documents and other competent evidence in
the receiving party's possession; or (vi) is required by law to be disclosed by
the receiving party, including filings with government agencies such as the
Securities and Exchange Commission, provided that the receiving party gives the
disclosing party prompt written notice of such requirement prior to such
disclosure and assistance in obtaining an order protecting the information from
public disclosure.
6.2 Non-use; Non-disclosure; Maintenance of Confidentiality. Each party
agrees not to use the Confidential Information disclosed to it by the other
party for any purpose except to carry out its rights and obligations under this
Agreement. Neither party will disclose the Confidential Information of the other
to third parties or to its employees, except employees who are required to have
the information in order to carry out such party's obligations under this
Agreement. Each party agrees that it shall take reasonable measures to protect
the secrecy of and to avoid the disclosure and unauthorized use of the
Confidential Information of the other party. Without limiting the foregoing,
each party shall take at least those measures that it takes to protect its own
confidential information,
-12-
<PAGE> 13
and shall ensure that its employees who have access to Confidential Information
of the other party have signed a non-use and non-disclosure agreement in content
at least as protective of Confidential Information as the provisions hereof
prior to any disclosure of Confidential Information to such employees. Each
party may disclose Confidential Information to its subsidiaries and affiliates
provided that any subsidiary or affiliate prior to disclosure agrees in writing
to be bound by the provisions of these sections.
7. REPRESENTATIONS AND WARRANTIES
7.1 Warranties. Shell represents and warrants to SIMSCI that (i) Shell
owns all right, title and interest in and to the Programs and Documentation and
all Intellectual Property Rights therein and related thereto; (ii) it has the
full right, power, and privilege to grant the rights herein; (iii) there are no
outstanding agreements, assignments or encumbrances inconsistent with the
provisions of this Agreement; (iv) there is no, and Shell shall not grant, any
right, license or interest inconsistent with the rights granted to SIMSCI herein
and Shell has not granted any right or license to the Programs to any third
party other than Affiliated Entities; (v) to the best of Shell's knowledge there
are no threatened or pending actions, suits, investigations, claims or
proceedings in any way related to the Programs and Documentation and/or
Intellectual Property Rights relating thereto; (vi) to the best of Shell's
knowledge the exercise of SIMSCI's rights hereunder does not infringe the
Intellectual Property Rights of any third party; and (vii) the Programs conform
to their specifications and any representations made in writing by Shell to
SIMSCI. Shell also represents and warrants that if the Programs, when used in
accordance with their associated documentation, are not capable of correctly
processing, providing and/or receiving date data within and between the
twentieth and twenty-first centuries, provided that all products (for example,
hardware, software and firmware) used with the Programs properly exchange
accurate date data with the Programs, Shell will correct such problem at no
charge to SIMSCI.
7.2 Disclaimer. THE WARRANTIES SET FORTH IN SECTION 7 ARE IN LIEU OF
ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, AND SHELL SPECIFICALLY
DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
7.3 Investment Representations.
(a) Investment Representation. Shell is acquiring the Shares
for its own account, for investment and not with a view to the sale of
distribution thereof, nor with any present intention of distributing or selling
the same.
(b) Restricted Securities. Shell understands that the Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act, and that the Shares must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from registration. Shell further understand that
the exemption from
-13-
<PAGE> 14
registration afforded by Rule 144 (the provisions of which are known to Shell)
issued under the Securities Act depends upon the satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for sales
in limited amounts.
(c) Accredited Investor. Shell represents and warrants to
SIMSCI that it is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act.
(d) Access to Financial and Other Information. Shell has been
furnished with, or has had access to, all information concerning SIMSCI,
including the opportunity to raise questions of officers of SIMSCI, as Shell has
deemed necessary or appropriate in order to enable it to make an informed
investment decision with respect to the purchase of the Shares. Shell further
represents and warrants to SIMSCI that (a) it has such knowledge and experience
in financial matters that it is capable of evaluating the merits and risks of
its investment in the Shares, and (b) its financial condition is such that it is
able to bear all economic risks of the investment in the Shares, including a
complete loss of its investment therein and the risk of holding the Shares for
an indefinite period of time.
7.4 Intellectual Property.
(a) Attachment 1 sets forth a complete and accurate schedule
of all Intellectual Property capable of being identified, identifying
specifically (i) all patents and patent applications owned by Shell, including
the country of filing, filing number, date of issue, expiration date and title;
(ii) all registered trademarks and service marks and all trademark and service
mark applications, including country of filing, filing number, date of issue and
expiration date; (iii) all common law trademarks, service marks and trade names;
(iv) all registered and unregistered copyrights; (v) all license, option and
other agreements pursuant to which Shell acquired rights to any Intellectual
Property Rights and all license, option and other agreements, oral or written,
pursuant to which Shell is obligated to pay royalties or other consideration to
third parties with respect to any Intellectual Property Rights; and (vi) all
license, option and other agreements, oral or written, pursuant to which Shell
has granted any third party any right to any Intellectual Property Rights.
Complete and accurate copies of all written agreements referred to in the
foregoing clauses (v) and (vi) have been provided to SIMSCI.
(b) Except as set forth on Attachment 1, (i) Shell has all
right, title and interest in and to the Intellectual Property Rights; (ii) Shell
has neither incorporated into nor relied on any software, technology or
proprietary information of any third party in the creation of the Programs;
(iii) Shell is not making use of any invention, software, technology or
proprietary information in connection with the Programs in which any present or
past employee of Shell or any other person has or has claimed an interest, and
Shell has no knowledge of facts that could reasonably be expected to give rise
to such a claim; (iv) Shell is in full compliance with all agreements pursuant
to which it acquired any Intellectual Property Rights; (vii) Shell has no
knowledge that any third party is infringing upon any of the Intellectual
Property Rights.
-14-
<PAGE> 15
7.5 Agreements, Contracts and Commitments. Set forth on Attachment 1 is
a list of all agreements, contracts and commitments (written or oral) relating
to the Programs to which Shell is a party or by which it is bound. Shell has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any contract.
Each contract is in full force and effect and, to the knowledge of Shell, the
other party to such contract has not breached, violated or defaulted under any
of the terms or conditions of any contract. Shell has obtained all necessary
consents, waivers and approvals of parties to any contract as are required to
assign all rights and benefits thereunder to SIMSCI.
7.6 Separate Representations. Each of the warranties set forth in this
Section 7 shall be separate and independent and, except as expressly provided to
the contrary, shall not be limited by reference to or inference from any other
warranty in this Agreement or any term of this Agreement.
8. REPRESENTATIONS AND WARRANTIES OF SIMSCI
SIMSCI represents and warrants as of the Effective Date to Shell as
follows:
8.1 Organization, Standing and Corporate Power. SIMSCI is a
corporation, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite power and authority
to carry on its business as now being conducted. SIMSCI and each Significant
Subsidiary (as defined below) of SIMSCI is duly qualified to do business and is
in good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have a
material adverse effect on the business, operating results or financial
condition of SIMSCI and its consolidated subsidiaries, taken as a whole (a
"Material Adverse Effect on SIMSCI"). SIMSCI has made available correct copies
of its Amended and Restated Certificate of Incorporation and Bylaws, in each
case as amended to the date of this Agreement. For purposes of this Agreement, a
"Significant Subsidiary" means any subsidiary that constitutes a significant
subsidiary of SIMSCI within the meaning of Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission (the "SEC").
8.2 Capital Structure. The authorized capital stock of SIMSCI consists
of 30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, of
which 100,000 shares are designated as Series A Participating Preferred Stock.
On August 29, 1997, 10,929,170 shares of Common Stock were outstanding, all of
which were validly issued, fully paid and nonassessable. All shares of Common
Stock to be issued to Shell as provided in Section 4.3 (the "Shell Shares"),
upon issuance on the terms and conditions specified in this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable. At the close of
business on September 1, 1997, assuming solely for purposes of this
representation and warranty that the per share price of SIMSCI Common Stock on
the Payment Date equals or exceeds the price of SIMSCI Common Stock on the
Effective Date, the Shell Shares constitute less than five percent (5%) of the
outstanding shares of SIMSCI Common Stock. None of SIMSCI's Significant
Subsidiaries is subject to the reporting requirements under Section 13 or 15
under the Securities Exchange Act of 1934, as amended.
-15-
<PAGE> 16
8.3 Authority; Noncontravention. SIMSCI has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The Board of Directors of SIMSCI
has duly approved this Agreement and the transactions contemplated by this
Agreement and no other consent or approval is required. The execution and
delivery of this Agreement by SIMSCI and the consummation by SIMSCI of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of SIMSCI. This Agreement, when executed
and delivered, will constitute a valid and binding obligation of SIMSCI,
enforceable against SIMSCI in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
of general application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained herein may be limited by applicable laws.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of, or default (with or without notice of lapse of time, or both) under, or give
rise to a right of consent, termination, purchase, cancellation or acceleration
of any obligation or to loss of any property, rights or benefits under, or
result in the imposition of any additional obligation under, or result in the
creation of any lien upon any of the properties or assets of SIMSCI or any
Significant Subsidiary under, (i) the Certificate of Incorporation or Bylaws of
SIMSCI or the comparable organizational documents of any Significant Subsidiary,
(ii) any contract, license, loan or credit agreement, note, lease or other
agreement filed or incorporated by reference in any Company SEC Document (as
defined below) as a "Material Contract" under Item 601 of Regulation S-K or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to SIMSCI or any Significant Subsidiary or their respective
properties or assets, other than any such conflicts, violations, defaults,
rights, losses, obligations or liens that individually or in the aggregate would
not have a Material Adverse Effect on SIMSCI or prevent or materially delay the
consummation of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any United States Federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign, is required by or with respect to SIMSCI or any Significant
Subsidiary in connection with the execution and delivery of this Agreement by
SIMSCI or the consummation by SIMSCI of the transactions contemplated by this
Agreement, except for (i) the filing of a Form 8-K with the SEC after the
Closing, (ii) the listing of the SIMSCI Common Stock to be issued upon Closing
on the Nasdaq National Market and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations or filings (x) as may be required
under "blue sky" laws of various states or (y) the failure of which to be
obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on SIMSCI or prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
8.4 SEC Documents; Financial Statements.
8.4.1 Since January 1, 1997, SIMSCI has filed all reports,
registration statements, proxy statements and other documents required to be
filed with the SEC under the Securities Act of
-16-
<PAGE> 17
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act") (the "Company SEC Documents"). As of their
respective filing dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and none of Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading, except to the extent that such statements have been corrected,
modified or superseded by a later filed Company SEC Document.
8.4.2 The consolidated financial statements of SIMSCI included
in Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with United States
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and presented fairly in all material respects
the consolidated financial position of SIMSCI as of the dates thereof and the
consolidated results of its operations and cash flows for the respective periods
indicated therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
8.5 Absence of Certain Changes or Events. Except as disclosed in
Company SEC Documents filed and publicly available prior to the date of this
Agreement, from January 1, 1997 to the date of this Agreement, SIMSCI has
conducted its business only in the ordinary course and there has not been any
Material Adverse Effect on SIMSCI.
8.6 Litigation. Except as disclosed in Company SEC Documents, there is
no suit, action or proceeding pending or, to the knowledge of SIMSCI, threatened
against SIMSCI or any of its Significant Subsidiaries that, individually or in
the aggregate, (i) would reasonably be expected to have a Material Adverse
Effect on SIMSCI, or (ii) would reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated by this Agreement.
9. INDEMNITY
9.1 Indemnification for Breach of Warranties. Shell agrees to indemnify
and hold harmless SIMSCI, its affiliates, customers and its and their end users,
from any third party claim, suit or proceeding ("Claim") against them based on
Shell's breach of any of the warranties contained in Section 7.1 and Section 7.4
and any claim that the Programs, when used within the scope of the license
granted in Section 2.1, infringe any patent, copyright, trade secret or other
intellectual property right of any third party, and to pay any damages,
settlement amounts and costs (including reasonable attorneys' fees and court
costs) relating to such a Claim. Shell will pay only settlement amounts
authorized by Shell and all costs, damages and attorneys' fees that a court
finally awards. SIMSCI shall promptly provide to Shell notice of any Claim, and
cooperate with and allow Shell to
-17-
<PAGE> 18
control the defense of any Claim and any settlement negotiations. SIMSCI may
participate in the proceedings at its option and expense.
9.2 Procedure. SIMSCI shall notify Shell in writing of any Claim for
which it seeks indemnification; and give Shell the exclusive authority to defend
or settle such Claim and, at SIMSCI's expense, give Shell reasonable information
and assistance to settle and/or defend any such Claim. Shell shall not have the
right to settle any Claim in a manner that is prejudicial to the interests of
SIMSCI without prior written consent.
10. LIMITATION OF LIABILITY
EXCEPT FOR LIABILITY ARISING UNDER SECTION 9 OR SECTION 2.4.5, IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, LOSSES, COSTS OR EXPENSES OF ANY
KIND, HOWEVER CAUSED AND WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE),
PRODUCTS LIABILITY OR ANY OTHER THEORY OF LIABILITY, INCLUDING BUT NOT LIMITED
TO LOST PROFITS, COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, LOSS OF GOODWILL, OR
LOSS OF DATA. THE FOREGOING LIMITATIONS SET FORTH IN THIS SECTION 10 SHALL APPLY
REGARDLESS OF WHETHER A PARTY KNOWS OR HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES, LOSSES, COSTS, OR EXPENSES. THE PARTIES AGREE THIS SECTION 10
REPRESENTS A REASONABLE ALLOCATION OF RISK.
11. TAXES
Each party is responsible for complying with the collection, payment,
and reporting of all taxes imposed by any governmental authority applicable to
its activities in connection with the sale, lease, delivery or license of the
Programs under this Agreement. Neither party is responsible for taxes that may
be imposed on the other party. Situations may arise where governmental
authorities require SIMSCI to withhold from amounts payable to Shell. In such
cases, SIMSCI may withhold the amount of taxes due from payments to be made to
Shell under this Agreement and remit the taxes withheld to the governmental
authority.
12. TERM AND TERMINATION
12.1 Term. This Agreement shall commence upon the Effective Date and
shall remain in effect until [*].
12.2 Termination. Either party may terminate its obligations under this
Agreement in the event of a material breach by the other party that remains
uncured for more than thirty (30) days after written notice to cure.
[*] Confidential Treatment Requested
-18-
<PAGE> 19
12.3 Effect of Termination. In the event of any termination or
expiration of this Agreement, Sections 1, 2.1, 2.2, 2.3, 2.4.5, 6, 7, 8, 9, 10,
11, 12, and 13 shall survive. Sections 5.1 and 5.2 shall survive except in the
event of termination by SIMSCI for a breach by Shell. In addition, except in the
case of termination for a breach of the scope of the license granted therein,
the
-19-
<PAGE> 20
licenses granted in Section 2.5 shall survive termination of this Agreement,
subject to the licensor's right thereafter to terminate such license for a
material breach of the scope of the license granted therein. In the event of
expiration, but not an earlier termination of this Agreement, Shell's rights
under Section 2.4.1 shall survive with respect to the Copies of ROMEO then
installed.
13. GENERAL
13.1 Governing Law. The rights and obligations of the parties under
this Agreement shall not be governed by the 1980 U.N. Convention on Contracts
for the International Sale of Goods; rather such rights and obligations shall be
governed by and construed under the laws of Texas.
13.2 Arbitration. Any controversy or claim ("claim") whether based on
contract, tort, statute or other legal or equitable theory (including but not
limited to any claim of fraud, misrepresentation or fraudulent inducement or any
question of validity or effect of this Agreement including this section) arising
out of or related to this Agreement (including any amendments or extensions), or
the breach or termination thereof shall be settled by arbitration in accordance
with then current rules and procedures of the Commercial Rules of Arbitration of
the American Arbitration Association by one (1) arbitrator appointed in
accordance with such rules. The arbitration and any award shall be in the
English language. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16 to the exclusion of any provision
of state law inconsistent therewith or which would produce a different result,
and judgment upon the award rendered by the arbitrator may be entered by any
court having jurisdiction. The arbitration shall be held in Houston, Texas. The
arbitrator shall determine the claims of the parties and render a final award in
accordance with the substantive law of the State of Texas, excluding the
conflicts provisions of such law. The arbitrator shall set forth the reasons for
the award in writing. Any claim by either party shall be time-barred if the
asserting party commences arbitration with respect to such claim later than two
(2) years after the cause of action accrues. All statutes of limitations and
defenses based upon passage of time applicable to any claim of a defending party
(including any counterclaim or set off) shall be tolled while the arbitration is
pending. The obligation to arbitrate any claim shall extend to the successors,
assigns and third party beneficiaries of the parties. Any discovery shall occur
by agreement of the parties, or by order of the arbitrator upon a finding of
good cause. Each party shall bear its own costs, expenses and attorney's fees;
provided that if court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall pay all
reasonable associated costs, expenses, and attorney's fees in connection with
such court proceeding. In order to prevent irreparable harm, the arbitrator
shall have the power to grant temporary or permanent injunctive or other
equitable relief. Prior to the appointment of an arbitrator, a party may,
notwithstanding any other provision of this Agreement, seek temporary injunctive
relief from any court of competent jurisdiction; provided that the party seeking
such relief shall (if arbitrator has not already commenced) simultaneously
commence arbitration. Such court ordered relief shall not continue more than ten
(10) days after the appointment of the arbitrator (or in any event for longer
than sixty (60) days). If any part of this arbitration provision is held to be
unenforceable, it shall be severed and shall not affect either the duty to
arbitrate or any part of this provision.
-20-
<PAGE> 21
13.3 Notice. All notices required or permitted under this Agreement
will be in writing and will be deemed given when: (i) delivered personally; (ii)
sent by confirmed telex or facsimile; (iii) five (5) days after having been sent
by registered or certified mail, return receipt requested, postage prepaid; or
(iv) one (1) day after deposit with a commercial overnight carrier specifying
next day delivery, with written verification of receipt. All communications will
be sent to the respective addresses set forth below or to such other address as
may be designated by a party by giving written notice to the other party
pursuant to this Section 13.3.
(a) if to SIMSCI, to:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attention: Charles R. Harris
Telephone No.: (714) 579-0412
Telecopy No.: (714) 579-0951
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark Bonham
Telephone No. (415) 493-9300
Telecopy No.: (415) 493-6811
(b) if to Shell, to:
Shell Oil Products Shell
Westhollow Technology Center
P.O. Box 1380
Houston, Texas 77251
Attention: Paul Cuneo
Telephone No: (281) 544-7401
Telecopy No.: (281) 544-8650
with a copy to:
Shell Oil Company
Intellectual Property-Legal
P.O. Box 2463, Houston, TX 77252-2463
Attention: Kim Muller
Telephone: (713) 241-2698
Facsimile: (713) 241-6617
-21-
<PAGE> 22
13.4 Independent Contractors. Nothing contained or done pursuant to
this Agreement shall be deemed or construed to create any partnership, joint
venture, or agency relationship between the parties hereto. Furthermore, the
parties agree that this Agreement does not constitute a partnership for tax
purposes. In the event that it is so construed, however, the parties agree to be
excluded from the provisions of Subchapter K of the United States Internal
Revenue Code of 1986, as amended. In no event shall such relationship constitute
a partnership for U.S. federal income tax purposes.
