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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SIMULATION SCIENCES INC.
(NAME OF SUBJECT COMPANY)
SIMULATION SCIENCES INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
829213 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
CHARLES R. HARRIS
CHIEF EXECUTIVE OFFICER
601 VALENCIA AVENUE, SUITE 100
BREA, CALIFORNIA 92823
(714) 579-0412
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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COPIES TO:
JEFFREY D. SAPER, ESQ.
BARRY E. TAYLOR, ESQ.
MARTIN W. KORMAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650)493-9300
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by S Acquisition Corp., a Delaware
corporation ("Offeror") and an indirect wholly owned subsidiary of Siebe plc, a
United Kingdom public limited company ("Parent" or "Siebe"), to purchase all of
the Shares (as defined below) of Simulation Sciences Inc., a Delaware
corporation. Capitalized terms used herein and not otherwise defined herein
shall have the meaning assigned to them in the Offer to Purchase dated April 21,
1998, a copy of which is filed as Exhibit 99.6 hereto (the "Offer to Purchase").
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Simulation Sciences Inc., a Delaware
corporation (the "Company" or "SimSci"). The address of the principal executive
office of the Company is 601 Valencia Avenue, Suite 100, Brea, California 92823.
The title of the class of equity securities of the Company to which this
Schedule 14D-9 relates is the common stock of the Company, par value $.001 per
share, and all associated rights, including Preferred Share Purchase Rights (the
"Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
the Schedule 14D-1 dated April 21, 1998 (as amended or supplemented, the
"Schedule 14D-1") filed with the Securities and Exchange Commission (the
"Commission") by Offeror and Siebe relating to an offer by the Offeror to
purchase all outstanding Shares at $10.00 per share, net to the seller in cash,
without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related letter of
transmittal ("Letter of Transmittal"). The Schedule 14D-1 states that the
principal executive offices of Siebe are located at Saxon House, 2-4 Victoria
Street, Windsor, Berkshire SL4 1EN, United Kingdom and that the principal
executive offices of Offeror are located at 1013 Centre Road, Wilmington,
Delaware 19805.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of April 15, 1998 (the "Merger Agreement") among the Company, Siebe, the
Offeror and S Sub Corp, a Delaware corporation and wholly owned subsidiary of
Offeror ("Merger Sub"). A copy of the Merger Agreement is filed as Exhibit 99.7
to this Schedule 14D-9 and is hereby incorporated by reference. The Merger
Agreement provides that, among other things, as soon as practicable after the
purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the relevant
provisions of the General Corporation Law of the State of Delaware ("Delaware
Law"), Merger Sub will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Offeror. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior thereto shall be
cancelled and extinguished and each Share (other than Shares held in the
treasury of the Company, Shares held by Siebe or any subsidiary thereof, and
Shares with respect to which appraisal rights are properly exercised) will, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of the Shares, be converted into the right to receive
$10.00 (or any higher price that may be paid for each Share pursuant to the
Offer) in cash, without interest (the "Merger Consideration"). The Merger
Agreement is summarized in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Schedule 14D-9 are to the
Company and its subsidiaries, viewed as a single entity.
(b) (i) Arrangements with the Company, its Executive Officers, Directors
and Affiliates
(1) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of the Company's directors, executive
officers, and affiliates are described in the Information Statement of the
Company attached to this Statement as Annex A ("Information Statement"). The
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Information Statement is being furnished to the Company's stockholders pursuant
to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated under the Exchange Act in connection
with Siebe's right (after consummation of the Offer) to designate persons to the
Board of Directors of the Company other than at a meeting of the stockholders of
the Company. The Information Statement is herein incorporated by reference.
(2) The Company maintains a bonus plan for its executive officers that
provides for the payment of cash awards based on the Company's financial
performance at the end of each quarter and at each year-end. Bonuses are awarded
under the Company's executive bonus plan based on a matrix that takes into
account the Company's earnings per share, revenue and individual objectives
assigned by the Board for the Chief Executive Officer and the Board or the Chief
Executive Officer for the other officers, on the one hand, and the extent to
which the Company's financial performance was above or below the Company's plan
for the relevant period and whether individual objectives are achieved. No
bonuses were paid or are owed to any executive officer based on the Company's
financial performance in the quarter ended March 31, 1998. The Board of
Directors has not yet determined whether and to what extent bonuses may be owed
for the individual objectives. The amount of bonuses could range from $4,500 to
$8,750. The Board of Directors will revise the matrix based on management
recommendations for the remainder of fiscal 1998. The targeted bonus award under
the executive bonus plan is 50% of base salary for the Chief Executive Officer
and 30% of base salary for the remaining executive officers and the maximum
bonus is 75% for the Chief Executive Officer and 45% for the remaining executive
officers.