13.5 Headings. The section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
13.6 Force Majeure. Neither party will be liable for any failure or
delay in its performance under this Agreement due to causes which are beyond its
reasonable control.
13.7 No Waiver; Modifications. No amendment or modification of this
Agreement, nor any waiver of any rights, will be effective unless assented to in
writing by the party to be charged, and the waiver of any breach or default will
not constitute a waiver of any other right hereunder or any subsequent breach or
default.
13.8 Assignment. Neither party may assign this Agreement without the
prior written consent of the other party, except that either party may assign
this Agreement to an entity into which it has merged or which has otherwise
succeeded to all or substantially all of its business and Assets to which this
Agreement pertains by merger, reorganization or otherwise, and which assumed in
writing or by operation of law its obligations under this Agreement. Further,
should any Shell entity or facility having rights under this Agreement enter
into a joint venture, partnership or other business entity in which Shell, an
Affiliate or a Subsidiary of Shell has an ownership interest, then Shell may
assign rights to the joint venture, partnership or other business venture but
only to the extent such entity or facility had rights before formation of the
joint venture, partnership or other business venture and such joint venture,
partnership or other business venture assumes in writing or by operation of law
its obligations under this Agreement. Any attempted assignment in violation of
this Section 13.8 shall be null and void and shall entitle the non-defaulting
party to terminate this Agreement. Subject to the foregoing, the rights and
liabilities of the parties hereto will bind and inure to the benefit of the
parties and their respective permitted successors, executors and administrators,
as the case may be.
13.9 Severability. In the event that any provision of this Agreement is
determined to be invalid, illegal or unenforceable by a court of competent
jurisdiction, the remainder of the Agreement shall remain in full force and
effect without said provision, and the parties shall negotiate, in good faith,
an enforceable substitute provision that most nearly effects the parties' intent
in entering into this Agreement.
13.10 Entire Agreement. This Agreement and the Confidentiality
Agreement of February 4, 1996 constitute the complete and entire agreement
between the parties regarding the subject matter
-22-
<PAGE> 23
hereof, and shall supersede and replace any and all prior agreements,
communications, and understandings (both written and oral), including without
limitation the License Agreement and the Term Sheet, regarding such subject
matter. Neither party has relied on any promises, inducements or representations
by the other, except those expressly stated in this Agreement.
13.11 No Restriction. Except as set forth in Section 4.3 above, this
Agreement is not to be construed as a commitment or obligation, express or
implied, on the part of SIMSCI that SIMSCI will market, sell, purchase, license
or sublicense any products under this Agreement. SIMSCI may independently
develop, acquire, and market materials, equipment, or programs that may be
competitive with (despite any similarity to) the Programs. SIMSCI shall have
full freedom and flexibility and sole and exclusive control over all aspects of
its business, including, without limitations (i) sales policies, (ii) credit
practices, (iii) hiring and supervision of personnel, (iv) marketing,
advertising, and promotion, (v) contracting, (vi) billing and collection; (vii)
pricing; and (viii) establishing the terms and conditions under which the
Programs and Services are offered to customers. Nothing in this Agreement shall
be construed to restrict SIMSCI from conducting any other business relating to
any third party's computer software products.
SHELL OIL PRODUCTS COMPANY SIMULATION SCIENCES, INC.
for itself and as agent for SHELL OIL
COMPANY
By: /s/ Paul L. Cuneo By: /s/ Charles R. Harris
----------------------------------- ---------------------------
Title: Director of Technology Title: President and
-------------------------------- Chief Executive Officer
---------------------------
Date: 9/11/97 Date: 9/11/97
-------------------------------- ---------------------------
-23-
<PAGE> 24
EXHIBIT A
PROGRAMS AND DOCUMENTATION
<TABLE>
<CAPTION>
ROUTINE DESCRIPTION
- ------- -----------
<S> <C>
[*] [*]
MITRE
[*]
MILANO
[*]
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 25
ATTACHMENT 1
ASSOCIATED TOOLS AND THIRD PARTY SOFTWARE
1. OPERA uses the following third-party software, which may be found in
the [*]. All are subroutines from the [*]:
[*]
2. MITRE uses the following third-party software:
[*]
[*] Confidential Treatment Requested
<PAGE> 26
EXHIBIT B
SHELL EMPLOYEES TO BE OFFERED EMPLOYMENT BY SIMSCI
[*]
[*] Confidential Treatment Requested
<PAGE> 27
EXHIBIT C
SHELL SERVICES COMPANY EMPLOYEES
[*]
[*] Confidential Treatment Requested
<PAGE> 28
EXHIBIT D
REGISTRATION RIGHTS
1. REGISTRATION RIGHTS WITH RESPECT TO SHARES
1.1 Definitions.
1.1.1 The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, and the declaration or
ordering of the effectiveness of such registration statement.
1.1.2 The term "Registrable Shares" means and includes the
Shares issued to Shell under this Agreement; provided, however, that Registrable
Securities shall not include any (a) Escrowed Shares during the pendency of an
escrow, (b) Shares which have previously been registered, or (c) Shares which
would otherwise be Registrable Shares if Shell would then be permitted to sell
all of the Shares (including the Escrowed Shares) within any three (3) month
period pursuant to Rule 144 under the Securities Act.
1.1.3 The term "Ownership Percentage" means and includes the
number of Registrable Shares held by Shell divided by the total number of all
other securities entitled to registration pursuant to agreements with SIMSCI
approved by the Board of Directors and held by others participating in the
underwriting.
1.1.4 The term "Securities Act" means the Securities Act of
1933, as amended.
1.1.5 The term "Form S-3" means such form under the Securities
Act as is in effect on the date hereof or any successor registration form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by SIMSCI with the SEC.
1.1.6 The term "SEC" or "Commission" means the U.S. Securities
and Exchange Commission.
1.1.7 The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
1.2 "Piggyback" Registration. If at anytime SIMSCI shall determine to
register under the Securities Act (including pursuant to a demand of any
stockholder of SIMSCI exercising registration rights) any of its Common Stock
(except shares to be issued solely in connection with any acquisition of any
entity or business, shares issuable solely upon exercise of stock options, or
shares issuable solely pursuant to employee benefit plans), it shall send to
Shell written notice of such
<PAGE> 29
determination and, if within ten (10) days after receipt of such notice, Shell
shall so request in writing, SIMSCI shall use its best efforts to include in
such registration statement all or any part of the Registrable Shares that Shell
requests to be registered, except that if, in connection with any offering
involving an underwriting of Common Stock to be issued by SIMSCI, the managing
underwriter shall impose a limitation on the number of shares of Common Stock
included in any such registration statement because, in its judgment, such
limitation is necessary to effect an orderly public distribution, and such
limitation is imposed as provided herein among the holders of such Common Stock
having an incidental ("piggy back") right to include such Common Stock in the
registration statement as provided below, then, to the extent any shares
requested to be included in the registration remain available for registration
after the underwriter's cut-back (the "Available Shares"), SIMSCI shall be
obligated to include in such registration statement, with respect to Shell, only
the product of (i) the number of Available Shares and (ii) Shell's Ownership
Percentage, as that term is defined in Section 1.1.3. Notwithstanding the
foregoing, no such reduction shall be made with respect to securities being
offered by SIMSCI for its own account or by holders of securities who have
requested SIMSCI to register such securities pursuant to a mandatory "demand"
registration obligation of SIMSCI. If Shell disapproves of the terms of such
underwriting, it may elect to withdraw therefrom by written notice to SIMSCI and
the underwriter.
1.3 Registration on Form S-3. After SIMSCI has qualified for the use of
Form S-3, Shell shall have the right to request an unlimited number of
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such shares), subject only to the following
limitations:
1.3.1 SIMSCI shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company-initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145 under the Securities Act);
1.3.2 SIMSCI shall not be obligated to cause a registration on
Form S-3 to become effective prior to expiration of one hundred eighty (180)
days following the effective date of the most recent registration pursuant to a
request by Shell under this Agreement or pursuant to a request by a holder of
registration rights under any other agreement of SIMSCI granting Form S-3 demand
registration rights;
1.3.3 SIMSCI shall not be required to effect a registration
pursuant to this Section 1.3.3 unless Shell proposes to dispose of shares of
Registrable Securities having an aggregate disposition price (before deduction
of underwriting discounts and expenses of sale) of at least $500,000; and
1.3.4 SIMSCI shall not be required to maintain and keep any
such registration on Form S-3 effective for a period exceeding ninety (90) days
from the effective date thereof. SIMSCI shall give notice to Shell and all
holders of registration rights under any other agreement of SIMSCI granting Form
S-3 or similar demand registration rights of the receipt of a request for
registration
-2-
<PAGE> 30
pursuant to this Section 1.3.4 and shall provide a reasonable opportunity for
all such other holders to participate in the registration.
1.4 Indemnification of Shell. In the event that SIMSCI registers any of
the Registrable Shares under the Securities Act, SIMSCI will indemnify and hold
harmless Shell and each underwriter of the Registrable Shares so registered
(including any broker or dealer through whom such shares may be sold) and each
person, if any, who controls Shell or any such underwriter within the meaning of
Section 15 of the Securities Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
become subject under the Securities Act or under any other statute or at common
law or otherwise, and, except as hereinafter provided, will reimburse Shell,
each such underwriter and each such controlling person, if any, for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented by SIMSCI) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading or any
violation by SIMSCI of any rule or regulation promulgated under the Securities
Act applicable to SIMSCI and relating to action or inaction required of SIMSCI
in connection with such registration, unless such untrue statement or omission
was made in such registration statement, preliminary or amended, preliminary
prospectus or prospectus in reliance upon and in conformity with information
furnished in writing to SIMSCI in connection therewith by Shell, or any such
controlling person expressly for use therein. Promptly after receipt by Shell,
any underwriter or any controlling person of notice of the commencement of any
action in respect of which indemnity may be sought against SIMSCI, Shell, or
such underwriter or such controlling person, as the case may be, will notify
SIMSCI in writing of the commencement thereof, and, subject to the provisions
hereinafter stated, SIMSCI shall assume the defense of such action (including
the employment of counsel, who shall be counsel reasonably satisfactory to
Shell, such underwriter or such controlling person, as the case may be), and the
payment of expenses insofar as such action shall relate to any alleged liability
in respect of which indemnity may be sought against SIMSCI. Shell, any such
underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and expenses of such counsel shall not be at the expense of SIMSCI
unless the employment of such counsel has been specifically authorized by
SIMSCI. SIMSCI shall not be liable to indemnify any person for any settlement of
any such action effected without SIMSCI's consent. SIMSCI shall not, except with
the approval of each party being indemnified under this Section 1.4, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
1.5 Indemnification of SIMSCI. In the event that SIMSCI registers any
of the Registrable Shares under the Securities Act, Shell will indemnify and
hold harmless SIMSCI, each
-3-
<PAGE> 31
of its directors, each of its officers who have signed the registration
statement, each underwriter of the Registrable Shares so registered (including
any broker or dealer through whom such of the shares may be sold) and each
person, if any, who controls SIMSCI within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse SIMSCI and each
such director, officer, underwriter or controlling person for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented) or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, but only insofar as any
such statement or omission was made in reliance upon and in conformity with
information furnished in writing to SIMSCI in connection therewith by Shell,
expressly for use therein. Promptly after receipt of notice of the commencement
of any action in respect of which indemnity may be sought against Shell, SIMSCI
will notify Shell in writing of the commencement thereof, and Shell shall,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel, who shall be counsel satisfactory to
SIMSCI) and the payment of expenses insofar as such action shall relate to the
alleged liability in respect of which indemnity may be sought against Shell.
SIMSCI and each such director, officer, underwriter or controlling person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall not be at
the expense of Shell unless employment of such counsel has been specifically
authorized by Shell. Notwithstanding the two preceding sentences, if the action
is one in which SIMSCI may be obligated to indemnify Shell pursuant to Section
1.4, SIMSCI shall have the right to assume the defense of such action, subject
to the right of Shell to participate therein as permitted by Section 1.4. Shell
shall not be liable to indemnify any person for any settlement of any such
action effected without Shell's consent. Shell shall not, except with the
approval of SIMSCI, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the party being so indemnified of a release from
all liability in respect to such claim or litigation.
1.6 Exchange Act Registration. SIMSCI will use its best efforts to file
on a timely basis with the Commission all information that the Commission may
require under either of Section 13 or Section 15(d) of the Exchange Act and, so
long as it is required to file such information, shall use its best efforts to
take all action that may be required as a condition to the availability of Rule
144 under the Securities Act (or any successor exemptive rule hereinafter in
effect) with respect to SIMSCI's Common Stock. SIMSCI shall furnish to Shell
forthwith upon request (i) a written statement by SIMSCI as to its compliance
with the reporting requirements of Rule 144, (ii) a copy of the most recent
annual or quarterly report of SIMSCI as filed with the Commission, and (iii) any
other reports
-4-
<PAGE> 32
and documents that Shell may reasonably request in availing itself
of any rule or regulation of the Commission allowing Shell to sell any such
Registrable Securities without registration.
1.7 Further Obligations of SIMSCI. Whenever SIMSCI is required
hereunder to register Registrable Shares, it agrees that it shall also do the
following:
1.7.1 Furnish to Shell such copies of each preliminary and
final prospectus and any other documents that Shell may reasonably request to
facilitate the public offering of its Registrable Shares;
1.7.2 Use its best efforts to register or qualify the
Registrable Shares to be registered pursuant to this Agreement under the
applicable securities or 'blue sky" laws of such jurisdictions as Shell may
reasonably request; provided, however, that SIMSCI shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action that would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities covered by
the registration statement in any jurisdiction where it is not then so subject;
1.7.3 Furnish to Shell a signed counterpart of,
(a) an opinion of counsel for SIMSCI, dated the
effective date of the registration statement;
(b) "comfort" letters signed by SIMSCI's independent
public accountants who have examined and reported on SIMSCI's financial
statements included in the registration statement, to the extent permitted by
the standards of the American Institute of Certified Public Accountants,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities, but only if and to the extent that
SIMSCI is required to deliver or cause the delivery of such opinion or "comfort"
letters to the underwriters in an underwritten public offering of securities;
and
1.7.4 Furnish to Shell, upon request, a copy of all documents
filed and all correspondence from or to the Commission in connection with any
such offering unless confidential treatment of such information has been
requested of the Commission.
1.8 Expenses. In the case of a registration under Sections 1.2 or 1.3,
SIMSCI shall bear all costs and expenses of each such registration, including,
but not limited to, printing, legal and accounting expenses, Commission filing
fees and "blue sky" fees and expenses; provided, however, that SIMSCI shall have
no obligation to pay or otherwise bear (i) any portion of the fees or
disbursements in excess of an aggregate of $5,000 of more than one counsel for
Shell in connection with the registration of its Registrable Shares, (ii) any
portion of the underwriter's commissions or
-5-
<PAGE> 33
discounts attributable to the Registrable Shares being offered and sold by
Shell, or (iii) any of such expenses if the payment of such expenses by SIMSCI
is prohibited by the laws of a state in which such offering is qualified and
only to the extent so prohibited; and provided further, that, in the event the
registration under the Securities Act is initiated by Shell pursuant to Section
1.3 of this Agreement and such registration is thereafter withdrawn or
terminated by Shell for reasons other than the occurrence of one or more events
regarding SIMSCI, which event or events may have a material adverse affect upon
the business or prospects of SIMSCI, and Shell learns of such event or events
after the date of the demand for registration and prior to the date of
withdrawal or termination by them and such withdrawal or termination occurs with
reasonable promptness thereafter, then SIMSCI shall have no obligation to pay or
otherwise bear any fees, expenses or other costs arising out of or relating to
such registration.
1.9 Transfer of Registration Rights. The rights to cause SIMSCI to
register shares granted to Shell under Sections 1.2 and 1.3 may be assigned to a
transferee or assignee in connection with the transfer or assignment of at least
50,000 Registrable Shares, provided that (i) such transfer or assignment may
otherwise be effected in accordance with applicable laws, (ii) such transferee
or assignee agrees to be bound by the terms of this Exhibit F, and (iii) SIMSCI
is given at least ten (10) days prior written notice of such transfer or
assignment.
1.10 Market Stand-off Agreement. To the extent requested by SIMSCI or
any underwriter of SIMSCI, Shell shall not sell or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any Registrable Shares
during a period (the "Stand-Off Period") equal to 90 days following the
effective date of a registration statement of SIMSCI filed under the Securities
Act except for securities sold as part of the offering covered by such
registration statement in accordance with the provisions of this Agreement. In
order to enforce the foregoing covenant, SIMSCI may impose stock transfer
restrictions with respect to the Registrable Shares of each holder until the end
of the Stand-Off Period.
1.11 Termination of Registration Rights. The registration rights
granted pursuant to this Exhibit F will terminate upon such time as Shell is
then permitted to sell all of the Shares within any three (3) month period
pursuant to Rule 144 under the Securities Act.
-6-
<PAGE> 34
EXHIBIT E
LICENSE AGREEMENT SECTION 2.4
2.4 The parties shall carry out their respective obligations set forth
in the Development Plan in accordance with the timetable set forth therein. In
addition to any other obligations that may be set forth in the Development Plan,
Shell shall provide [*] man-years of development work in support thereof (the
computation of which shall be according to generally accepted software industry
standards), in addition, SIMSCI shall pay to Shell (on a time and materials
basis at rates according to those customarily paid in the software development
industry) a monthly fee for any additional development work provided by Shell
wherein such work is a result of changes to the Development Plan.
[*] Confidential Treatment Requested
<PAGE> 35
EXHIBIT F
FORM OF ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made as of this _____ day
of _______ 1997, by and among Harris Trust Company of California ("Escrow
Agent"), Simulation Sciences Inc., a Delaware corporation ("Simulation
Sciences"), and Shell Oil Products Company, a Delaware corporation, acting for
itself and as agent for Shell Oil Company, a Delaware corporation (collectively,
"Shell").
RECITALS
A. Simulation Sciences and Shell have entered into that certain
Software License Agreement dated as of September ___, 1997 (the "Software
License Agreement"), providing for the grant by Shell of an exclusive license in
the field of on-line optimization to OPERA and MITRE (the "License").
B. Terms not otherwise defined herein shall have the respective
meanings set forth in the Software License Agreement.
C. This Agreement and the escrow arrangements herein are part of the
terms and conditions of the Software License Agreement and have been entered
into for the purposes of effecting the License.
D. Pursuant to Section 4.3 of the Software License Agreement,
Simulation Sciences is delivering _____ shares of Common Stock of Simulation
Sciences to be held by the Escrow Agent (the "Escrow Shares") according to the
terms of this Agreement and the Software License Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein and in the Software License Agreement, and intending
to be legally bound, hereby agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby appointed by
the other parties hereto to act as escrow agent hereunder. The Escrow Agent
hereby accepts such appointment and agrees to hold and administer the Escrow
Shares and any Proceeds (as such term is defined in Section 3) in accordance
with the terms and subject to the conditions set forth herein.