(3) On March 2, 1998, the Board of Directors granted to Robert E. Grice,
Jr., the Company's Executive Vice President, Finance and Chief Financial
Officer, an option to purchase 50,000 shares of the Company's Common Stock at an
exercise price of $10.25 per share.
(4) On March 16, 1998, the Board of Directors granted to Lawrence Gozzard,
the Company's Executive Vice President, Research and Development, an option to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$9.31 per share.
(5) Certain of the Company's executive officers participate in the
Company's Employee Stock Purchase Plan for U.S. Employees pursuant to which such
officers purchase Common Stock of the Company through payroll deductions.
(6) On April 15, 1998, the Board of Directors approved an amendment,
contingent upon the purchase of the Shares by the Offeror pursuant to the Offer,
to each of the 1994 Stock Option Plan, 1996 Stock Plan and the 1996 Director
Option Plan to provide for the acceleration of 100% of unvested options
immediately following the purchase of the Shares by the Offeror pursuant to the
Offer. As amended, such stock plans will provide for full acceleration of all
unvested options currently held by executive officers and directors of the
Company.
(7) On April 15, 1998, the Board of Directors approved, contingent upon the
purchase of the Shares pursuant to the Offer, an amendment to the Separation
Agreements (as defined in the Information Statement) (i) to extend the term of
such agreements for one year, (ii) to provide that effective as of the purchase
of the Shares pursuant to the Offer, the agreements will provide for a six-month
employment period during which the agreements will not be terminable by the
Company, except for cause, and (iii) to provide that at the end of such
six-month period, the agreement may be terminated by the executive at such
executive's sole discretion, and such executive shall be entitled to severance
payments under the Agreement; provided that the obligation to make such
severance payments shall terminate immediately if the executive officer accepts
employment, directly or indirectly, with a competitor of Siebe's Foxboro
business or the business of the Company.
(ii) Arrangements with Siebe, its Executive Officers, Directors and
Affiliates
CONFIDENTIALITY AGREEMENT
In connection with the negotiation of a possible transaction, the Company
and Siebe executed a Mutual Nondisclosure Agreement (the "Confidentiality
Agreement"), dated April 7, 1998, a copy of which is filed as
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Exhibit 99.1 hereto and is incorporated herein by reference. Among other things,
the Confidentiality Agreement provides that, beginning on the date of the
Confidentiality Agreement and ending twelve (12) months after the date on which
Parent or the Company provides notice that it has decided not to proceed with a
transaction between the parties, neither Parent nor the Company (nor their
affiliates) will, without the prior written consent of the other party's Board
of Directors, do any of the following (the "Standstill Provisions"): (a) acquire
or agree, offer, seek or propose to acquire, or cause to be acquired, ownership
of any of the other party's assets (other than in the ordinary course of
business) or businesses or any voting securities issued by the other party, or
any rights to acquire such ownership; (b) make or participate in any
solicitation of proxies or consents with respect to any securities of the other
party that may be entitled to vote in the election of the other party's
directors, or seek to influence any person with respect to the voting of any
such securities, or become a participant in an election contest with respect to
the other party, or demand a copy of the other party's stock ledger, list of
stockholders or other books and records, or attempt to call any meeting of the
stockholders of the other party; or (c) enter into any discussions or
arrangements with any third parties with respect to any of the foregoing. Those
provisions shall not apply if another person (including the Company) commences a
tender offer for, or publicly discloses a transaction to acquire, at least 50%
of the Company's securities (the "Standstill Proviso").
The Company waived the Standstill Provisions with respect to the Offer,
Merger and the Stock Option Agreement and such restrictions shall not apply
following consummation of the Offer. In addition, in the Merger Agreement, the
Company has agreed that, notwithstanding the Standstill Provisions, if any third
party commences an Alternative Acquisition (defined below) involving a change of
control in the Company or its business then, provided the Merger Agreement has
been terminated, Parent and its affiliates may propose or present any offer or
offers, or take other action it deems appropriate, in response thereto.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to the Schedule 14D-1 filed by Offeror and Siebe with the
Commission in connection with the Offer and as Exhibit 99.7 to this Schedule
14D-9. Such summary is qualified in its entirety by reference to the Merger
Agreement. Capitalized terms not otherwise defined in the following description
of the Merger Agreement have the respective meanings ascribed to them in the
Merger Agreement.
Commencement of Offer. The Merger Agreement provides for the commencement
of the Offer not later than five business days after the execution of the Merger
Agreement, provided that the Merger Agreement has not theretofore been
terminated pursuant to its terms. Parent, Offeror and the Company are required
to use all reasonable efforts to take all action as may be necessary or
appropriate in order to effectuate the Offer and the Merger as promptly as
possible and to carry out the transactions provided for or contemplated by the
Merger Agreement.
Merger. The Merger Agreement provides that, as soon as practicable after
expiration of the Offer and the receipt of any required approvals and adoption
of the Merger Agreement by the stockholders of the Company, to the extent
required by the Delaware General Corporation Law ("DGCL"), and the satisfaction
or waiver, if possible, of certain other conditions contained in the Merger
Agreement, Merger Sub (or another direct or indirect Delaware subsidiary of
Parent) will be merged with and into the Company, with the Company continuing as
the surviving corporation (the "Surviving Corporation") in the Merger under the
corporate name it possesses immediately prior to the Effective Time of the
Merger. Notwithstanding the foregoing, the parties to the Merger Agreement have
agreed that Offeror may revise the structure of the Merger (including merging
the Company into Merger Sub or merging the Company with or into another direct
or indirect wholly-owned subsidiary of Parent) provided that any such
restructuring does not (i) cause a failure of a condition to the Offer or the
Merger, (ii) adversely affect the stockholders of the Company and (iii) cause
the Company to breach its representations and warranties under the Merger
Agreement.
Vote Required to Approve Merger. In the Merger Agreement, the Company has
agreed, if required by the DGCL, in order to consummate the Merger, to take all
action necessary in accordance with the DGCL to
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convene a meeting of its stockholders promptly following consummation of the
Offer for the purpose of considering and approving the Merger. The Company,
acting through its Board of Directors, has further agreed that if a
stockholders' meeting is convened, the Board of Directors shall recommend that
stockholders of the Company vote in favor of the Merger and that such
recommendation shall not be withdrawn or adversely modified except by resolution
of the directors who are directors of the Company on the date of the Merger
Agreement (the "Continuing Directors") adopted in the exercise of applicable
fiduciary duties, after consultation with counsel. In the event that proxies are
to be solicited from the Company's stockholders, the Company shall, if and to
the extent requested by Offeror, use its best efforts to solicit from
stockholders of the Company proxies in favor of the Merger, and to take all
other reasonable action necessary or, in the opinion of Offeror, helpful to
secure the vote of its stockholders in favor of the Merger. At any such meeting,
all of the Shares then owned by Parent, Offeror or any subsidiary of Parent, and
all Shares for which the Company has received proxies to vote, will be voted in
favor of the Merger.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be cancelled and extinguished and
each Share (other than Shares held in the treasury of the Company, Shares held
by Parent or any subsidiary thereof, and Shares with respect to which appraisal
rights are properly exercised ("Dissenting Shares")) shall, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of the Shares, be converted into the right to receive the Offer Price
upon the surrender of the certificate formerly representing such Share. Each
share of common stock of Merger Sub issued and outstanding immediately prior to
the Effective Time shall, at the Effective Time, by virtue of the Merger and
without any action on the part of Merger Sub, the Company or the holders of
Shares, be converted into and shall thereafter evidence one validly issued and
outstanding share of common stock of the Surviving Corporation.