2. Purpose. The Escrow Shares shall be held by the Escrow Agent to
satisfy any damages, settlement amounts and costs (including reasonable
attorneys fees and court costs) (collectively, "Losses") resulting from any
Claim against Simulation Sciences based on Shell's breach of any of the
warranties contained in Sections 7.1 and 7.4 of the Software License
<PAGE> 36
Agreement and any Claim that the Programs, when used within the scope of the
license granted under Section 2.1 of the Software License Agreement, infringe
any patent, copyright, trade secret or other intellectual property right of any
third party, and, subject to such Losses, to ensure the availability of such
shares upon their release, if any, to Shell pursuant to the terms and conditions
of this Agreement.
3. Establishment of Escrow. On the Payment Date, Simulation Sciences
and Shell shall jointly give written notice of such event to Escrow Agent.
Promptly but in no event later than five business days after the Payment Date,
Simulation Sciences shall then deliver to Escrow Agent one or more stock
certificates representing the Escrow Shares, issued in the name of Shell. Escrow
Agent agrees to accept delivery of the Escrow Shares and any cash dividends,
Common Stock dividends, dividends payable in securities other than Simulation
Sciences' Common Stock or other payments or distributions of any kind
(including, without limitation, any distribution of cash into escrow in
substitution for the Escrow Shares pursuant to Section 6(f) below) made in
respect of the Escrow Shares (the "Proceeds") and to hold them in escrow subject
to the terms and conditions of this Agreement.
4. Interests in Escrow Shares; Transfer. The Escrow Shares and any
Proceeds shall be received by Escrow Agent and recorded in an escrow account. No
Escrow Shares or Proceeds may be pledged, sold, assigned or transferred by
Shell, except as expressly provided herein and unless such pledgee, buyer,
assignee or transferee acknowledges the existence of this Escrow Agreement and
agrees in writing to be bound by it.
5. Voting and Rights of Ownership. Shell will have voting rights with
respect to the Escrow Shares (and any Proceeds) attributable to Shell's interest
in the Escrow Shares (and Proceeds). So long as such Escrow Shares and any
Proceeds are held in escrow, Simulation Sciences and Escrow Agent will take all
reasonable steps necessary to allow the exercise of such rights. Additionally,
for income tax reporting purposes, any income earned on the Escrow Shares and
the Proceeds (including earnings on any such dividends) shall be considered
earned by Shell.
6. Claims.
(a) Upon receipt by the Escrow Agent and Shell of a notice (a
"Claim Notice") from Simulation Sciences that, pursuant to Section 9.2 of the
Software License Agreement, Simulation Sciences is asserting a claim for
indemnification for Losses (for purposes of this Agreement, a "Claim"), which
Claim Notice shall specify (i) the nature and estimated amount of such Losses
(the "Claimed Amount"), (ii) that Simulation Sciences' Claim is based on a good
faith belief that Simulation Sciences is entitled to remuneration for Losses as
provided in the Software License Agreement and (iii) that the estimate of Losses
specified in the Claim has been calculated in good faith, the Escrow Agent shall
retain, set aside and continue to hold the Escrow Shares and Proceeds, if
applicable (or such lesser portion of the Escrow Shares and Proceeds, if
applicable, having a value equal to 100% of the Claimed Amount using, for
purposes of the Escrow Shares, the per share price of Simulation Sciences'
Common Stock as determined either (x) pursuant to the
-2-
<PAGE> 37
calculation set forth in Section 4.3 of the Software License Agreement or (y)
based on the average closing price for the ten (10) trading days seven days
prior to the date of the Claim Notice, whichever results in the greater per
share price, as stated in the Claim Notice for purposes of calculating the
payment of the Shares under that agreement), in escrow hereunder until
resolution of the Claim pursuant to this Agreement, subject to the further
provisions hereof.
(b) Within ten (10) days after delivery of a Claim Notice to
the Escrow Agent and Shell, Shell shall provide to Simulation Sciences, with a
copy to the Escrow Agent, a written response (a "Response Notice") in which
Shell shall either: (i) agree that the full Claimed Amount may be released to
Simulation Sciences from the Escrow Shares or Proceeds, if applicable, (ii)
agree that part, but not all, of the Claimed Amount (the "Agreed Amount") may be
released to Simulation Sciences from the Escrow Shares or Proceeds, if
applicable, and shall specify the Agreed Amount, and contest the release to
Simulation Sciences of the balance or (iii) contest the release to Simulation
Sciences of any part of the Claimed Amount from the Escrow Shares or Proceeds,
if applicable. Shell may contest the release of all or a portion of the Claimed
Amount only based upon a good faith belief that all or such portion of the
Claimed Amount does not constitute Losses for which Simulation Sciences is
entitled to remuneration under Section 9 of the Software License Agreement. If
no Response Notice is received by the Escrow Agent within such 10-day period,
Shell shall be deemed to have agreed that all of the Claimed Amount may be
released to Simulation Sciences from the Escrow Shares or Proceeds, if
applicable, provided that the failure to deliver a Response Notice shall not be
deemed to be an admission of liability by Shell.
(c) If Shell in the Response Notice agrees (or is deemed to
have agreed) that the entire Claimed Amount may be released to Simulation
Sciences from the Escrow Shares or Proceeds, if applicable, the Escrow Agent
shall within three (3) business days following the required delivery date for
the Response Notice, transfer, deliver and assign to Simulation Sciences, free
and clear of any interests of Shell, a portion of the Escrow Shares or Proceeds,
if applicable, having a value equal to the Claimed Amount. For purposes of the
Escrow Shares, the per share price shall be determined either (i) pursuant to
the calculation set forth in Section 4.3 of the Software License Agreement or
(ii) based on the average closing price for the ten (10) trading days seven days
prior to the date of the Claim Notice, whichever results in the greater per
share price, for purposes of calculating the payment of the Shares under that
agreement.
(d) If Shell in the Response Notice agrees that part, but not
all, of the Claimed Amount may be released to Simulation Sciences from the
Escrow Shares or Proceeds, if applicable, the Escrow Agent shall within three
(3) business days following the required delivery date for the Response Notice,
transfer deliver and assign to Simulation Sciences, free and clear of any
interests of the Shareholders therein, the portion of the Escrow Shares or
Proceeds, if applicable, as specified in the Response Notice having a value
equal to the Agreed Amount (or such lesser amount of Escrow Shares or Proceeds,
if applicable, as is then held in escrow hereunder). For purposes of the Escrow
Shares, the per share price shall be determined either (i) pursuant to the
calculation set forth in Section 4.3 of the Software License Agreement or (ii)
based
-3-
<PAGE> 38
on the average closing price for the ten (10) trading days seven days prior to
the date of the Claim Notice, whichever results in the greater per share price,
for purposes of calculating the payment of the Shares under that agreement.
(e) If Shell in the Response Notice contests the release of
all or part of the Claimed Amount (the "Contested Amount"), Simulation Sciences
and Shell shall first make a good faith effort to settle the matter themselves.
If they do not settle the matter within ten (10) days of the delivery of Shell's
Response Notice contesting the Claimed Amount, either Simulation Sciences or
Shell shall have the right, by delivery of written notice thereof (the
"Arbitration Notice") to the other party, to submit the matter to binding
arbitration in Houston, Texas. All matters so submitted to arbitration shall be
settled in accordance with the Commercial Arbitration Rules then in effect of
the American Arbitration Association (the "AAA Rules") by one (1) arbitrator
appointed in accordance with such rules within thirty (30) days of the
submission of the matter to arbitration. Shell and Simulation Sciences shall
bear equally the fees and expenses of the arbitrator. Shell and Simulation
Sciences shall cause the arbitrator to decide the matter to be arbitrated
pursuant hereto within thirty (30) days after the appointment of the arbitrator.
The arbitrator's decision shall relate solely to whether Simulation Sciences is
entitled to receive the Claimed Amount of the Escrow Shares or Proceeds, if
applicable, pursuant to the applicable terms of the Software License Agreement
and this Escrow Agreement and, if so, the amount of such Claimed Amount. The
final decision of the arbitrator shall be furnished to Shell, Simulation
Sciences and the Escrow Agent in writing and shall constitute a conclusive
determination of the matter in question, binding upon Shell, Simulation Sciences
and the Escrow Agent and shall not be contested by any of them. Such decision
may be used in a court of law only for the purpose of seeking enforcement of the
arbitrators' award. Notwithstanding any provision of this Escrow Agreement or
the Software License Agreement to the contrary, after receipt of a Response
Notice that the Claimed Amount is contested by Shell, the Escrow Agent, pursuant
to this Section 6, shall continue to hold an amount of the Escrow Shares and
Proceeds, if applicable, as specified in the Response Notice, which amount shall
equal 100% of the Contested Amount using the per share price of Simulation
Sciences' Common stock as determined either (x) pursuant to the calculation set
forth in Section 4.3 of the Software License Agreement or (y) based on the
average closing price for the ten (10) trading days seven days prior to the date
of the Claim Notice, whichever results in the greater per share price, for
purposes of calculating the payment of the Shares under that agreement (up to
the amount of the Escrow Shares and Proceeds, if applicable, then held in escrow
hereunder), notwithstanding the occurrence of the Final Release Date, until (i)
delivery of a copy of a settlement agreement or joint escrow instructions
executed by Simulation Sciences and Shell setting forth instructions to the
Escrow Agent as to the release of the Escrow Shares or Proceeds, if applicable,
if any, that shall be made with respect to the Contested Amount or (ii) delivery
of a copy of the final decision of the arbitrator setting forth instructions to
the Escrow Agent as to the amount of the Escrow Shares or Proceeds, if
applicable, to be released if any, that shall be made with respect to the
Contested Amount. If applicable, the Escrow Agent shall thereupon release the
Escrow Shares and Proceeds, if applicable, from escrow (to the extent the Escrow
Shares or Proceeds, if applicable, are then held in escrow hereunder) in
accordance with such agreement or instructions. Except as otherwise set forth
herein, all costs and expenses of
-4-
<PAGE> 39
any proceeding described in this paragraph 6(e) including any expenses of the
arbitrator(s) shall be borne by the losing party in any such proceeding (with
costs and expenses to be assessed and assigned by the arbitrator in the event of
an arbitration in which there is no losing party). The Escrow Agent shall be
under no duty whatsoever to institute or defend any proceedings which might in
its judgment involve expense or liability unless it shall have been furnished
with indemnity acceptable to it. The Escrow Agent shall have the right to
interplead the parties to any dispute in any court of competent jurisdiction and
request that such court determine the respective rights of the parties with
respect to this Escrow Agreement and, upon doing so, the Escrow Agent shall be
released from any obligations or liability as a consequence of such claims or
demands.
(f) Notwithstanding any other provision of this Section 6 to
the contrary, in the event that the Claimed Amount set forth in the Claim Notice
exceeds 1.3 times the amount that the arbitrator finally determines under
Section 6(e) above that Simulation Sciences is entitled to receive with respect
to its Claim, and a release of all or a portion of the Escrow Shares pursuant to
Section 7 hereof is delayed pending resolution of the Contested Amount, then
Simulation Sciences shall be responsible for any decrease in the value of the
Escrow Shares from the date that such shares would have been released from
escrow pursuant to Section 7 hereof absent the Claim to the date that such
shares are actually released from escrow; provided, however, that, if Shell and
Simulation Sciences mutually agree, Shell may substitute cash for the portion of
the Escrow Shares that would otherwise be eligible for release from escrow
pursuant to Section 7 hereof in the amount of the Contested Amount, in which
case such portion of the Escrow Shares eligible for release pursuant to Section
7 hereof shall be promptly released in accordance with the provisions of this
Agreement.
7. Release of the Escrow Shares or Proceeds. The Escrow Agent shall
hold the Escrow Shares and Proceeds, if applicable, until authorized to release
any portion of the Escrow Shares or Proceeds, if applicable, in accordance with
this Section 7 or in accordance with Sections 6 or 8 of this Agreement.
(a) Release at [*] Anniversary of Payment Date. On the terms
and subject to the conditions set forth in Sections 6 and 8 of this Agreement,
on the [*] anniversary of the Payment Date, the Escrow Agent shall deliver to
Shell (or its assigns as permitted under Section 13.8 of the Software License
Agreement and this Agreement) [*] of the Escrow Shares and Proceeds, if
applicable, then held in escrow.
(b) Release at [*] Anniversary of Payment Date. On the
terms and subject to the conditions set forth in Sections 6 and 8 of this
Agreement, on the [*] anniversary of the Payment Date, the Escrow Agent shall
deliver to Shell (or its assigns as permitted under Section 13.8 of the Software
License Agreement and this Agreement) [*] of the remaining Escrow Shares
and Proceeds, if applicable, then held in escrow.
(c) Release at [*] Anniversary of Payment Date. On the terms
and subject to the conditions set forth in Sections 6 and 8 of this Agreement,
on the [*] anniversary of the
[*] Confidential Treatment Requested
-5-
<PAGE> 40
Payment Date (the "Final Release Date"), the Escrow Agent shall deliver to Shell
(or its assigns as permitted under Section 13.8 of the Software License
Agreement and this Agreement) the remaining Escrow Shares and Proceeds, if
applicable, then held in escrow.
8. Early Release of Escrow Shares. Subject to the provisions of Section
6 of this Agreement, and notwithstanding the provisions of Section 7, if the
average closing price per share of Simulation Sciences' Common Stock on the
Nasdaq National Market, adjusted for stock splits, dividends and the like for
any ten consecutive trading days after the Payment Date (the "Average Market
Price"), is more than 30% but lower than 70% of the price per share of Simulated
Sciences' Common Stock as determined pursuant to the calculation set forth in
Section 4.3 of the Software License Agreement for purposes of calculating the
payment of the Shares under that agreement, then 50% of the Escrow Shares or
Proceeds, if applicable, then held in escrow under the Escrow Agreement shall be
released to Shell promptly but in any event within one business day after the
Escrow Agent's receipt of (i) written request from Shell and (ii) Simulation
Sciences' written instructions to the Escrow Agent to release such amount of
unreleased shares. If the Average Market Price is lower than 30% of the per
share price of Simulation Sciences' Common Stock determined pursuant to the
calculations set forth in Section 4.3 of the Software License Agreement for
purposes of calculating the payment of the Shares under that agreement, then 80%
of the Escrow Shares and any Proceeds then held in escrow shall be released to
Shell promptly but in any event within one business day after the Escrow Agent's
receipt of (i) written request from Shell and (ii) Simulation Sciences' written
instructions to the Escrow Agent to release such amount of unreleased shares.
Simulation Sciences must deliver such written instructions to Escrow Agent the
first business day after receipt by Simulation Sciences' Chief Executive
Officer, Chief Financial Officer or Controller of a copy of Shell's request if
Shell's calculation of the Average Market Price therein is correct in all
material respects.
9. Limitation of Escrow Agent's Duties and Liability.
(a) The duties and responsibilities of the Escrow Agent
hereunder shall be determined solely by the express provisions of this
Agreement, and Escrow Agent is not charged with any duties or responsibilities
in connection with any other document or agreement, including, without
limitation, the Software License Agreement, nor shall any other duties or
responsibilities be implied. The Escrow Agent shall not have any liability
under, nor duty to inquire into, the terms and provisions of any agreement or
instructions, other than as outlined in this Agreement.
(b) The Escrow Agent may rely and shall be protected in acting
or refraining from acting upon any written notice, instruction or request
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party or parties. The Escrow Agent shall be
under no duty to inquire into or investigate the validity, accuracy or content
of any such document. The Escrow Agent shall have no duty to solicit any items
that may be due it hereunder.
-6-
<PAGE> 41
(c) The Escrow Agent shall not be liable for any action taken
or omitted by it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's willful mis conduct or gross negligence was
the primary cause of any loss to any other party hereto. The Escrow Agent may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or omitted by it hereunder in
good faith and in accordance with the opinion of such counsel.
(d) Simulation Sciences and Shell, hereby agree, jointly and
severally, to indemnify the Escrow Agent for, and to hold it harmless against,
any loss, liability or expense arising out of, or in connection with, this
Agreement and carrying out its duties hereunder, including the costs and
expenses of defending itself against any claim of liability, except in those
cases where the Escrow Agent has been guilty of gross negligence or willful
misconduct. Anything in this Agreement to the contrary notwithstanding, in no
event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action. This right of
indemnification shall survive the termination of this Agreement. The costs and
expenses of enforcing this right of indemnification shall also be paid by the
parties pursuant to this Section.
(e) Shell and Simulation Sciences each shall provide the
Escrow Agent with its respective tax identification number assigned by the
Internal Revenue Service.
(f) In the event that the Escrow Agent is uncertain as to its
duties or rights hereunder or receives instructions, claims or demands from any
party hereto that, in its opinion, conflict with any of the provisions of this
Agreement, the Escrow Agent shall be entitled to refrain from taking any action
and its sole obligation shall be to keep safely the Escrow Shares and any
Proceeds in escrow until the Escrow Agent is directed otherwise in a written
instrument signed by each of the other parties hereto or, by a final order or
judgment of (i) an arbitrator pursuant to Section 6(e) hereof or (ii) a court of
competent jurisdiction.
10. Escrow Agent Expenses. The fees of the Escrow Agent are set forth
in Exhibit A hereto. All fees of the Escrow Agent for establishing and holding
in escrow and paying out the Escrow Shares and any Proceeds shall be borne
equally by Simulation Sciences and Shell.
11. Successor Escrow Agent.
(a) In the event the Escrow Agent becomes unavailable or
unwilling to continue in its appointed capacity hereunder, the Escrow Agent may
resign and be discharged from its duties or obligations hereunder by giving
notice of resignation to each of the parties hereto, specifying a date not less
than sixty (60) days following such notice date when such resignation will take
effect; provided, however, that such resignation shall in no event take effect
before the successor to the Escrow Agent shall have been appointed pursuant to
this Section 11. If a successor shall not have been appointed after such 60-day
period, the Escrow Agent may, at the
-7-
<PAGE> 42
expense of Simulation Sciences and Shell petition any court of competent
jurisdiction for the appointment of a successor escrow agent. Simulation
Sciences may appoint a successor to the Escrow Agent with the consent of the
Representative which consent shall not reasonably withheld. The Escrow Agent
shall promptly transfer the Escrow Shares and any Proceeds to such designated
successor.
(b) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all of the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without further act.
12. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered mail, return
receipt requested, postage prepaid, (ii) via a reputable nationwide overnight
courier service, (iii) by certified mail, return receipt requested, postage
prepaid, or (iv) by facsimile transmission (provided written receipt of which is
confirmed), in each case to the parties hereto at the following addresses set
forth below or at any such address as may be specified by like notice by any of
the parties.
If to the Escrow Agent, to:
Harris Trust Company of California
601 South Figueroa
Los Angeles, California 90017
Attn: ____________________
Telephone: (213) 239-0675
Facsimile: (213) 239-0631
If to Simulation Sciences, to:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attn: Charles R. Harris
Telephone: (714) 579-0412
Facsimile: (714) 579-0951
-8-
<PAGE> 43
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attn: Mark Bonham
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
If to Shell, to:
Shell Oil Products Shell
Westhollow Technology Center
P.O. Box 1380
Houston, Texas 77251
Attention: Paul Cuneo
Telephone No: (713) 544-7401
Telecopy No.: (713) 544-8650
with a copy to:
Shell Oil Company
Intellectual Property-Legal
P.O. Box 2463, Houston, TX 77252-2463
Attention: Kim Muller
Telephone: (713) 241-2698
Facsimile: (713) 241-6617
13. Governing Law. The construction and performance of this Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas (without regard to the choice of law provisions thereof).