Treatment of Stock Option Plans and Stock Purchase Plans. Following the
purchase of Shares pursuant to the Offer, the unvested portion of all
outstanding stock options, warrants or other rights to acquire shares under the
Company's 1994 Stock Option Plan, 1996 Stock Plan, 1996 Director Option Plan or
any other agreement or arrangement (collectively, the "Stock Plans") shall
automatically accelerate in accordance with the terms of the Stock Plans (the
"Accelerated Options"). In lieu of exercising such Accelerated Options, each
holder of an Accelerated Option shall, upon surrender for cancellation of the
same to the Company on or before the Effective Time, be entitled to receive from
the Company for each Share subject to such Accelerated Option an amount in cash
equal to the excess, if any, of (a) the product of the number of Shares covered
by such Accelerated Options multiplied by the Offer Price, over (b) the product
of the number of Shares covered by such Accelerated Options multiplied by the
per-Share exercise, purchase or conversion price payable upon exercise, purchase
or conversion, subject to any required withholding taxes. Any outstanding stock
options or warrants that shall not have been so exercised or surrendered for
payment shall terminate at the Effective Time.
Also in the Merger Agreement, the Company has agreed to amend its 1996
Employee Stock Purchase Plan for U.S. Employees and its 1996 Employee Stock
Purchase Plan for non-U.S. employees (together, the "Employee Stock Purchase
Plans") so that (a) any Shares to be purchased under the Employee Stock Purchase
Plans will be purchased no later than the last trading day immediately prior to
the consummation of the Offer, and (b) immediately following such purchase, each
of the Employee Stock Purchase Plans will terminate.
Except as set forth above, the Company has agreed in the Merger Agreement
not to modify or accelerate the exercisability of any stock options, rights or
warrants presently outstanding, or to amend, change or waive (or exempt any
person from the effect of) the Rights Agreement, except in the exercise of the
fiduciary duties of its Board of Directors after consultation with counsel.
Conditions to Obligations of All Parties to the Merger. The obligations of
each of the parties to effect the Merger following completion of the Offer are
subject to the following conditions:
(i) The Merger shall have been approved and adopted by the vote of the
stockholders of the Company to the extent required by the DGCL;
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(ii) All waiting, review and investigation periods (and any extension
thereof) applicable to the consummation of the Merger under the Hart-Scott
Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act") shall have expired or been terminated;
(iii) There shall have been no law, statute, rule or order, domestic
or foreign, enacted or promulgated which would make consummation of the
Merger illegal;
(iv) No injunction or other order entered by a United States (state or
federal) court of competent jurisdiction shall have been issued and remain
in effect which would prohibit consummation of the Merger;
(v) The Merger Agreement shall not have been terminated as provided
therein (see 'Merger Agreement -- Termination," below); and
(vi) Offeror shall have been required to purchase Shares pursuant to
the Offer.
Schedule 14D-9. In the Merger Agreement, the Company has agreed that
simultaneously with, or as promptly as possible after, the commencement of the
Offer, it will file with the Commission and promptly mail to its stockholders,
this Schedule 14D-9 containing the recommendation of the Board of Directors that
the Company's stockholders accept the Offer, tender their Shares thereunder to
Offeror and, if required by applicable law, approve the Merger; provided, that
such recommendation may not be withdrawn or modified except by resolution of the
Board of Directors adopted in the exercise of its fiduciary duties after
consultation with counsel.
Board of Directors. The Merger Agreement provides that promptly upon the
payment by Offeror or any of Parent's direct or indirect subsidiaries pursuant
to the Offer for such number of Shares which represents at least a majority of
the outstanding Shares, the Company shall increase the size of its Board of
Directors to seven members, and Offeror shall be entitled to designate members
of the Board of Directors such that Offeror, subject to the provisions of
Section 14(f) of the Exchange Act, will have a number of representatives on the
Board of Directors, rounded up to the next whole number, equal to the product
obtained by multiplying seven by the percentage of Shares beneficially owned by
Parent and any of its subsidiaries. The Company has agreed, upon the request of
Offeror, to promptly increase the size of the Board of Directors as permitted in
accordance with the Certificate of Incorporation of the Company and/or use its
reasonable efforts to secure the resignations of such number of directors as is
necessary to enable Offeror's designees to be elected to the Board of Directors
and has agreed to use its best efforts to cause Offeror's designees to be so
elected. Notwithstanding the foregoing, if Offeror's designees at any time prior
to the Effective Time constitute a majority of the Company's Board of Directors
of the Company, then the Board of Directors shall have at least two Continuing
Directors. The Company has agreed, at the request of Offeror and at its expense,
to take all actions necessary to effect the foregoing, including the mailing to
its stockholders of the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, in form and substance reasonably
satisfactory to Offeror and its counsel.