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each party hereto, and its successors, assigns and
transferees. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
15. Amendment. This Agreement may be amended by the written agreement
of each of the parties hereto; provided, however, that in the event the Escrow
Agent does not agree to an amendment otherwise agreed by each of the other
parties hereto, the Escrow Agent shall resign and a successor escrow agent shall
be appointed in accordance with Section 14 hereof.
-9-
<PAGE> 44
16. Termination. This Escrow Agreement shall terminate upon the release
by the Escrow Agent of all of the Escrow Shares in accordance with this Escrow
Agreement; provided that the provisions of Sections 9(c) and 9(d) shall survive
such termination, or the resignation or removal of the Escrow Agent pursuant to
Section 11 hereof.
17. Representations. Each of the parties represents and warrants that
he or it has all requisite power and authority (corporate or otherwise) to
execute and deliver this Escrow Agreement, to perform his or its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery by such party of this Escrow Agreement, the performance by such
party of its obligations hereunder and the consummation by such party of the
transactions contemplated hereby have been duly and validly authorized by all
necessary actions (corporate or otherwise) on the part of such party. This
Escrow Agreement has been duly and validly executed and delivered by such party
and constitutes a valid and binding obligation of such party, enforceable
against such party in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
19. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, written or
oral, between the parties hereto with respect to the subject matter hereof.
20. Waivers. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing
and signed by a duly authorized representative of the party granting such
waiver. No waiver by any party of any such condition or breach in any one
instance shall be deemed to be a further or continuing waiver of such condition
or breach or a waiver of any other condition or breach of any other provision
contained herein.
-10-
<PAGE> 45
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
HARRIS TRUST COMPANY OF CALIFORNIA
as ESCROW AGENT
By
-----------------------------------------
Name:
Title:
SIMULATION SCIENCES INC.
By
-----------------------------------------
Name:
Title:
SHELL OIL COMPANY
By
-----------------------------------------
Name:
Title:
[SIGNATURE PAGE TO SIMULATION SCIENCES ESCROW AGREEMENT]
-11-
<PAGE> 46
EXHIBIT A
---------------------------
ESCROW AGENT FEES
SUBMITTED TO:
SIMULATION SCIENCES INC.
BY:
HARRIS TRUST COMPANY OF CALIFORNIA
Escrow Agent Services
- Set-up of Escrow Account....................................
- Annual Administration Fee...................................
- Up to 5 distributions.......................................
- Over 5 distributions........................................
- Out-of-pocket expenses will be billed at cost.
There are no such expenses associated with the set-up of the
Escrow Account.
<PAGE> 1
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT - PROFIT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into on this
15th day of September, 1997 (the "Effective Date") by and between Shell Oil
Products Company, a Delaware corporation, acting for itself and as agent for
Shell Oil Company, a Delaware corporation (collectively, "Shell"or "Seller"),
and Simulation Sciences, Inc., a Delaware corporation ("SIMSCI" or "Buyer").
RECITALS
A. Shell utilizes a software planning system known internally to Shell
as "PROFIT" (the "Product" as more fully described herein) that provides
simulation-based decision support to operating managers by selecting optimal
product manufacturing plans, including product selection, intermediates staging
and feedstock procurement, and Shell is the owner of the related tangible and
intangible assets.
B. SIMSCI is a leading provider of commercial simulation software and
related services to the petroleum, petrochemical and industrial chemical process
industries as well as the engineering and construction firms that support those
industries. SIMSCI desires to acquire all rights to the Product and related
assets.
AGREEMENT
ARTICLE I
DEFINITIONS
Capitalized terms in this Agreement have the following meanings:
1.1 "Affiliated Entities" shall mean (i) Affiliates as of May 29, 1997
and (ii) any Subsidiaries of Shell.
1.2 "Affiliates" shall mean [*], a company of [*], [*], an [*] company,
and any company (other than Shell) in whatever country organized, in which
either or both of said companies shall, at the time in question and directly or
indirectly through one or more intermediaries, [*] or more of the stock having
the [*] or, any company (other than Shell), in whatever country organized, in
which Shell, at the time in question and directly or indirectly through one or
more intermediaries, [*] or more of the stock with the [*].
1.3 "Derivative Work" is a work that is based on an underlying work and
that would be a copyright infringement if prepared without the authorization of
the copyright owner(s) of the
[*] Confidential Treatment Requested
<PAGE> 2
underlying work as described under United States copyright laws. A Derivative
Work is subject to the ownership rights and licenses of a party or of others in
the underlying work.
1.4 "Documentation" shall mean all technical documentation and
procedural and instructional manuals regarding the use of the Programs including
on-line help capabilities.
1.5 "Error" shall mean a substantial nonconformity of the Programs with
the corresponding user documentation.
1.6 "Intellectual Property Rights" shall mean all current and future
worldwide patents and other patent rights, utility models, copyrights, trade
secrets, trademarks and other intellectual property rights, including without
limitation all applications and registrations with respect thereto.
1.7 "Products" shall mean the Programs and the Documentation.
1.8 "Programs" shall mean solely the Shell computer software programs
listed in Exhibit C in both object and source code formats and all New Versions
thereof.
1.9 "Source Code" shall mean software in human-readable form, including
all related programmers' comments, data files and structures, header files,
include files, make files, macros, object libraries, programming tools not
commercially available, technical specifications, flowcharts and logic diagrams,
schematics, annotations and documentation reasonably necessary or useful in
enabling an independent third party programmer with reasonable programming
skills to create, operate, maintain, modify and improve the software without the
help of any other person. Data files containing Source Code must be in standard
ASCII format and be readable by a text editor.
1.10 A "Subsidiary" of Shell shall mean a corporation, company, or
other entity (other than Shell), in whatever country organized, in which, (i) as
of the Effective Date, (x) Shell directly or indirectly through one or more
intermediaries has the [*] and (y) Shell or its Affiliates [*]; or (ii) after
the Effective Date, Shell or an Affiliate owns at least [*] of the outstanding
shares or securities (representing the right to vote for the election of
directors or other managing authority). With respect to a corporation, company
or other entity whose outstanding shares or securities (representing the right
to vote for the election of directors or other managing authority) become at
least [*] owned or controlled by Shell after the Effective Date during the term
of this Agreement, only such a corporation, company or other entity that is not
a competitor of SIMSCI shall be deemed to be a Subsidiary. For purposes of this
Section 1.10 "competitor of SIMSCI" shall mean an entity that is in the business
of developing and marketing for commercial purposes computer software in direct
competition with the Programs. Further, with respect to interests acquired after
the Effective Date, any such corporation, company, or other entity shall be
deemed to be a Subsidiary for only so long as such ownership or [*] exists.
[*] Confidential Treatment Requested
-2-
<PAGE> 3
1.11 "New Versions" means Error corrections and enhancements in
features and functionality of the Programs whether designated by a change in the
number to the right or left of the decimal point.
ARTICLE II
THE ACQUISITION
2.1 Purchase and Sale of Assets. Seller hereby irrevocably sells,
assigns and transfers to Buyer all of Seller's right, title and interest in and
to the following (collectively, the "Assets"):
(a) all rights and ownership of the Product, including but not
limited to all versions of the Product, all technical, design, development,
installation, operation and maintenance information concerning the Product,
including source code, source documentation, source listings and annotations,
object code, example data and example results, as well as all reference manuals
and support materials normally distributed to end-users and potential end-users
in connection with the distribution of the Product;
(b) all other physical and intangible assets, including
without limitation, a list of Shell's and the Affiliated Entities' internal
users of the Product and applicable contacts, system and user documentation
and/or operating manuals and, to the extent any such materials exist, proposals,
business strategy plans, projects under development, management plans and
business opportunities relating to the Product;
(c) all Intellectual Property Rights in the foregoing items in
Sections (a) and (b) including without limitation any patents, patent rights,
copyrights, mask work rights, trademarks, service marks, trade names, trade
secrets, and any registrations or filings relating thereto, processes, know-how,
and any and all similar rights. Notwithstanding the foregoing, any references to
Shell, Shell Oil Company, Shell Oil Products Company, or any other Shell
company, or any appearance of the Shell Pecten logo which are found in the
foregoing items in Sections (a) and (b) shall not transfer rights in those
trademarks, service marks and trade names.
(d) all of Seller's claims against any parties relating to any
of the foregoing in (a) through (c) and all of Seller's rights under contracts
pertaining to the foregoing, including without limitation any license,
development, consulting and maintenance agreements.
2.2 Delivery. Seller shall deliver to Buyer at Buyer's facility in
Brea, California all tangible Assets within thirty (30) days of the Effective
Date.
2.3 No Assumption of Obligations. Buyer shall assume no liabilities or
obligations of Seller in connection with the purchase of the Assets. Seller will
indemnify and hold Buyer harmless from and against any and all losses, costs,
expenses, claims, liabilities, deficiencies, judgments and
-3-
<PAGE> 4
damages incurred or suffered by Buyer or any of its affiliates related to or
arising out of any liabilities or obligations of Seller.
2.4 Consideration. As full payment for the assignment and delivery of
the Assets by Seller to Buyer, Buyer shall pay to Seller $1,500,000 (subject to
adjustment for assumed obligations) (the "Purchase Price") by check or wire
transfer in immediately available funds on the Effective Date. Buyer shall pay
and promptly discharge when due all sales and related taxes imposed or levied by
reason of the sale of the Assets to Buyer. The parties shall cooperate with each
other to the extent reasonably requested and legally permitted to minimize any
such taxes. Exhibit D sets forth the portion of the Purchase Price being paid in
respect of the Programs and other intangible Assets and the portion allocable to
the Documentation and other tangible Assets.
2.5 Taking of Necessary Action; Further Action. Seller shall, and shall
cause its employees, agents and consultants to, without charge and promptly upon
request by Buyer, take any and all reasonable action(s) and execute any and all
document(s) requested by Buyer in order to (i) effect and perfect the assignment
in Section 2.1, (ii) obtain, enforce or defend Buyer's Intellectual Property
Rights in the Assets, and (iii) otherwise enable Buyer to obtain the full
benefit of such assignment.
ARTICLE III
LICENSE TO SELLER
3.1 Grant of License. Subject to the terms and conditions of this
Agreement, Buyer hereby grants to Seller and the Affiliated Entities a
non-exclusive, non-transferable, worldwide, perpetual, royalty-free and fully
paid-up license, without right of sublicense, to use perform and have performed,
display and have displayed, prepare and have prepared Derivative Works,
reproduce and have reproduced the Product as it exists as of the Effective Date
in object code and Source code form, but only for Seller's and the Affiliated
Entities' internal processing purposes. Shell shall own all right, title and
interest in and to any Derivative Works of the Programs created by Shell;
provided, however, that Shell shall deliver quarterly to SIMSCI in both object
and Source Code formats all copies of any Derivative Works created by Shell
and/or its Affiliated Entities. Shell hereby grant to SIMSCI a perpetual,
royalty-free, worldwide license, including the right to grant and authorize
sublicenses, to use, reproduce, distribute, prepare and have prepared Derivative
Works of, any such Derivative Works.
3.2 Restrictions. All rights not expressly granted herein are reserved
by Buyer, and except for the licenses granted pursuant to Section 3.1 above,
Buyer retains all right, title and interest in and to the Assets, including all
Intellectual Property Rights therein. Nothing contained in this Agreement shall
be construed as conferring upon Shell or the Affiliated Entities, by
implication, estoppel or otherwise, any license or other right except the
license and rights expressly granted herein. Except as otherwise expressly
provided herein, the licenses granted herein are granted solely
-4-
<PAGE> 5
to Seller and the Affiliated Entities, and not, by implication or otherwise, to
any parent, or other affiliate of Seller.
3.3 Transition Period In Event of Acquisition or Divestiture. In the
event Shell or an Affiliated Entity either acquires or divests itself of
ownership interest in an entity or facility that is using or has a potential
need to use the Product (in any case, a "Transition Transaction"), then, (i) for
a period of twelve (12) months from the effect date of the Transition
Transaction (the "Transitional Period"), use of the Product by such entity or
facility shall be considered use for Shell's internal purposes under Section 3.1
above; and (ii) in the event that a Transition Transaction is an acquisition,
during the Transition Period the parties hereto will discuss whether a
contractual relationship other than this Agreement shall govern the continued
use of the Product by such newly acquired entity or facility. As used in this
Section 3.3, "acquisition" shall mean any business transaction wherein Shell or
an Affiliated Entity obtain rights of ownership in an entity or facility through
any business venture, including but not limited to, any purchase, joint venture
or partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 General. (i) Seller owns all right, title and interest in and to
the Product and Documentation and all Intellectual Property Rights therein and
related thereto; (ii) it has the full right, power, and privilege to grant the
rights herein and perform its obligations hereunder; (iii) there are no
outstanding agreements, assignments or encumbrances inconsistent with the
provisions of this Agreement or which would impair the exercise by Buyer of its
full ownership rights in the Assets, other than existing licenses as identified
on Exhibit A; (iv) there is no, and Seller shall not grant, any right, license
or interest inconsistent with the rights granted to Buyer herein; (v) to the
best of Shell's knowledge there are no threatened or pending actions, suits,
investigations, claims or proceedings in any way related to the Assets and
Seller has no knowledge of facts that could reasonably be expected to give rise
to such a claim; (vi) to the best of Shell's knowledge the Assets do not
infringe the Intellectual Property Rights of any third party; and (vii) the
Product conforms to its specifications and any representations made in writing
by Seller to Buyer. Shell also represents and warrants that if the Programs,
when used in accordance with their associated documentation, are not capable of
correctly processing, providing and/or receiving date data within and between
the twentieth and twenty-first centuries, provided that all products (for
example, hardware, software and firmware) used with the Programs properly
exchange accurate date data with the Programs, Shell will correct such problem
at no charge to SIMSCI.
-5-
<PAGE> 6
4.2 Intellectual Property.
(a) Exhibit B sets forth a complete and accurate schedule of
all Intellectual Property Rights capable of being identified, identifying
specifically (i) all patents and patent applications owned by Seller, including
the country of filing, filing number, date of issue, expiration date and title;
(ii) all registered trademarks and service marks and all trademark and service
mark applications, including country of filing, filing number, date of issue and
expiration date; (iii) all common law trademarks, service marks and trade names;
(iv) all registered and unregistered copyrights; (v) all license, option and
other agreements pursuant to which Seller acquired rights to any Intellectual
Property Rights and all license, option and other agreements, oral or written,
pursuant to which Seller is obligated to pay royalties or other consideration to
third parties with respect to any Intellectual Property Rights; and (vi) all
license, option and other agreements, oral or written, pursuant to which Seller
has granted any third party any right to any Intellectual Property Rights.
Complete and accurate copies of all written agreements referred to in the
foregoing clauses (v) and (vi) have been provided to Buyer.
(b) Except as set forth on Exhibit B, (i) Seller has all
right, title and interest in and to the Intellectual Property Rights; (ii)
Seller has neither incorporated into nor relied on any software, technology or
proprietary information of any third party in the creation of the Product; (iii)
Seller is not making use of any invention, software, technology or proprietary
information in connection with the Product in which any present or past employee
of Seller or any other person has or has claimed an interest, and Seller has no
knowledge of facts that could reasonably be expected to give rise to such a
claim; (iv) Seller is in full compliance with all agreements pursuant to which
it acquired any Intellectual Property Rights; and (v) Seller has no knowledge
that any third party is infringing upon any of the Intellectual Property Rights.
4.3 Agreements, Contracts and Commitments. Set forth on Exhibit A is a
list of all agreements, contracts and commitments (written or oral) whether
internal to Shell, with an Affiliated Entity or with third parties relating to
the Assets to which Seller is a party or by which it is bound in addition to
those identified pursuant to Section 4.2 (a). Seller has not breached, violated
or defaulted under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any contract. Each contract
is in full force and effect and, to the knowledge of Seller, the other party to
such contract has not breached, violated or defaulted under any of the terms or
conditions of any contract. Seller has obtained all necessary consents, waivers
and approvals of parties to any contract as are required to assign all rights
and benefits thereunder to Buyer.
4.4 Employee Arrangements. No employee of Seller who is listed on
Exhibit B ("New Employees") is subject to any agreement or other arrangement
that would in any manner hinder or obstruct the employment by Buyer of such
individual, or result in any payments by Buyer in connection with such
employment. Seller has not engaged in (and for a period of three (3) years
following the Effective Date will not engage in) the solicitation, encouragement
or any other action intended to (i) induce any New Employee to terminate his or
her employment with Buyer after the Effective Date, (ii) interfere in any manner
with the contractual or employment relationship between
-6-
<PAGE> 7
Buyer and the New Employees after the Closing Date, or (iii) rehire any of the
New Employees within three (3) years from the Effective Date, unless such
employees are terminated by SIMSCI.
4.5 Representations Complete. There is no fact, circumstance or
condition of any kind or nature whatsoever known to Seller which reasonably
could be expected to have a material adverse effect on the Assets which has not
been set forth in this Agreement (including the Exhibits hereto).
4.6 Notification of Certain Matters. Seller shall give prompt notice to
Buyer of the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
Seller contained in this Agreement to be untrue or inaccurate.
4.7 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER MAKES NO
REPRESENTATIONS, EXTENDS NO WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES
NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; SUITABILITY, COMPLETENESS OR ACCURACY OF THE PRODUCT; AND
THE SCOPE, VALIDITY OR ENFORCEABILITY OF ANY PATENT RIGHTS RELATED TO THE
PRODUCT.
4.8 Separate Representations. Each of the warranties set forth in this
Section 4 shall be separate and independent and, except as expressly provided to
the contrary, shall not be limited by reference to or inference from any other
warranty in this Agreement or any term of this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Confidentiality. Each of the parties agrees to keep proprietary
information or knowledge of the other party obtained in connection to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby confidential; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is or becomes generally known to the public and
did not become so known through any violation of law or this Agreement by the
non-disclosing party, (c) is later lawfully acquired by such party from other
sources, (d) is required to be disclosed by order of court or government agency
after seeking any reasonably available protection against general disclosure or
(e) which is disclosed in the course of any litigation between any of the
parties hereto; it being understood that the parties may disclose relevant
information and knowledge to their respective employees and agents on a need to
know basis, provided that the parties cause such employees and agents to treat
such information and knowledge confidentially.
-7-
<PAGE> 8
5.2 Post-Closing Employment of the New Employees. SIMSCI intends to
offer employment to those current employees of Shell named on Exhibit B. Shell
shall use best efforts to encourage such employees to accept employment with
SIMSCI. With respect to employees who do not accept an offer of employment by
SIMSCI but remain employed by Shell, upon SIMSCI's request Shell shall make such
employees available to provide consulting services to SIMSCI under Section 5.5
below. Within thirty (30) days of the date upon which SIMSCI provides to Shell
notice that it no longer requires consulting services in connection with the
Programs (which shall be no sooner than December 31, 1997), Shell shall reassign
such employees from their current assignments. Seller agrees not to solicit for
employment or to rehire such persons for a period of three years, unless such
employees are terminated by SIMSCI. Nothing contained in this Section is
intended or shall be deemed to confer upon any employee of Seller, past,
present, or future, any rights of employment of any nature other than as
contemplated by any employment agreement to be entered into by Buyer and each
New Employee, it being understood and agreed that the provisions of this Section
are intended to set forth an agreement among Buyer and Seller, and are not
intended to benefit any persons not party to this Agreement, including such New
Employees.