Parent currently intends to designate a majority of the directors of the
Company following consummation of the Offer. It is currently anticipated that
Parent will designate Allen M. Yurko, Dr. George W. Sarney, Roger Mann, Colin P.
Bonsey and/or James C. Bays, or such other persons listed in Annex A hereto as
Parent shall determine, to serve as directors of the Company following
consummation of the Offer. See Annex A.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent, Offeror and Merger Sub,
including, but not limited to, representations and warranties relating to the
Company's organization and qualification, capitalization and authority to enter
into the Merger Agreement and the Stock Option Agreement (defined below) and
carry out the transactions contemplated thereby, the Company's subsidiaries,
Commission filings (including financial statements), the documents supplied by
the Company relating to the Offer, required consents and approvals, employee
benefit plans, litigation, the material liabilities of the Company and its
subsidiaries, environmental matters relating to the Company and its
subsidiaries, labor matters, trademarks, patents and other intellectual
property, the payment of taxes, arrangements with financial advisors, the Rights
Agreement, the absence of product liability claims, related party transactions,
and the absence of certain material adverse changes or
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events since December 31, 1997. The Company has also represented that it has
taken or will take all action necessary to render Section 203 of the DGCL and
the Rights Agreement inapplicable to Parent, Offeror or Merger Sub solely by
virtue of the Offer, the Merger, the Merger Agreement, the Stock Option
Agreement, the purchase of Shares pursuant to the Offer, the Merger or the Stock
Option Agreement, and the transactions contemplated thereby or therein. The
Company has also represented that the aggregate fees and expenses payable by the
Company and its subsidiaries in respect of the Merger Agreement and the
transactions contemplated thereby to any of its advisors will not exceed
$3,000,000, as long as the transactions are consummated without any related
litigation, and excluding any fees and expenses relating to certain antitrust
matters.
Parent, Offeror and Merger Sub have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to Parent's, Offeror's and Merger Sub's organization and
qualification, their authority to enter into the Merger Agreement and the Stock
Option Agreement and consummate the Offer and the Merger, required consents and
approvals, documents related to the Offer, the applicability of certain margin
rules and the availability of sufficient financing to consummate the Offer.
Conduct of Company's Business Pending Merger. Pursuant to the Merger
Agreement, the Company has agreed that, prior to the Effective Time, unless
Offeror shall otherwise have agreed in writing or as otherwise contemplated by
the Merger Agreement, the Company will do the following:
(i) carry on the business of the Company and its subsidiaries only in,
and will maintain its and its subsidiaries facilities in, the ordinary
course of business and consistent with past practice;
(ii) use its reasonable efforts and shall cause its subsidiaries to
use reasonable efforts, to preserve intact their respective business
organizations and goodwill, keep available the services of their current
officers and employees as a group and maintain satisfactory relationships
with customers, suppliers, distributors and others having business dealings
with them;
(iii) as requested by Offeror and Merger Sub, confer on a regular and
frequent basis with representatives of Offeror and Merger Sub to report
operational matters and the general status of ongoing operations;
(iv) not take any action which would cause, or which reasonably may be
expected to cause, a failure to satisfy the conditions described under
"Merger Agreement -- Certain Conditions to Offeror's Obligations"; and
(v) notify Offeror and Merger Sub of any emergency or other change in
the normal course of the Company's or any of its subsidiaries' business or
in the operation of the Company's or the subsidiaries' properties and of
any governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would, individually
or in the aggregate, have a material adverse effect on the business,
revenues, assets, operations or financial conditions of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect") or would
reasonably be expected to impair any party's ability to consummate the
transaction contemplated by the Merger Agreement.
The Company has also agreed pursuant to the Merger Agreement that, prior to
the Effective Time, it will not directly or indirectly do, or permit any of its
subsidiaries to do, any of the following:
(i) issue, sell, pledge, dispose of or encumber (or permit any of its
subsidiaries to issue, sell, pledge, dispose of or encumber) any shares of,
or any options, warrants, conversion privileges or rights of any kind to
acquire any shares of any capital stock of the Company or any of its
subsidiaries (other than shares issuable upon exercise of the outstanding
(as of the date of the Merger Agreement) options or rights under the
Employee Stock Purchase Plans to acquire Shares in accordance with their
terms in effect on the date of the Merger Agreement);
(ii) amend or propose to amend the Certificate or Articles of
Incorporation or By-Laws of the Company or any of its subsidiaries;
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(iii) split, combine or reclassify any outstanding Shares, or declare,
set aside or pay any dividend or other distribution payable in cash, stock,
property or otherwise with respect to the Shares other than pursuant to the
Rights Agreement;
(iv) other than pursuant to the Rights Agreement (as defined below),
redeem, purchase or acquire or offer to acquire (or permit any of its
subsidiaries to redeem, purchase or acquire or offer to acquire) any Shares
or other securities of the Company or any of its subsidiaries other than as
contemplated by the Merger Agreement and other than for the repurchase by
the Company, pursuant to existing agreements, of any outstanding Shares
upon termination of any employment, director or consulting relationship
with the Company; or
(v) enter into or materially modify any agreement, commitment or
arrangement with respect to any of the foregoing.
Pursuant to the Merger Agreement, the Company has agreed that neither the
Company nor any of the subsidiaries will:
(i) sell, pledge, lease, dispose of or encumber any material assets
other than in the ordinary course of business consistent with past
practice;
(ii) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, partnership or other business organization
or enterprise or material assets thereof;
(iii) incur any indebtedness for borrowed money or issue any debt
securities except for borrowings in the ordinary course of business and
consistent with past practice;
(iv) guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person (other than a subsidiary of the Company or the Company) except
in the ordinary course of business consistent with past practice and in
amounts immaterial to the Company;
(v) enter into or materially modify any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(vi) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers or directors;
(vii) in the case of employees who are not officers or directors, take
any action other than in the ordinary course of business consistent with
past practice (none of which actions shall be unreasonable or unusual) with
respect to the grant of any bonuses, salary increases, severance or
termination pay or with respect to any increase of benefits in effect on
the date of the Merger Agreement; or
(viii) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust fund or arrangement for the benefit
or welfare of any employee.
In addition, the Company has agreed that it will not (i) except as is
necessary after consultation with counsel to comply with fiduciary duties of the
Board of Directors of the Company, call any meeting (other than as contemplated
by the Merger Agreement) of its stockholders or waive or modify any provision
of, or terminate any, confidentiality or standstill agreement entered into by
the Company with any person; and (ii) except as expressly contemplated in the
Merger Agreement, modify or accelerate the exercisability of any stock options,
rights or warrants presently outstanding, and shall not amend, change or waive
(or exempt any person from the effect of) the Rights Agreement, except in the
exercise of the fiduciary duties of the Company's Board of Directors or as
expressly contemplated by the Merger Agreement.
The Company has also agreed that neither it nor any of its subsidiaries
will: (i) adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; or (ii) make any material tax
election or settle or compromise any material federal, state, local or foreign
tax liability, except in the ordinary course of business consistent with past
practice. In addition, the Merger Agreement also
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requires the Company to use its reasonable efforts to cause its current
insurance (or reinsurance) policies not to be cancelled or terminated or any of
the coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to or
greater than the coverage under the cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and effect.
Non-Solicitation Obligations; Bona Fide Offers. The Company agreed in the
Merger Agreement to immediately cease and terminate any existing activities,
discussions or negotiations with any parties with respect to any acquisition of
or sale of any equity interest in or substantial assets of the Company or any of
its subsidiaries. Also, from the date of the Merger Agreement until the
Effective Time or the termination of the Merger Agreement, the Company will not,
directly or indirectly, through any of its affiliates, officers, directors or
agents, or otherwise solicit, initiate, entertain or encourage any proposals or
offers from any other person other than Parent or its affiliates (a "third
party") relating to any possible acquisition of the Company or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets, or otherwise) (an "Alternative Acquisition"), or engage in any
recapitalization or sale of any equity interest in or sale or assignment of
substantial assets of the Company or any of its subsidiaries (other than
pursuant to the exercise of options and Rights outstanding on the date of the
Merger Agreement or granted afterwards with Parent's written permission) to a
third party (an "Equity Transaction"), nor will the Company participate in any
negotiations regarding, or furnish to any third party any information with
respect to, or otherwise cooperate with, facilitate or encourage any effort or
attempt by any third party to do or seek an Alternative Acquisition or Equity
Transaction ("Non-Solicitation Obligations").