5.3 Maintenance and Support Agreements. Buyer agrees to offer and Shell
agrees to purchase for itself and behalf of its Affiliated Entities using the
Product maintenance and support services on reasonable terms pursuant to a
separate agreement (to be executed within thirty (30) days of the Effective
Date) consistent with Buyer's customary maintenance and support policies.
5.4 Non-Competition Agreement. For a period of three years from the
Effective Date Seller agrees not to market, sell or distribute to any third
party any products similar to or competitive with the Product.
5.5 Product Development and Integration Efforts. Seller will assist
Buyer as reasonably requested in its commercialization and integration efforts
with respect to the Product. Buyer agrees to estimate the amount of effort
needed and with respect to each such request, Seller agrees to use its best
efforts to cause appropriately skilled individuals employed by Shell to be made
available to Buyer. Seller further agrees to request its Affiliates, including
Shell Services Company, to negotiate consulting agreements with SIMSCI for
assistance in its commercialization and integration of the Product. Any
invention, idea, design, works of authorship or Intellectual Property Rights
created by any employee of Seller that is created (i) in the course of assisting
Buyer as set forth in this Section and (ii) the result of work performed
directly for Buyer shall be the sole property of Buyer and Seller hereby assigns
to Buyer all its right, title and interest thereto including all Intellectual
Property Rights therein. Seller warrants that each such individual is an
employee of Seller and has signed an invention assignment agreement assigning to
Shell all rights in works created by such individual in the performance of his
or her services.
ARTICLE VI
INDEMNIFICATION
-8-
<PAGE> 9
6.1 Indemnity. Seller hereby agrees to indemnify and hold Buyer and its
subsidiaries, directors, officers and agents harmless against and in respect of
any loss, cost, expense, claim, liability, deficiency, judgment or damage
incurred by Buyer, its subsidiaries, officers, directors and agents (a "Loss")
as a result of any breach of a representation or warranty of Seller contained in
this Agreement or any failure by Seller to perform or comply with any covenant
contained in this Agreement.
6.2 Procedure. Buyer shall notify Seller in writing of any Loss for
which it seeks indemnification under Section 6.1 above; and give Seller the
exclusive authority to defend or settle such claim (it being understood that
Buyer may participate with counsel of its choosing at Buyer's own expense); and,
at Seller's expense (except for the value of the time of Buyer's employees),
give Seller reasonable information and assistance to settle and/or defend any
such claim. Seller shall not have the right to settle any claim in a manner that
is prejudicial to the interests of Buyer without Buyer's prior written consent.
ARTICLE VII
GENERAL PROVISIONS
7.1 Governing Law. The rights and obligations of the parties under this
Agreement shall be governed by and construed under the laws of Texas.
7.2 Arbitration. Any controversy or claim ("claim") whether based on
contract, tort, statute or other legal or equitable theory (including but not
limited to any claim of fraud, misrepresentation or fraudulent inducement or any
question of validity or effect of this Agreement including this section) arising
out of or related to this Agreement (including any amendments or extensions), or
the breach or termination thereof shall be settled by arbitration in accordance
with then current rules and procedures of the Commercial Rules of Arbitration of
the American Arbitration Association by one (1) arbitrator appointed in
accordance with such rules. The arbitration and any award shall be in the
English language. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16 to the exclusion of any provision
of state law inconsistent therewith or which would produce a different result,
and judgment upon the award rendered by the arbitrator may be entered by any
court having jurisdiction. The arbitration shall be held in Houston, Texas. The
arbitrator shall determine the claims of the parties and render a final award in
accordance with the substantive law of the State of Texas, excluding the
conflicts provisions of such law. The arbitrator shall set forth the reasons for
the award in writing. Any claim by either party shall be time-barred if the
asserting party commences arbitration with respect to such claim later than two
(2) years after the cause of action accrues. All statutes of limitations and
defenses based upon passage of time applicable to any claim of a defending party
(including any counterclaim or set off) shall be tolled while the arbitration is
pending. The obligation to arbitrate any claim shall extend to the successors,
assigns and third party beneficiaries of the parties. Any
-9-
<PAGE> 10
discovery shall occur by agreement of the parties, or by order of the arbitrator
upon a finding of good cause. Each party shall bear its own costs, expenses and
attorney's fees; provided that if court proceedings to stay litigation or compel
arbitration are necessary, the party who unsuccessfully opposes such proceedings
shall pay all reasonable associated costs, expenses, and attorney's fees in
connection with such court proceeding. In order to prevent irreparable harm, the
arbitrator shall have the power to grant temporary or permanent injunctive or
other equitable relief. Prior to the appointment of an arbitrator, a party may,
notwithstanding any other provision of this Agreement, seek temporary injunctive
relief from any court of competent jurisdiction; provided that the party seeking
such relief shall (if arbitrator has not already commenced) simultaneously
commence arbitration. Such court ordered relief shall not continue more than ten
(10) days after the appointment of the arbitrator (or in any event for longer
than sixty (60) days). If any part of this arbitration provision is held to be
unenforceable, it shall be severed and shall not affect either the duty to
arbitrate or any part of this provision.
7.3 Notice. All notices required or permitted under this Agreement will
be in writing and will be deemed given when: (i) delivered personally; (ii) sent
by confirmed telex or facsimile; (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (iv)
one (1) day after deposit with a commercial overnight carrier specifying next
day delivery, with written verification of receipt. All communications will be
sent to the respective addresses set forth below or to such other address as may
be designated by a party by giving written notice to the other party pursuant to
this Section 6.3.
(a) if to Buyer, to:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attention: Charles R. Harris
Telephone No.: (714) 579-0412
Telecopy No.: (714) 579-0951
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark Bonham
Telephone No. (415) 493-9300
Telecopy No.: (415) 493-6811
-10-
<PAGE> 11
(b) if to Seller, to:
Shell Oil Products Company
Westhollow Technology Center
P.O. Box 1380
Houston, Texas 77251
Attention: Paul Cuneo
Telephone No: 281-544-7401
Telecopy No.: 281-544-8650
with a copy to:
Shell Oil Company
Intellectual Property-Legal
P.O. Box 2463, Houston, TX 77252-2463
Attention: Mr. Kim Muller
Telephone: 713-241-2698
Facsimile: 713-241-6617
7.4 Independent Contractors. Nothing contained or done pursuant to this
Agreement shall be deemed or construed to create any partnership, joint venture,
or agency relationship between the parties hereto. Furthermore, the parties
agree that this Agreement does not constitute a partnership for tax purposes. In
the event that it is so construed, however, the parties agree to be excluded
from the provisions of Subchapter K of the United States Internal Revenue Code
of 1986, as amended. In no event shall such relationship constitute a
partnership for U.S. federal income tax purposes.
7.5 Headings. The section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
7.6 Force Majeure. Neither party will be liable for any failure or
delay in its performance under this Agreement due to causes which are beyond its
reasonable control.
7.7 No Waiver; Modifications. No amendment or modification of this
Agreement, nor any waiver of any rights, will be effective unless assented to in
writing by the party to be charged, and the waiver of any breach or default will
not constitute a waiver of any other right hereunder or any subsequent breach or
default.
7.8 Assignment. Neither party may assign this Agreement without the
prior written consent of the other party, except that either party may assign
this Agreement to an entity into which it has merged or which has otherwise
succeeded to all or substantially all of its business and Assets to which this
Agreement pertains by merger, reorganization or otherwise, and which assumed in
writing or by operation of law its obligations under this Agreement. Further,
should any Shell entity
-11-
<PAGE> 12
or facility having rights under this Agreement enter into a joint venture,
partnership or other business entity in which Shell, an Affiliate or a
Subsidiary of Shell has an ownership interest, then Shell may assign rights to
the joint venture, partnership or other business venture but only to the extent
such entity or facility had rights before formation of the joint venture,
partnership or other business venture and such joint venture, partnership or
other business venture assumes in writing or by operation of law its obligations
under this Agreement. Any attempted assignment in violation of this Section 7.8
shall be null and void and shall entitle the non-defaulting party to terminate
this Agreement. Subject to the foregoing, the rights and liabilities of the
parties hereto will bind and inure to the benefit of the parties and their
respective permitted successors, executors and administrators, as the case may
be.
7.9 Severability. In the event that any provision of this Agreement is
determined to be invalid, illegal or unenforceable by a court of competent
jurisdiction, the remainder of the Agreement shall remain in full force and
effect without said provision, and the parties shall negotiate, in good faith,
an enforceable substitute provision that most nearly effects the parties' intent
in entering into this Agreement.
7.10 Entire Agreement. This Agreement, including the Confidentiality
Agreement between the parties dated February 4, 1996, is the complete and entire
agreement between the parties regarding the subject matter hereof, and shall
supersede and replace any and all prior agreements, communications, and
understandings (both written and oral), including without limitation the Term
-12-
<PAGE> 13
Sheet dated May 29, 1997 between the parties, regarding such subject matter.
Neither party has relied on any promises, inducements or representations by the
other, except those expressly stated in this Agreement.
"BUYER"
SIMULATION SCIENCES INC.
By: /s/ Charles R. Harris
-----------------------------------------
Name: Charles R. Harris
--------------------------------------
Title: Chief Executive Officer
--------------------------------------
"SELLER"
SHELL OIL PRODUCTS COMPANY
Acting for itself and as agent for Shell Oil
Company
By: /s/ Paul L. Cuneo
-----------------------------------------
Name: Paul L. Cuneo
--------------------------------------
Title: Director of Technology
--------------------------------------
-13-
<PAGE> 14
EXHIBIT A
DISCLOSURE SCHEDULE
[see list of third party software on Exhibit C]
<PAGE> 15
EXHIBIT B
NEW EMPLOYEES
[*]
[*] Confidential Treatment Requested
<PAGE> 16
EXHIBIT C
PROGRAMS
PROFIT 6000 (UNIX BASED)
[*]
NT-BASED VERSION OF PROFIT
[*]
Attached below is a list of the third-party software for insertion in the
appropriate exhibit of the Asset Purchase Agreement - PROFIT.
THIRD-PARTY SOFTWARE USED BY PROFIT 6000
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
THIRD-PARTY SOFTWARE CURRENTLY INCLUDED IN DEVELOPMENT OF WINDOWS NT VERSION OF
PROFIT
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
o [*]
[*] Confidential Treatment Requested
<PAGE> 17
EXHIBIT D
ALLOCATION
Tangibles: $[*]
Intangibles: $[*]
[*] Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.3
SOFTWARE MARKETING AGREEMENT - QDMC/PCTP
This Software Marketing Agreement ("the Agreement") is entered into on
this 15th day of September, 1997 (the "Effective Date") by and between Shell Oil
Products Company, a Delaware corporation, acting for itself and as agent for
Shell Oil Company, a Delaware corporation (collectively, "Shell"), and
Simulation Sciences, Inc., a Delaware corporation ("SIMSCI").
RECITALS
WHEREAS, SIMSCI and Shell are complementary in their specific areas of
competence; and
WHEREAS, SIMSCI is a software technology company delivering process
simulation and rigorous real time optimization solutions, serving in segments of
process industries; and
WHEREAS, Shell is in the business of, among other things, the
exploration and production, refining and marketing, and processing of
petrochemical products; and
WHEREAS, Shell has developed and is the owner of certain computer
software programs; and
WHEREAS, Shell desires to grant to SIMSCI, and SIMSCI desires to
receive from Shell, certain rights to market, sell and evaluate such computer
software programs, all on the terms and conditions set forth herein
WHEREAS, The parties have entered into that certain term sheet dated
May 29, 1997 concerning the subject matter hereof (the "Term Sheet"); and
WHEREAS, The parties now desire to supersede the Term Sheet by entering
into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree as follows:
[*] Confidential Treatment Requested
<PAGE> 2
AGREEMENT
1. DEFINITIONS Capitalized terms in this Agreement have the following meanings:
1.1 "Affiliated Entities" shall mean (i) Affiliates as of May 29, 1997
and (ii) Subsidiaries.
1.2 "Affiliates" shall mean [*], a company of [*], [*], an [*] company,
and any company (other than Shell) in whatever country organized, in which
either or both of said companies shall, at the time in question and directly or
indirectly through one or more intermediaries, [*] or more of the stock having
the [*] or, any company (other than Shell), in whatever country organized, in
which Shell, at the time in question and directly or indirectly through one or
more intermediaries, owns or has the power to exercise control of [*] or more of
the stock with the [*].
1.3 "Derivative Work" is a work that is based on an underlying work and
that would be a copyright infringement if prepared without the authorization of
the copyright owner(s) of the underlying work as described under United States
copyright laws. A Derivative Work is subject to the ownership rights and
licenses of a party or of others in the underlying work.
1.4 "Documentation" shall mean all technical documentation and
procedural and instructional manuals regarding the use of the Programs including
on-line help capabilities.
1.5 "Error" shall mean a substantial nonconformity of the Programs with
the corresponding user documentation.
1.6 "Intellectual Property Rights" shall mean all current and future
worldwide patents and other patent rights, utility models, copyrights, trade
secrets, trademarks and other intellectual property rights, including without
limitation all applications and registrations with respect thereto.
1.7 "Marketing and Demonstration Materials" shall mean Product
brochures, manuals, technical specification sheets, demonstration presentations,
Product education and training materials, Product descriptions including those
used in electronic online services, and other marketing sales literature used by
Shell in connection with its marketing activities or provided by Shell to SIMSCI
for SIMSCI's use in connection with marketing activities.
1.8 "Products" shall mean the Programs in object code form and the
Documentation.
1.9 "Programs" shall mean solely the Shell computer software programs
listed in Exhibit A and all New Versions thereof.
[*] Confidential Treatment Requested
-2-
<PAGE> 3
1.10 "Scoping Study" shall mean the research, development and planning
efforts undertaken by SIMSCI in connection with integrating the Products with
SIMSCI's products, including ROMEO, PRO/II and PROVISION, which may include the
preparation of a business plan for the commercialization of such new integrated
products.
1.11 "Source Code" shall mean software in human-readable form,
including all related programmers' comments, data files and structures, header
files, include files, make files, macros, object libraries, programming tools
not commercially available, technical specifications, flowcharts
-3-
<PAGE> 4
and logic diagrams, schematics, annotations and documentation reasonably
necessary or useful in enabling an independent third party programmer with
reasonable programming skills to create, operate, maintain, modify and improve
the software without the help of any other person. Data files containing Source
Code must be in standard ASCII format and be readable by a text editor.
1.12 A "Subsidiary" shall mean a corporation, company, or other entity,
in whatever country organized, in which, (i) as of the Purchase Date, (x) Shell
or an Affiliate directly or indirectly through one or more intermediaries has
the [*] or (y) Shell or an Affiliate [*] or (ii) after the Purchase Date, Shell
or an Affiliate directly or indirectly through one or more intermediaries owns
at least [*] of the outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority). With respect to
a corporation, company or other entity whose outstanding shares or securities
(representing the right to vote for the election of directors or other managing
authority) become at least [*] owned or controlled by Shell after the Purchase
Date during the term of this Agreement, only such a corporation, company or
other entity that is not a competitor of SIMSCI shall be deemed to be a
Subsidiary. For purposes of this Section 1.12 a competitor of SIMSCI shall mean
an entity that is in the business of developing and marketing for commercial
purposes computer software in direct competition with the Programs. Further,
with respect to interests acquired after the Purchase Date, any such
corporation, company, or other entity shall be deemed to be a Subsidiary for
only so long as such ownership or [*] exists.
1.13 "New Versions" means Error corrections and enhancements in
features and functionality of the Programs whether designated by a change in the
number to the right or left of the decimal point.
2. LICENSE GRANTS
2.1 Marketing License. Shell hereby grants to SIMSCI during the term of
this Agreement an exclusive, worldwide, fully paid-up, royalty-free license
under all its Intellectual Property Rights in the Programs to perform, display,
adapt, reproduce, and distribute to end users, in any medium or distribution
technology whatsoever, whether known or unknown, and either alone or in
connection with other products, the Products and associated Marketing and
Demonstration Materials.
2.2 Source Code License. Shell hereby grants to SIMSCI during the term
of this Agreement an exclusive, fully paid-up, royalty-free license to use, have
used, make, have made, import, have imported, reproduce, have reproduced,
display, have displayed, perform, have performed, prepare and have prepared
Derivative Works of and distribute and have distributed the Programs in Source
Code form for the exclusive and sole purpose of [*]. SIMSCI shall own all right,
title and interest in and to any Derivative Works created in connection with the
Scoping Study, including without limitation all Intellectual Property rights
therein and related thereto.
[*] Confidential Treatment Requested
-4-
<PAGE> 5
2.3 Limitation. The rights granted in Section 2.1 and 2.2 are subject
to the rights in existence as of the Effective Date of Affiliated Entities and
those companies listed on Exhibit B to which licenses were granted prior to June
30, 1997 ("Existing Licensees") to use, reproduce and display the Products
internally which shall continue in full force and effect until such rights
expire or are terminated. Further, Shell and any Affiliated Entities reserve the
right to use, copy, reproduce, display and prepare Derivative Works of the
Products solely for internal purposes. In no event during the term of this
Agreement shall Shell or any Affiliated Entity market, sell or distribute the
Products or the Programs to any third party, and Shell agrees that it will
direct to SIMSCI all inquiries from third parties interested in obtaining a
license to use the Products.
2.4 Certain License Provisions.
2.4.1 SIMSCI shall use commercially reasonable efforts to
include in agreements relating to use of the Programs, to the extent
customary in the industry and permitted by the law of the jurisdiction
in which the agreement is likely to be interpreted or enforced, terms
which:
(a) proscribe or limit decompilation, reverse
engineering, or other surreptitious accessing of the Programs
to reveal any trade secrets or other proprietary know-how
embodied therein to which the sublicensee is not granted
rights; and
(b) protect Shell's intellectual property rights in
the Programs to substantially the same degree as SIMSCI's
intellectual property rights are protected.
2.4.2 SIMSCI shall include agreements relating to use of the
Program, to the extent permitted by the law of the jurisdiction in
which the agreement is likely to be interpreted or enforced, terms
which:
(a) provide a disclaimer of the implied warranties of
merchantability and fitness for a particular purpose on behalf
of its licensors with respect to the Programs;
(b) provide an exclusion of SIMSCI's licensors'
liability for incidental, consequential and indirect damages;
and
(c) provide a limitation of SIMSCI's licensors'
maximum liability to the amount that a licensee has paid in
licensing fees or royalties.
Notwithstanding the foregoing, it is understood that such provisions may not be
enforceable in a particular jurisdiction or with respect to a particular
agreement, and that it may not be commercially feasible for SIMSCI to negotiate
successfully the inclusion of such provisions in a particular agreement.
-5-
<PAGE> 6
2.5 Notices. SIMSCI shall ensure that all copies of the Programs or any
Documentation which are distributed to any third party bear all of the legends,
marks, and notices as follows:
2.5.1 the words "CONTAINS LICENSED PROPRIETARY MATERIAL OF
SHELL OIL COMPANY" or a copyright notice,
2.5.2 a restricted-rights legend conforming to the Federal
Acquisition Regulations (FARs) then in effect that apply to software
developed entirely at private expense,
2.5.3 indicators of trademark claim or registration wherever
any Shell trademark appears.