However, notwithstanding the Company's Non-Solicitation Obligations, the
Company may negotiate with or furnish information to a third party that provides
a "Bona Fide Offer," provided that the Company first notifies the Parent in
writing of its receipt of such proposal and of its material terms. A "Bona Fide
Offer" means any bona fide proposal made by a third party with respect to an
Alternative Acquisition on terms which the Board of Directors of the Company
determines in its good faith judgment (after consultation with its outside
financial advisors) to be more favorable to the Company's stockholders than the
Offer and the Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of the
Company (after consultation with its outside financial advisors) is highly
probable of being obtained by such third party. In addition, the Company may
terminate this Agreement and accept such Bona Fide Offer upon the payment to
Parent of the Termination Fee (defined under "Merger Agreement -- Expenses;
Termination Fee" below).
Indemnification. Parent has agreed in the Merger Agreement to cause the
Surviving Corporation to maintain, for three years from the date Parent, Offeror
and Merger Sub together acquire a majority of the Shares, all rights to
indemnification existing in favor of the directors, officers, employees and
agents of the Company pursuant to the Company's By-Laws at or prior to the
Effective Time, unless required by law. Parent has also agreed in the Merger
Agreement to use its reasonable efforts to cause the Surviving Corporation to
maintain in full force and effect for a period of at least three years from the
Effective Time directors' and officers' liability insurance with limits of at
least those currently in place containing terms and provisions comparable to the
terms and provisions of the current policy maintained by the Company, for the
benefit of existing and former officers, directors, employees and agents of the
Company, but the Surviving Corporation shall only be liable for annual premiums
of no more than 30% greater than that incurred by the Company on the date of the
Merger Agreement. Parent has further agreed that, from and after the
consummation of the Offer, it will fulfill and honor, and it will cause the
Company to fulfill and honor, all obligations of the Company pursuant to each
indemnification agreement in effect at such time between the Company and each
person who is or was a director, officer, employee or agent of the Company at or
prior to such time. Parent has further agreed to assume the foregoing
indemnification obligations during any period of time in which the Surviving
Corporation fails or is unable to perform such obligations.
Employment Agreements. In addition, Parent has agreed that it will cause
the Company or its successors to honor without modification all employment
agreements and severance agreements and policies in effect prior to the date of
the Merger Agreement between the Company and any employee of the Company. The
Company has advised Offeror that the Company has entered into separation
agreements with certain of its
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officers, including Charles R. Harris, its President and Chief Executive
Officer, and that, in connection with the Offer, effective April 15, 1998, the
Company's Board of Directors authorized an amendment to the separation
agreements (i) to extend the terms of the agreements for one year, (ii) to
provide (effective upon the purchase of Shares pursuant to the Offer) for a
six-month employment period during which the agreements will not be terminable
by the Company except for cause, and (iii) to provide that, at the end of such
six-month period, each such agreement may be terminated by the employee in his
or her sole discretion and such employee shall be entitled to severance payments
under the agreement. Generally, such severance payments are equal to six months
salary. However, if the employee has not found new employment at the end of six
months, the employee may continue to receive his or her salary for additional
one month periods, not to exceed an additional six months, until the employee
has found new employment. Such obligation to pay severance will terminate
immediately if the officer accepts employment, directly or indirectly, with a
competitor of Foxboro or the Company's business.