3. DELIVERY AND PAYMENT
3.1 Delivery. Within thirty (30) days of the Effective Date, Shell
agrees to deliver, at Shell's expense, to SIMSCI the Products (on such media as
may be mutually agreed by the parties) and Source Code for the Programs. Shell
shall deliver at least two (2) electronic copies of the Documentation and at
least two (2) electronic copies of the Marketing and Demonstration Materials
should any such materials exist.
3.2 License Fee. In consideration of the rights and licenses granted in
Section 2 hereof, SIMSCI shall pay to Shell a one-time license fee of One
Million Dollars ($1,000,000) (the "License Fee"). SIMSCI shall not be obligated
to pay to Shell any other fee or royalty for the licenses and rights granted
herein. SIMSCI shall pay the License Fee in cash (by check or wire transfer)
upon the Effective Date. The amount of the License Fee allocable to the Program
and other intangibles and the amount allocable to the Documentation, Marketing
and Demonstration Materials and other tangible items is set forth on Attachment
2 to Exhibit C.
4. TECHNICAL ASSISTANCE AND SUPPORT
4.1 Technical Assistance During Scoping Study. Shell will assist SIMSCI
as reasonably requested with the Scoping Study. SIMSCI agrees to estimate the
amount of effort needed and Shell agrees to use its best efforts with respect to
each such request to cause appropriately skilled individuals employed by Shell
to be made available to SIMSCI to assist in its commercialization and
integration of the Programs. In particular, Shell agrees that [*] shall be
available for at least [*] of [*] working time until [*]. Any consulting
services shall be at SIMSCI's expense based on Shell's cost as charged by Shell
to any Affiliated Entity which is based upon the experience of the employee and
the employee's years of service and pay level; provided such cost shall not
exceed $[*] per hour for services of [*] and $[*] per hour for all other
employees. Shell shall provide SIMSCI with specific employee charge rates as
employees are requested by and assigned to assist SIMSCI. Shell further agrees
to use its best efforts to cause its Affiliates, including Shell Services
Company, to
[*] Confidential Treatment Requested
-6-
<PAGE> 7
negotiate consulting agreements with SIMSCI to provide assistance in SIMSCI's
commercialization and integration of the Programs. Any invention, idea, design,
works of authorship or intellectual
-7-
<PAGE> 8
property created by any Shell employee that is (i) related to the Scoping Study,
SIMSCI products or the Programs, (ii) the result of work performed directly for
SIMSCI and (iii) created during the term of this Software Marketing Agreement
shall be the sole property of SIMSCI and Shell hereby assigns to SIMSCI all
Shell's right, title and interest thereto including all Intellectual Property
Rights therein. Shell warrants that each such individual shall be an employee of
Shell shall have signed an invention assignment agreement assigning to Shell all
rights in works created by such individual in the performance of his or her
services.
4.2 Maintenance and Support. Shell will deliver all New Versions of the
Programs to SIMSCI promptly upon completion of such items. SIMSCI shall be
responsible for first level support to all its customers of the Programs and
Shell shall provide back up technical support to SIMSCI by telephone and e-mail.
Shell will not respond to inquiries directly from SIMSCI customers other than as
may be called for pursuant to the Marketing Cooperation Letter entered into
between the parties. Shell shall use its best efforts to correct Errors reported
by SIMSCI and shall respond to requests for support from SIMSCI with a level of
effort commensurate with the severity of the Errors reported by SIMSCI.
4.3 Training. At SIMSCI's request, Shell shall provide training
sessions for technical training to SIMSCI sufficient to enable SIMSCI to
effectively market the Products. Such training shall be held at Shell's Process
Control training facility at its Westhollow Technology Center, provided that
SIMSCI shall bear the costs of travel and related expenses of SIMSCI trainees
and pay to Shell a fee not to exceed $[*] per day per student for such training
with a minimum of [*] and maximum of [*] students per training session.
4.4 No Claims. Neither party shall bring, directly or indirectly, any
action, claim or proceeding against the other party (the "Hiring Party") as a
result of the Hiring Party hiring the employees of the other party so long as
the Hiring Party did not actively solicit such employees.
5. OPTION TO ACQUIRE
5.1 Option. During the term of this Agreement, SIMSCI shall have an
exclusive option to acquire from Shell (the "Option") all of Shell's right,
title and interest in and to the Programs (including all object code and Source
Code and Intellectual Property Rights therein) and related assets on the terms
and conditions set forth in Exhibit C. To exercise the Option SIMSCI must
provide Shell with written notice of its election along with tender of payment
of the Purchase Price by no later than midnight on [*].
5.2 Due Diligence. Upon reasonable advance notice, SIMSCI and its
agents shall have full access, upon reasonable request and during normal
business hours to the officers, employees,
[*] Confidential Treatment Requested
-8-
<PAGE> 9
records, financial statements, customer lists, supplier lists, contracts and
other business information of Shell related to the Assets (as defined in Exhibit
C) in order to conduct due diligence with respect to the Assets.
6. CONFIDENTIALITY
6.1 Definition. "Confidential Information" means information of a
proprietary or confidential nature disclosed by either party to the other party,
whether directly or indirectly, and whether in writing, orally or by inspection
of tangible objects, which is designated as "Confidential," "Proprietary" or
some similar designation. Information communicated orally shall be considered
Confidential Information if such information is designated as being confidential
or proprietary at the time of disclosure. Confidential Information shall not,
however, include any information which (i) was publicly known and made generally
available in the public domain prior to the time of disclosure by the disclosing
party; (ii) becomes publicly known and made generally available after disclosure
by the disclosing party to the receiving party through no action or inaction of
the receiving party; (iii) is already in the possession of the receiving party
at the time of disclosure by the disclosing party as shown by the receiving
party's files and records immediately prior to the time of disclosure; (iv) is
obtained by the receiving party from a third party without a breach of such
third party's obligations of confidentiality; (v) is independently developed by
the receiving party without use of or reference to the disclosing party's
Confidential Information, as shown by documents and other competent evidence in
the receiving party's possession; or (vi) is required by law to be disclosed by
the receiving party, including filings with government agencies such as the
Securities and Exchange Commission, provided that the receiving party gives the
disclosing party prompt written notice of such requirement prior to such
disclosure and assistance in obtaining an order protecting the information from
public disclosure.
6.2 Non-use; Non-disclosure; Maintenance of Confidentiality. Each party
agrees not to use the Confidential Information disclosed to it by the other
party for any purpose except to carry out its rights and obligations under this
Agreement. Neither party will disclose the Confidential Information of the other
to third parties or to its employees, except employees who are required to have
the information in order to carry out such party's obligations under this
Agreement. Each party agrees that it shall take reasonable measures to protect
the secrecy of and to avoid the disclosure and unauthorized use of the
Confidential Information of the other party. Without limiting the foregoing,
each party shall take at least those measures that it takes to protect its own
confidential information, and shall ensure that its employees who have access to
Confidential Information of the other party have signed a non-use and
non-disclosure agreement in content at least as protective of Confidential
Information as the provisions hereof prior to any disclosure of Confidential
Information to such employees. Each party may disclose Confidential Information
to its subsidiaries and other affiliates, except with respect to Shell, no
disclosures may be made to affiliates which are competitors of SIMSCI, provided
that any subsidiary or other affiliate prior to disclosure agrees in writing to
be bound by the provisions of these sections.
-9-
<PAGE> 10
7. REPRESENTATIONS AND WARRANTIES
7.1 Warranties. Shell represents and warrants to SIMSCI that (i) Shell
owns all right, title and interest in and to the Programs and Documentation and
all Intellectual Property Rights therein and related thereto; (ii) it has the
full right, power, and privilege to grant the rights herein; (iii) there are no
outstanding agreements, assignments or encumbrances inconsistent with the
provisions of this Agreement; (iv) except as set forth in Exhibit B there is no,
and Shell shall not grant, any right, license or interest inconsistent with the
rights granted to SIMSCI herein and Shell has not granted any right or license
to the Programs to any third party other than Affiliated Entities; (v) to the
best of Shell's knowledge there are no threatened or pending actions, suits,
investigations, claims or proceedings in any way related to the Programs and
Documentation and/or Intellectual Property Rights relating thereto; (vi) to the
best of Shell's knowledge the exercise of SIMSCI's rights hereunder does not
infringe the Intellectual Property Rights of any third party; (vii) the Programs
conform to their specifications and any representations made in writing by Shell
to SIMSCI, and (viii) Exhibit B sets forth the identity of all third parties to
which Shell has provided copies of the Programs and the scope of rights granted
to each such third party. Shell also represents and warrants that if the
Programs, when used in accordance with their associated documentation, are not
capable of correctly processing, providing and/or receiving date data within and
between the twentieth and twenty-first centuries, provided that all products
(for example, hardware, software and firmware) used with the Programs properly
exchange accurate date data with the Programs, Shell will correct such problem
at no charge to SIMSCI.
7.2 Disclaimer. THE WARRANTIES SET FORTH IN SECTION 7 ARE IN LIEU OF
ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, AND SHELL SPECIFICALLY
DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
7.3 Separate Representations. Each of the warranties set forth in this
Section 7 shall be separate and independent and, except as expressly provided to
the contrary, shall not be limited by reference to or inference from any other
warranty in this Agreement or any term of this Agreement.
8. INDEMNITY
8.1 Indemnification for breach of Warranties. Shell agrees to indemnify
and hold harmless SIMSCI, its affiliates, customers and its and their end users,
from any third party claim, suit or proceeding ("Claim") against them based on
Shell's breach of the warranties contained in Section 7.1 and to pay any
damages, settlement amounts and costs (including reasonable attorneys' fees and
court costs) relating to such a Claim. Shell will only pay settlement amounts
authorized by Shell and all costs, damages and attorneys' fees that a court
finally awards. SIMSCI shall promptly provide to Shell notice of any Claim, and
cooperate with and allow Shell to control the defense of any Claim and any
settlement negotiations. SIMSCI may participate in the proceedings at its option
and expense.
-10-
<PAGE> 11
8.2 Intellectual Property Indemnification. Shell agrees to indemnify
and hold harmless SIMSCI, its affiliates, customers and its and their end users,
from any Claim against them based on an allegation that the Programs infringe
any patent, copyright, trade secret or other intellectual property right of any
third party, and to pay any damages, settlement amounts and costs (including
reasonable attorneys' fees and court costs) relating to such a Claim. In
addition to any remedies specified in this Agreement, SIMSCI may pursue any
other remedy it may have in law or in equity. Shell will pay any settlement
amounts authorized by Shell and all costs, damages and attorneys' fees that a
court finally awards. SIMSCI shall promptly provide to Shell notice of any
Claim, and cooperate with and allow Shell to control the defense of any Claim
and any settlement negotiations. SIMSCI may participate in the proceedings at
its option and expense.
8.3 Procedure. SIMSCI shall notify Shell in writing of any Claim for
which it seeks indemnification under Section 8.1 above; and give Shell the
exclusive authority to defend or settle such Claim (it being understood that
SIMSCI may participate with counsel of its choosing at SIMSCI's own expense);
and, at Shell's expense (except for the value of the time of SIMSCI's
employees), give Shell reasonable information and assistance to settle and/or
defend any such Claim. Shell shall not have the right to settle any Claim in a
manner that is prejudicial to the interests of SIMSCI without SIMSCI's prior
written consent.
9. LIMITATION OF LIABILITY
EXCEPT FOR LIABILITY ARISING UNDER SECTION 8, IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, LOSSES, COSTS OR EXPENSES OF ANY KIND, HOWEVER CAUSED AND
WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), IN CONNECTION WITH THE
LICENSES GRANTED HEREUNDER OR IN THE ASSIGNMENT AGREEMENT AND EXERCISE OF RIGHTS
THEREUNDER. THE FOREGOING LIMITATIONS SET FORTH IN THIS SECTION 9 SHALL APPLY
REGARDLESS OF WHETHER A PARTY KNOWS OR HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES, LOSSES, COSTS, OR EXPENSES. THE PARTIES AGREE THIS SECTION 9
REPRESENTS A REASONABLE ALLOCATION OF RISK.
10. TAXES
Each party is responsible for complying with the collection, payment,
and reporting of all taxes imposed by any governmental authority applicable to
its activities in connection with the sale, lease, delivery or license of the
Products under this Agreement. Neither party is responsible for taxes that may
be imposed on the other party. Situations may arise where governmental
authorities require SIMSCI to withhold from amounts payable to Shell. In such
cases, SIMSCI may withhold the amount of taxes due from payments to be made to
Shell under this Agreement and remit the taxes withheld to the governmental
authority.
-11-
<PAGE> 12
11. TERM AND TERMINATION
11.1 Term. This Agreement shall commence upon the Effective Date
and shall remain in effect until the earlier of [*] or the date of exercise
by SIMSCI of the Option.
11.2. Effect of Termination; Survival. In the event that SIMSCI has
not elected to exercise the Option, upon expiration of the Agreement, SIMSCI
may retain a reasonable number of copies of the Programs (in both object and
Source Code format) and the Documentation sufficient to provide support to its
customers and all rights and licenses granted by Shell to SIMSCI shall cease,
except SIMSCI shall continue to have all necessary rights and licenses to
perform the following activities: (a) SIMSCI may continue to exercise the
rights and licenses granted under this Agreement for up to six months after
termination to fill customer orders SIMSCI receives before the expiration date,
(b) for as long as necessary to provide maintenance and subsidiaries for
internal use, other than as provided in this Section 11.2, shall terminate and
SIMSCI shall immediately refrain from selling, releasing or developing and
products embodying the Programs or parts thereof. All rights and licenses to
use the underlying works of Derivative Works developed by SIMSCI during the
Scoping Study shall terminate. All rights and licenses granted to SIMSCI's
customers and to SIMSCI for internal use as provided in this Section 11.2 shall
survive and continue and shall in no way be affected by such termination of
this Agreement. Sections 1, 4.4, 6, 7, 8, 9, 11 and 12 shall survive any
expiration of this Agreement.
12. GENERAL
12.1 Governing Law. The rights and obligations of the parties under
this Agreement shall not be governed by the 1980 U.N. Convention on Contracts
for the International Sale of Goods; rather such rights and obligations shall
be governed by and construed under the laws of Texas.
12.2 Arbitration. Any controversy or claim ("claim") whether based
on contract, tort, statute or other legal or equitable theory (including but
not limited to any claim of fraud, misrepresentation or fraudulent inducement or
any question of validity or effect of this Agreement including this section)
arising out of or related to this Agreement (including any amendments or
extensions), or the breach or termination thereof shall be settled by
arbitration in accordance with then current rules and procedures of the
Commercial Rules of Arbitration of the American Arbitration Association by one
(1) arbitrator appointed in accordance with such rules. The arbitration and any
award shall be in the English language. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Sections 1-16 to the exclusion of
any provision of state law inconsistent therewith or which would produce a
different result, and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction. The arbitration shall be held in
Houston, Texas. The arbitrator shall determine the claims of the parties and
render a final award in accordance with the substantive law of the State of
Texas, excluding the conflicts
[*] Confidential Treatment Requested
-12-
<PAGE> 13
provisions of such law. The arbitrator shall set forth the reasons for the award
in writing. Any claim by either party shall be time-barred if the asserting
party commences arbitration with respect to such claim later than two (2) years
after the cause of action accrues. All statutes of limitations and defenses
based upon passage of time applicable to any claim of a defending party
(including any counterclaim or setoff) shall be tolled while the arbitration is
pending. The obligation to arbitrate any claim shall extend to the successors,
assigns and third party beneficiaries of the parties. Any discovery shall occur
by agreement of the parties, or by order of the arbitrator upon a finding of
good cause. Each party shall bear its own costs, expenses and attorney's fees;
provided that if court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall pay all
reasonable associated costs, expenses, and attorney's fees in connection with
such court proceeding. In order to prevent irreparable harm, the arbitrator
shall have the power to grant temporary or permanent injunctive or other
equitable relief. Prior to the appointment of an arbitrator, a party may,
notwithstanding any other provision of this Agreement, seek temporary injunctive
relief from any court of competent jurisdiction; provided that the party seeking
such relief shall (if arbitrator has not already commenced) simultaneously
commence arbitration. Such court ordered relief shall not continue more than ten
(10) days after the appointment of the arbitrator (or in any event for longer
than sixty (60) days). If any part of this arbitration provision is held to be
unenforceable, it shall be severed and shall not affect either the duty to
arbitrate or any part of this provision.
12.3 Notice. All notices required or permitted under this Agreement
will be in writing and will be deemed given when: (i) delivered personally; (ii)
sent by confirmed telex or facsimile; (iii) five (5) days after having been sent
by registered or certified mail, return receipt requested, postage prepaid; or
(iv) one (1) day after deposit with a commercial overnight carrier specifying
next day delivery, with written verification of receipt. All communications will
be sent to the respective addresses set forth below or to such other address as
may be designated by a party by giving written notice to the other party
pursuant to this Section 12.3.
(a) if to SIMSCI, to:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attention: Charles R. Harris
Telephone No.: (714) 579-0412
Telecopy No.: (714) 579-0951
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark Bonham
-13-
<PAGE> 14
Telephone No. (415) 493-9300
Telecopy No.: (415) 493-6811
(b) if to Shell, to:
Shell Oil Products Company
Westhollow Technology Center
P.O. Box 1380
Houston, Texas 77251
Attention: Paul Cuneo
Telephone No: (281) 544-7401
Telecopy No.: (281) 544-8650
with a copy to:
Shell Oil Company
Intellectual Property-Legal
P.O. Box 2463, Houston, TX 77252-2463
Attention: Kim Muller
Telephone: (713) 241-2698
Facsimile: (713) 241-6617
12.4 Independent Contractors. Nothing contained or done pursuant to
this Agreement shall be deemed or construed to create any partnership, joint
venture, or agency relationship between the parties hereto. Furthermore, the
parties agree that this Agreement does not constitute a partnership for tax
purposes. In the event that it is so construed, however, the parties agree to be
excluded from the provisions of Subchapter K of the United States Internal
Revenue Code of 1986, as amended. In no event shall such relationship constitute
a partnership for U.S. federal income tax purposes.
12.5 Headings. The section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
12.6 Force Majeure. Neither party will be liable for any failure or
delay in its performance under this Agreement due to causes which are beyond its
reasonable control.
12.7 No Waiver; Modifications. No amendment or modification of this
Agreement, nor any waiver of any rights, will be effective unless assented to in
writing by the party to be charged, and the waiver of any breach or default will
not constitute a waiver of any other right hereunder or any subsequent breach or
default.
12.8 Assignment. Neither party may assign this Agreement without the
prior written consent of the other party, except that either party may assign
this Agreement to an entity into which
-14-
<PAGE> 15
it has merged or which has otherwise succeeded to all or substantially all of
its business and assets to which this Agreement pertains by merger,
reorganization or otherwise, and which has assumed in writing or by operation of
law its obligations under this Agreement. Any attempted assignment in violation
of this Section 12.8 shall be null and void and shall entitle the non-defaulting
party to terminate this Agreement. Subject to the foregoing, the rights and
liabilities of the parties hereto will bind and inure to the benefit of the
parties and their respective permitted successors, executors and administrators,
as the case may be.
12.9 Severability. In the event that any provision of this Agreement is
determined to be invalid, illegal or unenforceable by a court of competent
jurisdiction, the remainder of the Agreement shall remain in full force and
effect without said provision, and the parties shall negotiate, in good faith,
an enforceable substitute provision that most nearly effects the parties' intent
in entering into this Agreement.
12.10 Entire Agreement. This Agreement [including the Confidentiality
Agreement of February 4, 1996] is the complete and entire agreement between the
parties regarding the subject matter hereof, and shall supersede and replace any
and all prior agreements, communications, and understandings (both written and
oral), including without limitation the Term Sheet dated May 29, 1997 between
the parties, regarding such subject matter. Neither party has relied on any
promises, inducements or representations by the other, except those expressly
stated in this Agreement.
12.11 No Restriction. This Agreement is not to be construed as a
commitment or obligation, express or implied, on the part of SIMSCI that SIMSCI
will market, sell, purchase, license or sublicense any Products under this
Agreement. SIMSCI agrees that it will not independently develop programs that
may be competitive with the Products, however SIMSCI shall not be restricted
from acquiring, and thereafter developing, programs that may be competitive with
the Products. In the event of such acquisition SIMSCI shall notify Shell. SIMSCI
shall have full freedom and flexibility and sole and exclusive control over all
aspects of its business, including, without limitations (i) sales policies, (ii)
credit practices, (iii) hiring and supervision of personnel, (iv) marketing,
advertising, and promotion, (v) contracting, (vi) billing and collection; (vii)
pricing; and (viii) establishing the terms and conditions under which the
Products and Services are offered to customers. Nothing in this Agreement shall
be construed to restrict SIMSCI from conducting any other business relating to
any third party's computer software products.
SHELL OIL PRODUCTS COMPANY SIMULATION SCIENCES, INC.
FOR ITSELF AND AS AGENT FOR
SHELL OIL COMPANY
By: /s/ Paul Cuneo By: /s/ Charles R. Harris
------------------------------- ---------------------------------
Title: Director of Technology Title: President and
------------------------------- Chief Executive Officer
---------------------------------
-15-
<PAGE> 16
Date: 9/11/97 Date: 9/11/97
------------------------------- ---------------------------------
-16-
<PAGE> 17
EXHIBIT A
PROGRAMS AND DOCUMENTATION
1. Shell Owned Software:
[*]
[*] Confidential Treatment Requested
<PAGE> 18
EXHIBIT B
EXISTING LICENSEES
1. [*]
2. [*]
<PAGE> 19
EXHIBIT C
ASSIGNMENT AGREEMENT
The following terms and conditions shall become effective upon the date
on which SIMSCI elects to exercise the Option (the "Purchase Date") pursuant to
Section 5 of the Software Marketing Agreement dated September 15, 1997.
Capitalized terms used herein but not otherwise defined shall have the meaning
defined in the Software Marketing Agreement.
1. ASSIGNMENT OF ASSETS
1.1 Assignment. Shell agrees to and hereby does irrevocably sell,
assign and transfer to SIMSCI, without limitation or reservation, all worldwide
right, title and interest in and to the following (collectively, the "Assets"):
(a) all rights and ownership of the Programs, including but
not limited to all technical, design, development, installation, operation and
maintenance information concerning the Programs, including Source Code, source
documentation, source listings and annotations, engineering notebooks (if any
such materials exist), example data and example results, as well as all
reference manuals and support materials normally distributed to end-users and
potential end-users in connection with the distribution of the Programs;
(b) all other physical and intangible assets, including
without limitation, to the extent any such materials exist, customer lists,
potential customer lists, proposals, operating manuals, accounting records,
business strategy plans, projects under development, lead referral methods,
co-selling arrangements, distribution methods and contacts, management plans and
business opportunities relating to the Programs;
(c) all Intellectual Property Rights in the foregoing items in
Sections (a) and (b) including without limitation U.S. Patent No. 4,616,308
(Morshedi et al.), any other patent rights, all copyrights, trade secrets, and
any registrations, applications or filings relating thereto, processes,
know-how, and any and all similar rights (collectively, the "Intellectual
Property"). Notwithstanding the foregoing, any references to Shell, Shell Oil
Company, Shell Oil Products Company, or any other Shell company, or any
appearance of the Shell Pecten logo which are found in the foregoing items in
Sections (a) and (b) shall not transfer rights in those trademarks, service
marks and trade named; and
(d) all of Shell's claims against any parties relating to any
of the foregoing in (a) through (c) and all of Shell's rights under contracts
pertaining to the foregoing, including without limitation any license,
development, consulting and maintenance agreements.
[*] Confidential Treatment Requested
<PAGE> 20
1.2 Assumption of Obligations. SIMSCI shall not assume any liabilities
with respect to the Assets unless otherwise agreed in writing in which case that
parties shall make an appropriate adjustment to the Purchase Price.
1.3 Further Assurances. Shell shall, and shall cause its Affiliated
Entities, employees, agents and consultants to, without charge and promptly upon
request by SIMSCI execute any and all document(s) reasonably requested by SIMSCI
in order to (i) effect and perfect the assignment in Section 1.1, (ii) obtain,
enforce or defend SIMSCI's Intellectual Property Rights in the Assets, and (iii)
otherwise enable SIMSCI to obtain the full benefit of such assignment.
1.4 Delivery. Within thirty (30) days of the Purchase Date Shell shall
deliver to SIMSCI all Assets not previously delivered to SIMSCI. In addition,
Shell shall deliver promptly upon release to any Affiliated Entity copies of all
New Versions of the Programs prepared by Shell or by the Affiliated Entities
which are within Shell's possession or control. Upon SIMSCI's request during the
term of this Agreement, Shell shall also reduce to written summary and deliver
to SIMSCI all such other information of which Shell is aware that SIMSCI may
reasonably require to modify, debug, upgrade, support or otherwise correct
Errors and/or operate the Programs.
2. PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. In consideration for the foregoing assignment of
the Assets, SIMSCI shall pay to Shell [*], (the "Purchase Price"). Attachment 2
sets forth the amount of the Purchase Price allocable to the Programs and
intangible assets and the amount allocable to the Documentation, physical assets
and other tangible items. Buyer shall pay and promptly discharge when due all
sales and related taxes imposed or levied by reason of the sale of the Assets to
Buyer.
2.2 Payment. SIMSCI will pay the Purchase Price in a combination of
cash (by check or wire transfer) and stock. Cash in the amount of [*] will be
delivered by SIMSCI to Shell on the Purchase Date. Shares of SIMSCI Common Stock
valued at [*] (calculated based on the average closing price for the ten (10)
trading days seven days prior to the Purchase Date) will be issued to Shell,
placed in an escrow account with a mutually agreed upon third party escrow agent
(the "Escrow Agent") and, subject to the terms of the applicable escrow
agreement by and among Shell, SIMSCI and the Escrow Agent, distributed to Shell
by the escrow agent in accordance with the applicable escrow agreement and the
following schedule: (i) 23% of the total Shares will be delivered on the first
annual anniversary of the Purchase Date, (ii) 19% of the total Shares will be
delivered on the second annual anniversary of the Purchase Date (iii) 29% of the
total Shares will be delivered on the third annual anniversary of the Purchase
Date, and (iv) 29% of the total Shares distributed will be delivered on the
fourth annual anniversary of the Purchase Date. Shares remaining in the escrow
account are referred to as the "Escrowed Shares". The shares released from
escrow shall have the registration rights set forth in Exhibit D.
2.3 Early Release of Escrow. If there is a Market Price Decline of (i)
more than fifty percent (50%) and less than seventy percent (70%), then fifty
percent (50%) of the remaining
[*] Confidential Treatment Requested
-2-
<PAGE> 21
Escrowed Shares shall be released promptly to Shell upon Shell's written
request, and (ii) seventy percent (70%) or more, then eighty percent (80%) of
the remaining Escrowed Shares shall be released promptly to Shell upon Shell's
written request. "Market Price Decline" shall mean that the
-3-
<PAGE> 22
value per share of SIMSCI's common stock in the Nasdaq National Market, adjusted
for stock splits, dividends and the like, as measured by the average closing
price for any ten (10) consecutive trading days, is lower than the closing price
of the SIMSCI's stock on the Purchase Date.
3. REPRESENTATIONS AND WARRANTIES OF SHELL. Shell represents and warrants
to SIMSCI as follows:
3.1 Intellectual Property.
(a) Attachment 1 sets forth a complete and accurate schedule
of all Intellectual Property capable of being identified, identifying
specifically (i) all patents and patent applications owned by Seller, including
the country of filing, filing number, date of issue, expiration date and title;
(ii) all registered trademarks and service marks and all trademark and service
mark applications, including country of filing, filing number, date of issue and
expiration date; (iii) all common law trademarks, service marks and trade names;
(iv) all registered and unregistered copyrights; (v) all license, option and
other agreements pursuant to which Shell acquired rights to any Intellectual
Property and all license, option and other agreements, oral or written, pursuant
to which Shell is obligated to pay royalties or other consideration to third
parties with respect to any Intellectual Property; and (vi) all license, option
and other agreements, oral or written, pursuant to which Shell has granted any
third party any right to any Intellectual Property. Complete and accurate copies
of all written agreements referred to in the foregoing clauses (v) and (vi) have
been provided to SIMSCI.
(b) Except as set forth on Attachment 1, (i) Shell has all
right, title and interest in and to the Intellectual Property; (ii) Shell has
neither incorporated into nor relied on any software, technology or proprietary
information of any third party in the creation of the Programs; (iii) Shell is
not making use of any invention, software, technology or proprietary information
in connection with the Programs in which any present or past employee of Shell
or any other person has or has claimed an interest, and Shell has no knowledge
of facts that could reasonably be expected to give rise to such a claim; (iv)
Shell is in full compliance with all agreements pursuant to which it acquired
any Intellectual Property; (vii) Shell has no knowledge that any third party is
infringing upon any of the Intellectual Property.
3.2 Agreements, Contracts and Commitments. Set forth on Attachment 1 is
a list of all agreements, contracts and commitments (written or oral) relating
to the Assets to which Shell is a party or by which it is bound in addition to
those identified pursuant to Section 3.1 (a). Shell has not breached, violated
or defaulted under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any contract. Each contract
is in full force and effect and, to the knowledge of Shell, the other party to
such contract has not breached, violated or defaulted under any of the terms or
conditions of any contract. Shell has obtained all necessary consents, waivers
and approvals of parties to any contract as are required to assign all rights
and benefits thereunder to SIMSCI.
-4-
<PAGE> 23
3.3 Investment Representations.
(a) Investment Representation. Shell is acquiring the Shares
for its own account, for investment and not with a view to the sale of
distribution thereof, nor with any present intention of distributing or selling
the same.
(b) Restricted Securities. Shell understands that the Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act, and that the Shares must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from registration. Shell further understand that
the exemption from registration afforded by Rule 144 (the provisions of which
are known to Shell) issued under the Securities Act depends upon the
satisfaction of various conditions and that, if applicable, Rule 144 may only
afford the basis for sales in limited amounts.
(c) Accredited Investor. Shell represents and warrants to
SIMSCI that it is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act.
(d) Access to Financial and Other Information. Shell has been
furnished with, or has had access to, all information concerning SIMSCI,
including the opportunity to raise questions of officers of SIMSCI, as Shell has
deemed necessary or appropriate in order to enable it to make an informed
investment decision with respect to the purchase of the Shares. Shell further
represents and warrants to SIMSCI that (a) it has such knowledge and experience
in financial matters that it is capable of evaluating the merits and risks of
its investment in the Shares, and (b) its financial condition is such that it is
able to bear all economic risks of the investment in the Shares, including a
complete loss of its investment therein and the risk of holding the Shares for
an indefinite period of time.
3.4 Representations Complete. There is no fact, circumstance or
condition of any kind or nature whatsoever known to Shell which reasonably could
be expected to have a material adverse effect on the Assets which has not been
set forth in this Agreement.
3.5 Notification of Certain Matters. Shell shall give prompt notice to
SIMSCI of the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
Shell contained in this Agreement to be untrue or inaccurate.
4. REPRESENTATIONS AND WARRANTIES OF SIMSCI
4.1 Representations and Warranties of SIMSCI. SIMSCI represents and
warrants to Shell as follows:
(a) Organization, Standing and Corporate Power. SIMSCI is a
corporation, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and
-5-
<PAGE> 24
has the requisite power and authority to carry on its business as now being
conducted. SIMSCI and each Significant Subsidiary (as defined below) of SIMSCI
is duly qualified to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a material adverse effect on the business,
operating results or financial condition of SIMSCI and its consolidated
subsidiaries, taken as a whole (a "Material Adverse Effect on SIMSCI"). SIMSCI
has made available correct copies of its Amended and Restated Certificate of
Incorporation and Bylaws, in each case as amended to the date of this Agreement.
For purposes of this Agreement, a "Significant Subsidiary" means any subsidiary
that constitutes a significant subsidiary of SIMSCI within the meaning of Rule
1-02 of Regulation S-X of the Securities and Exchange Commission (the "SEC").
(b) Capital Structure. The authorized capital stock of SIMSCI
consists of 30,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock, of which 100,000 shares are designated as Series A Participating
Preferred Stock. On August 29, 1997, 10,929,170 shares of Common Stock were
outstanding, all of which were validly issued, fully paid and nonassessable. All
shares of Common Stock to be issued to Shell as provided in Section 2.2 (the
"Shell Shares"), upon issuance on the terms and conditions specified in this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
(c) Authority; Noncontravention. SIMSCI has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The Board of Directors of SIMSCI
has duly approved this Agreement and the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by SIMSCI and the
consummation by SIMSCI of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate action on the part of SIMSCI.
This Agreement, when executed and delivered, will constitute a valid and binding
obligation of SIMSCI, enforceable against SIMSCI in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained
herein may be limited by applicable laws. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
of lapse of time, or both) under, or give rise to a right of consent,
termination, purchase, cancellation or acceleration of any obligation or to loss
of any property, rights or benefits under, or result in the imposition of any
additional obligation under, or result in the creation of any lien upon any of
the properties or assets of SIMSCI or any Significant Subsidiary under, (i) the
Certificate of Incorporation or Bylaws of SIMSCI or the comparable
organizational documents of any Significant Subsidiary, (ii) any contract,
license, loan or credit agreement, note, lease or other agreement filed or
incorporated by reference in any Company SEC Document (as defined below) as a
"Material Contract" under Item 601 of Regulation S-K or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to SIMSCI
or any
-6-
<PAGE> 25
Significant Subsidiary or their respective properties or assets, other than any
such conflicts, violations, defaults, rights, losses, obligations or liens that
individually or in the aggregate would not have a Material Adverse Effect on
SIMSCI or prevent or materially delay the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any United States Federal, state or
local government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign, is required by or with
respect to SIMSCI or any Significant Subsidiary in connection with the execution
and delivery of this Agreement by SIMSCI or the consummation by SIMSCI of the
transactions contemplated by this Agreement, except for (i) the filing of a Form
8-K with the SEC after the Closing, (ii) the listing of the SIMSCI Common Stock
to be issued upon Closing on the Nasdaq National Market and (iii) such other
consents, approvals, orders, authorizations, registrations, declarations or
filings (x) as may be required under "blue sky" laws of various states or (y)
the failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on SIMSCI or prevent or materially
delay the consummation of the transactions contemplated by this Agreement.
(d) SEC Documents; Financial Statements.
(i) Since January 1, 1997, SIMSCI has filed all
reports, registration statements, proxy statements and other documents required
to be filed with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (the "Company SEC Documents"). As of their respective filing
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Documents, and, to the knowledge of SIMSCI, none of Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except to the extent that such statements have been
corrected, modified or superseded by a later filed Company SEC Document.
(ii) The consolidated financial statements of SIMSCI
included in Company SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with United States
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and presented fairly in all material respects
the consolidated financial position of SIMSCI as of the dates thereof and the
consolidated results of its operations and cash flows for the respective periods
indicated therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(e) Absence of Certain Changes or Events. Except as disclosed
in Company SEC Documents filed and publicly available prior to the date of this
Agreement, from January 1, 1997 to
-7-
<PAGE> 26
the date of this Agreement, SIMSCI has conducted its business only in the
ordinary course and there has not been any Material Adverse Effect on SIMSCI.
(f) Litigation. Except as disclosed in Company SEC Documents,
there is no suit, action or proceeding pending or, to the knowledge of SIMSCI,
threatened against SIMSCI or any of its Significant Subsidiaries that,
individually or in the aggregate, (i) would reasonably be expected to have a
Material Adverse Effect on SIMSCI, or (ii) would reasonably be expected to
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
5. LICENSE TO SHELL
5.1 License. Subject to the terms and conditions of this Assignment
Agreement, SIMSCI hereby grants to Shell and the Affiliated Entities (but only
for so long as they remain Affiliated Entities) a non-exclusive,
non-transferable, worldwide, perpetual, fully paid-up, royalty-free license,
without right of sublicense, to reproduce, have reproduced, modify, have
modified, perform and display the Programs and Documentation in object code and
Source code form, but only for Shell's and the Affiliated Entities internal use
and not for external distribution. Shell shall not use the Programs and
Documentation except as expressly permitted herein. Shell shall own all right,
title and interest in and to any Derivative Works created solely by Shell,
including without limitation, all Intellectual Property Rights therein subject
to SIMSCI's in the underlying works.
5.2 Restrictions. All rights not expressly granted herein are reserved
by SIMSCI, and except for the licenses granted pursuant to Section 5.1 above,
SIMSCI retains all right, title and interest in and to the Assets, including all
Intellectual Property Rights therein. Nothing contained in this Agreement shall
be construed as conferring upon Shell or the Affiliated Entities, by
implication, estoppel or otherwise, any license or other right except the
license and rights expressly granted herein. Except as otherwise expressly
provided herein, the licenses granted herein are granted solely to Shell for its
use and the use of the Affiliated Entities, and not, by implication or
otherwise, to any other party. In the event Shell or an Affiliated Entity either
acquires or divests itself of ownership interest in an entity or facility that
is using or has a potential need to use the Programs (in any case, a "Transition
Transaction"), then, (i) for a period of twelve (12) months from the effect date
of the Transition Transaction (the "Transitional Period"), use of the Programs
by such entity or facility shall be considered use for Shell's internal purposes
under Section 5.1; and (ii) in the event that a Transition Transaction is an
acquisition, during the Transition Period the parties hereto will discuss
whether a contractual relationship other than this Agreement shall govern the
continued use of the Programs by such newly acquired entity or facility. As used
in this Section 5.2, "acquisition" shall mean any business transaction wherein
Shell or an Affiliated Entity obtain rights of ownership in an entity or
facility through any business venture, including but not limited to, any
purchase, joint venture or partnership.
5.3 Product Warranty. SIMSCI warrants that any version of the Program
delivered to Shell by SIMSCI pursuant to the license granted in Section 5.1
shall substantially conform to its applicable specifications for a period of 90
days from the date of delivery.
-8-
<PAGE> 27
6. NON-COMPETE
For a period of three years from the Purchase Date of this assignment,
Shell agrees not to market, sell or distribute any products similar to or
competitive with the Programs. It is understood that this restriction prohibits
Shell from distributing any version of the Program or other Derivative Works
thereof completed as of expiration of the three-year period and permits
distribution only of those versions or other Derivative Works for which
development is completed after the expiration of such period.
7. MAINTENANCE AND DERIVATIVE WORKS
7.1 Maintenance. SIMSCI will make maintenance services available to
Shell and any Affiliated Entities on the same terms and conditions as it offers
to other customers of the Programs.
7.2 Derivative Works. The parties anticipate cooperating in the future
with respect to the creation of Derivative Works of the Programs. If one party
wishes to engage in a development project with the other party with respect to
creating Derivative Works of the Programs, it may submit a proposal to the other
party. Before beginning any work on such project the parties will complete and
execute a statement of work setting forth mutually agreed upon specifications,
development milestones, development costs, each party's obligations with respect
to completion of such development project and each party's respective rights to
the developed work. Except as specifically set forth otherwise in such statement
of work, SIMSCI shall own all such Derivative Works and Shell shall have license
rights to such works as set forth in Section 4 of this Assignment Agreement.
-9-
<PAGE> 28
ATTACHMENT 1
Third Party Software:
[*]
[*] Confidential Treatment Requested
<PAGE> 29
EXHIBIT D
REGISTRATION RIGHTS
1. REGISTRATION RIGHTS WITH RESPECT TO SHARES
1.1 Definitions.
1.1.1 The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, and the declaration or
ordering of the effectiveness of such registration statement.
1.1.2 The term "Registrable Shares" means and includes the
Shares issued to Shell under this Agreement; provided, however, that Registrable
Securities shall not include any (a) Escrowed Shares, (b) Shares which have
previously been registered, or (c) Shares which would otherwise be Registrable
Shares if Shell would then be permitted to sell all of the Shares (including the
Escrowed Shares) within any three (3) month period pursuant to Rule 144 under
the Securities Act.
1.1.3 The term "Ownership Percentage" means and includes the
number of Registrable Shares held by Shell divided by the total number of all
other securities entitled to registration pursuant to agreements with SIMSCI
approved by the Board of Directors and held by others participating in the
underwriting.
1.1.4 The term "Securities Act" means the Securities Act of
1933, as amended.
1.1.5 The term "Form S-3" means such form under the Securities
Act as is in effect on the date hereof or any successor registration form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by SIMSCI with the SEC.
1.1.6 The term "SEC" or "Commission" means the U.S. Securities
and Exchange Commission.
1.1.7 The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
1.2 "Piggyback" Registration. If at anytime SIMSCI shall determine to
register under the Securities Act (including pursuant to a demand of any
stockholder of SIMSCI exercising registration rights) any of its Common Stock
(except shares to be issued solely in connection with any acquisition of any
entity or business, shares issuable solely upon exercise of stock options, or
shares
<PAGE> 30
issuable solely pursuant to employee benefit plans), it shall send to Shell
written notice of such determination and, if within ten (10) days after receipt
of such notice, Shell shall so request in writing, SIMSCI shall use its best
efforts to include in such registration statement all or any part of the
Registrable Shares that Shell requests to be registered, except that if, in
connection with any offering involving an underwriting of Common Stock to be
issued by SIMSCI, the managing underwriter shall impose a limitation on the
number of shares of Common Stock included in any such registration statement
because, in its judgment, such limitation is necessary to effect an orderly
public distribution, and such limitation is imposed as provided herein among the
holders of such Common Stock having an incidental ("piggy back") right to
include such Common Stock in the registration statement as provided below, then,
to the extent any shares requested to be included in the registration remain
available for registration after the underwriter's cut-back (the "Available
Shares"), SIMSCI shall be obligated to include in such registration statement,
with respect to Shell, only the product of (i) the number of Available Shares
and (ii) Shell's Ownership Percentage, as that term is defined in Section 1.1.3.
Notwithstanding the foregoing, no such reduction shall be made with respect to
securities being offered by SIMSCI for its own account or by holders of
securities who have requested SIMSCI to register such securities pursuant to a
mandatory registration obligation of SIMSCI. If Shell disapproves of the terms
of such underwriting, it may elect to withdraw therefrom by written notice to
SIMSCI and the underwriter.
1.3 Registration on Form S-3. After SIMSCI has qualified for the use of
Form S-3, Shell shall have the right to request an unlimited number of
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such shares), subject only to the following
limitations:
1.3.1 SIMSCI shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company-initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145 under the Securities Act);
1.3.2 SIMSCI shall not be obligated to cause a registration on
Form S-3 to become effective prior to expiration of one hundred eighty (180)
days following the effective date of the most recent registration pursuant to a
request by Shell under this Agreement or pursuant to a request by a holder of
registration rights under any other agreement of SIMSCI granting Form S-3 demand
registration rights;
1.3.3 SIMSCI shall not be required to effect a registration
pursuant to this Section 1.3.3 unless Shell proposes to dispose of shares of
Registrable Securities having an aggregate disposition price (before deduction
of underwriting discounts and expenses of sale) of at least $500,000; and
1.3.4 SIMSCI shall not be required to maintain and keep any
such registration on Form S-3 effective for a period exceeding ninety (90) days
from the effective date thereof. SIMSCI shall give notice to Shell and all
holders of registration rights under any other agreement of SIMSCI
-2-
<PAGE> 31
granting Form S-3 or similar demand registration rights of the receipt of a
request for registration pursuant to this Section 1.3.4 and shall provide a
reasonable opportunity for all such other holders to participate in the
registration.
1.4 Indemnification of Shell. In the event that SIMSCI registers any of
the Registrable Shares under the Securities Act, SIMSCI will indemnify and hold
harmless Shell and each underwriter of the Registrable Shares so registered
(including any broker or dealer through whom such shares may be sold) and each
person, if any, who controls Shell or any such underwriter within the meaning of
Section 15 of the Securities Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
become subject under the Securities Act or under any other statute or at common
law or otherwise, and, except as hereinafter provided, will reimburse Shell,
each such underwriter and each such controlling person, if any, for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented by SIMSCI) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading or any
violation by SIMSCI of any rule or regulation promulgated under the Securities
Act applicable to SIMSCI and relating to action or inaction required of SIMSCI
in connection with such registration, unless such untrue statement or omission
was made in such registration statement, preliminary or amended, preliminary
prospectus or prospectus in reliance upon and in conformity with information
furnished in writing to SIMSCI in connection therewith by Shell, or any such
controlling person expressly for use therein. Promptly after receipt by Shell,
any underwriter or any controlling person of notice of the commencement of any
action in respect of which indemnity may be sought against SIMSCI, Shell, or
such underwriter or such controlling person, as the case may be, will notify
SIMSCI in writing of the commencement thereof, and, subject to the provisions
hereinafter stated, SIMSCI shall assume the defense of such action (including
the employment of counsel, who shall be counsel reasonably satisfactory to
Shell, such underwriter or such controlling person, as the case may be), and the
payment of expenses insofar as such action shall relate to any alleged liability
in respect of which indemnity may be sought against SIMSCI. Shell, any such
underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and expenses of such counsel shall not be at the expense of SIMSCI
unless the employment of such counsel has been specifically authorized by
SIMSCI. SIMSCI shall not be liable to indemnify any person for any settlement of
any such action effected without SIMSCI's consent. SIMSCI shall not, except with
the approval of each party being indemnified under this Section 1.4, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
-3-
<PAGE> 32
1.5 Indemnification of SIMSCI. In the event that SIMSCI registers any
of the Registrable Shares under the Securities Act, Shell will indemnify and
hold harmless SIMSCI, each of its directors, each of its officers who have
signed the registration statement, each underwriter of the Registrable Shares so
registered (including any broker or dealer through whom such of the shares may
be sold) and each person, if any, who controls SIMSCI within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse
SIMSCI and each such director, officer, underwriter or controlling person for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented) or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, but only insofar as any
such statement or omission was made in reliance upon and in conformity with
information furnished in writing to SIMSCI in connection therewith by Shell,
expressly for use therein. Promptly after receipt of notice of the commencement
of any action in respect of which indemnity may be sought against Shell, SIMSCI
will notify Shell in writing of the commencement thereof, and Shell shall,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel, who shall be counsel satisfactory to
SIMSCI) and the payment of expenses insofar as such action shall relate to the
alleged liability in respect of which indemnity may be sought against Shell.
SIMSCI and each such director, officer, underwriter or controlling person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall not be at
the expense of Shell unless employment of such counsel has been specifically
authorized by Shell. Notwithstanding the two preceding sentences, if the action
is one in which SIMSCI may be obligated to indemnify Shell pursuant to Section
1.4, SIMSCI shall have the right to assume the defense of such action, subject
to the right of Shell to participate therein as permitted by Section 1.4. Shell
shall not be liable to indemnify any person for any settlement of any such
action effected without Shell's consent. Shell shall not, except with the
approval of SIMSCI, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the party being so indemnified of a release from
all liability in respect to such claim or litigation.
1.6 Exchange Act Registration. SIMSCI will use its best efforts to file
on a timely basis with the Commission all information that the Commission may
require under either of Section 13 or Section 15(d) of the Exchange Act and, so
long as it is required to file such information, shall use its best efforts to
take all action that may be required as a condition to the availability of Rule
144 under the Securities Act (or any successor exemptive rule hereinafter in
effect) with respect to SIMSCI's Common Stock. SIMSCI shall furnish to Shell
forthwith upon request (i) a written statement by SIMSCI as to its compliance
with the reporting requirements of Rule 144, (ii) a copy of the most
-4-
<PAGE> 33
recent annual or quarterly report of SIMSCI as filed with the Commission, and
(iii) any other reports and documents that Shell may reasonably request in
availing itself of any rule or regulation of the Commission allowing Shell to
sell any such Registrable Securities without registration.
1.7 Further Obligations of SIMSCI. Whenever SIMSCI is required
hereunder to register Registrable Shares, it agrees that it shall also do the
following:
1.7.1 Furnish to Shell such copies of each preliminary and
final prospectus and any other documents that Shell may reasonably request to
facilitate the public offering of its Registrable Shares;
1.7.2 Use its best efforts to register or qualify the
Registrable Shares to be registered pursuant to this Agreement under the
applicable securities or 'blue sky" laws of such jurisdictions as Shell may
reasonably request; provided, however, that SIMSCI shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action that would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities covered by
the registration statement in any jurisdiction where it is not then so subject;
1.7.3 Furnish to Shell a signed counterpart of,
(a) an opinion of counsel for SIMSCI, dated the
effective date of the registration statement;
(b) "comfort" letters signed by SIMSCI's independent
public accountants who have examined and reported on SIMSCI's financial
statements included in the registration statement, to the extent permitted by
the standards of the American Institute of Certified Public Accountants,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities, but only if and to the extent that
SIMSCI is required to deliver or cause the delivery of such opinion or "comfort"
letters to the underwriters in an underwritten public offering of securities;
and
1.7.4 Furnish to Shell, upon request, a copy of all documents
filed and all correspondence from or to the Commission in connection with any
such offering unless confidential treatment of such information has been
requested of the Commission.
1.8 Expenses. In the case of a registration under Sections 1.2 or 1.3,
SIMSCI shall bear all costs and expenses of each such registration, including,
but not limited to, printing, legal and accounting expenses, Commission filing
fees and "blue sky" fees and expenses; provided, however, that SIMSCI shall have
no obligation to pay or otherwise bear (i) any portion of the fees or
disbursements in excess of an aggregate of $5,000 of more than one counsel for
Shell in connection
-5-
<PAGE> 34
with the registration of its Registrable Shares, (ii) any portion of the
underwriter's commissions or discounts attributable to the Registrable Shares
being offered and sold by Shell, or (iii) any of such expenses if the payment of
such expenses by SIMSCI is prohibited by the laws of a state in which such
offering is qualified and only to the extent so prohibited; and provided
further, that, in the event the registration under the Securities Act is
initiated by Shell pursuant to Section 1.3 of this Agreement and such
registration is thereafter withdrawn or terminated by Shell for reasons other
than the occurrence of one or more events regarding SIMSCI, which event or
events may have a material adverse affect upon the business or prospects of
SIMSCI, and Shell learns of such event or events after the date of the demand
for registration and prior to the date of withdrawal or termination by them and
such withdrawal or termination occurs with reasonable promptness thereafter,
then SIMSCI shall have no obligation to pay or otherwise bear any fees, expenses
or other costs arising out of or relating to such registration.
1.9 Transfer of Registration Rights. The rights to cause SIMSCI to
register shares granted to Shell under Sections 1.2 and 1.3 may be assigned to a
transferee or assignee in connection with the transfer or assignment of at least
50,000 Registrable Shares, provided that (i) such transfer or assignment may
otherwise be effected in accordance with applicable laws, (ii) such transferee
or assignee agrees to be bound by the terms of this Exhibit F, and (iii) SIMSCI
is given at least ten (10) days prior written notice of such transfer or
assignment.
1.10 Market Stand-off Agreement. To the extent requested by SIMSCI or
any underwriter of SIMSCI, Shell shall not sell or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any Registrable Shares
during a period (the "Stand-Off Period") equal to 90 days following the
effective date of a registration statement of SIMSCI filed under the Securities
Act except for securities sold as part of the offering covered by such
registration statement in accordance with the provisions of this Agreement. In
order to enforce the foregoing covenant, SIMSCI may impose stock transfer
restrictions with respect to the Registrable Shares of each holder until the end
of the Stand-Off Period.
1.11 Termination of Registration Rights. The registration rights
granted pursuant to this Exhibit F will terminate upon such time as Shell is
then permitted to sell all of the Shares within any three (3) month period
pursuant to Rule 144 under the Securities Act.
-6-
<PAGE> 35
ATTACHMENT 2
ALLOCATION
Tangibles: $[*]
[*] Confidential Treatment Requested
<PAGE> 1
EXHIBIT 99.1
SIMULATION SCIENCES INC. ANNOUNCES
SIMSCI Acquires Rights to Shell TechnologyAcquisition
provides software technology and
resources for enterprise optimization
BREA, CALIFORNIA, SEPTEMBER 15, 1997--Simulation Sciences Inc. (SIMSCI)
(Nasdaq:SMCI) today announced that it has completed agreements to acquire
business planning software and to obtain exclusive, royalty-free licenses to
on-line modeling, and process control software from Shell Oil Products Company
for the purpose of developing and marketing an enterprise optimization system
for the process industry.
Under terms of the agreements, SIMSCI will make a $1.5 million payment to Shell
for Shell's business planning software. In addition, SIMSCI will make an initial
$1 million payment for certain exclusive world-wide marketing rights and the
right to purchase Shell's advanced multivariable process control tools. With
respect to SIMSCI's previously announced agreement with Shell to develop a next
generation on-line modeling and optimization application (ROMeo), SIMSCI has
acquired an exclusive, royalty-free license to the OPERA solver and the MITRE
modeling environment for $6 million in cash and stock to be paid when SIMSCI
ships the first commercial version of ROMeo, expected in the first half of 1998.
As a result of this agreement, eight Shell employees are expected to join SIMSCI
to assist in the development and support of the software and the implementation
of customer projects.
Paul L. Cuneo, director of technology for Shell Oil Products Company (SOPC),
said, "Since the early 1970's Shell has invested millions of dollars in the
development, enhancement and application of its planning, on-line modeling, and
process control software. This technology is proven and we believe it is the
best of its kind in the industry. In the United States alone, we have
approximately 500 advanced process control applications currently executing
on-line that use this technology. Industry analysts continue to tell us that
Shell is a leader in the application of these technologies in refineries around
the world.
"We are convinced that combining Shell's innovative planning, modeling, and
advanced process control technology with SIMSCI's simulation and enabling
technology will result in a best-in-class software system for process and plant
optimization," continued Mr. Cuneo.
Charles R. Harris, president and chief executive officer of SIMSCI, said, "Our
strategy is to deliver best-in-class software that provides high value and helps
our customers make a positive impact on their bottom line. The Shell technology
we are acquiring not only provides this value, but also has the advantage of
being already proven and validated by Shell. We intend to commercialize this
technology and leverage its benefits from unit control and optimization to
broader-based business applications with the capability to optimize an
enterprise."
Advanced Multivariable Control Technology
Shell's advanced process control tools include QDMC, a state-of-the-art,
field-proven multivariable controller that is used on-line to overcome process
disturbances, predict future performance and determine the adjustments required
to keep the process controlled within certain limits. In addition,
<PAGE> 2
Shell's control tools include advanced design algorithms to improve the
accuracy, implementation and maintenance of multivariable controllers. According
to independent market research, Shell is a world leader in implementation, use
and maintenance of advanced process control and optimization systems. Shell
intends to continue to develop QDMC and to grant SIMSCI rights to new versions.
Business Planning Software
Shell's business planning software, known internally to Shell as PROFIT, is a
proven planning system currently in use at multiple Shell refineries. It
provides business managers with information designed to increase operating
profits throughout a refinery and across multiple-refineries. PROFIT provides
simulation-based decision support to operating managers by selecting optimal
product manufacturing plans, including product selection, intermediates staging
and feedstock procurement.
ROMeo
The development of the ROMeo platform began last year with the formation of a
joint development team by SIMSCI and Shell. ROMeo utilizes Shell's proven
equation-based solver, OPERA, as well as MITRE, Shell's advanced algebraic
modeling environment. ROMeo is designed to enable engineers and management to
model process units and optimize operations on a plant-wide basis. Using
real-time data and current economic objectives, the system is designed to
provide a real-world model of the actual operating facility, calculate new
process setpoints to achieve optimum performance, and help determine the
location and cause of operating problems.
Based in Houston, Texas, Shell Oil Products Company (SOPC) is a subsidiary of
Shell Oil Company. For more information about Shell, visit the Shell Oil Company
website at http://www.shellus.com.
Simulation Sciences Inc. (SIMSCI) is a leading provider of commercial simulation
software and related services to the petroleum, petrochemical and industrial
chemical process industries as well as the engineering and construction firms
that support those industries. SIMSCI's Windows-based graphical user interface
and simulation software products are designed to increase profitability by
reducing capital investment costs, improving yields and enhancing management
decision making. SIMSCI maintains offices in the United States, Venezuela,
Egypt, Germany, Singapore, the United Kingdom and Japan and provides support and
service to more than 650 customers in 70 countries. For more information about
SIMSCI, visit the SIMSCI Website at http://www.simsci.com.
This release contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding planned
payments, development of software products, SIMSCI's intention to commercialize
the technology, and the effectiveness of any products that are developed. Actual
results could differ materially as a result of a number of factors, including
difficulty in assimilating the Shell technology, disruption of the Company's
ongoing business, technical difficulties that prevent completion of new products
or limit their effectiveness, additional unanticipated expenses associated with
the transaction and impairment of relationships with employees and customers as
a result of the transaction. There can be no assurance that any new product will
achieve market acceptance or result in significant revenue or earnings for the
Company. There also can be no assurance that the Company will be successful in
resolving such
<PAGE> 3
issues or other problems encountered in connection with the transaction. For
additional discussion of factors which could materially adversely affect the
Company, please see the Company's most recent Form 10-K or 10-Q filings with the
Securities and Exchange Commission.
CONTACT:
KITTY BORAH
SHELL MEDIA RELATIONS
(713) 241-4544
BRYCE BETTERIDGE
SIMSCI
(206) 564-6887
SIMSCI is a service mark; and PRO/II a registered mark of Simulation Sciences
Inc. All other trademarks herein are owned by their respective companies.