Amendment to Preferred Shares Rights Agreement. Pursuant to the Merger
Agreement, the Company has agreed to effect an amendment to the Preferred Shares
Rights Agreement dated as of August 13, 1997 (the "Rights Agreement") entered
into between the Company and Harris Trust Company of California, as Rights Agent
(the "Rights Agent"), to exclude Parent and its Affiliates and Associates (as
such terms are defined in the Rights Agreement), including Offeror and Merger
Sub, from the definition of "Acquiring Person" therein, with respect to the
beneficial ownership of the Shares which Parent, Offeror or any of their
respective Affiliates and Associates have obtained the right to acquire, or will
acquire, as a result of the transactions contemplated by the Merger Agreement
and the Stock Option Agreement. Such amendment has been effected by the
execution of a formal amendment to the Rights Agreement on April 17, 1998 (the
"Rights Amendment") by the Company and the Rights Agent, and the filing with the
Commission, (and the effectiveness) of an amendment to the Company's
Registration Statement on Form 8-A on April 21, 1998 with respect to such Rights
Amendment. The Rights Amendment ensures that neither Parent, Offeror nor any of
their respective Affiliates and Associates will be considered an "Acquiring
Person" under the Rights Agreement, and prevents the occurrence of a
"Distribution Date," a "Shares Acquisition Date" or a "Triggering Event" (each
as defined therein) as a result of Offeror's acquisition of Shares upon
consummation of the Offer, or Parent's or Offeror's acquisition of Shares, or
rights to acquire same, in connection with the Merger or otherwise pursuant to
the Merger Agreement or Stock Option Agreement or any of the transactions
contemplated thereby.
Consents and Amendments. In the Merger Agreement, the Company has agreed to
use its commercially reasonable efforts to obtain, without the payment of any
fee or compensation, certain consents to the Offer, the Merger, and the
transactions contemplated by the Merger Agreement. Also, the Company has agreed
to use its best efforts to amend the Software License Agreement (the "Shell
License Agreement") dated September 15, 1997 by and between the Company and
Shell Oil Products Company, with Shell acting for itself and Shell Oil Company
(collectively "Shell"), on terms reasonably satisfactory to Parent.
Termination of Merger Agreement. The Merger Agreement provides grounds for
which it may be terminated at any time prior to the Effective Time, but only if
no Shares have been purchased pursuant to the Offer. The Merger Agreement may be
so terminated:
(a) by mutual consent of the Boards of Directors of Parent and the
Company;
(b) by either Offeror or the Company if the Offer shall not have been
consummated on or before October 31, 1998; provided, however, that a party
shall not be entitled to terminate the Merger Agreement pursuant to such
provision if such party is in material breach of its obligations under the
Merger Agreement;
(c) by Offeror if (i) the Company or any of its subsidiaries
authorizes, recommends or proposes, or has announced such an intention, or
has entered into an agreement with respect to, any Alternative Acquisition
or Equity Transaction, or the Company's board of directors withdraws or
adversely modifies its favorable recommendations with respect to the Offer
and the Merger, or any corporation, entity, "group" or "person" (as defined
in the Exchange Act) other than Parent, Offeror or the Merger Sub,
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<PAGE> 11
acquires beneficial ownership of more than 50% of the outstanding Shares,
or (ii) the Rights Amendment is not adopted by April 20, 1998 or does not
remain in full force and effect thereafter;
(d) by Offeror upon any failure of any of the conditions to the Offer
set forth in Section 15 below; provided that if any and all such conditions
are and continue to be reasonably probable of being satisfied by the 30th
business day after commencement of the Offer, Offeror shall not terminate
the Merger Agreement as a result of such failures until such 30th business
day;
(e) by the Company if (i) the Offer has not commenced substantially in
accordance with its terms, or (ii) the Offer expires or is terminated
without any Shares having been purchased, or (iii) if a tender offer for
Shares is commenced by a person or entity, or the Company receives an offer
with respect to a merger, sale of assets or other business combination with
a person, any of which the Board of Directors determines, in the exercise
of its fiduciary duties and subject to its duties under the Merger
Agreement with respect to Bona Fide Offers, makes necessary or advisable
the termination of the Merger Agreement, or (iv) there has been a material
breach or failure to perform in any material respect by Parent, Offeror or
Merger Sub of any representation, warranty, covenant or other agreement
contained in the Merger Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to such breaching party;
or
(f) by Offeror if any governmental entity shall have issued an order,
decree or ruling or taken other action (in each case which is final and
nonappealable) permanently enjoining, restraining or otherwise prohibiting
acceptance or payment for Shares pursuant to the Offer or the Merger.
If the Merger Agreement is so terminated (a) the Merger Agreement will
become void and there will be no liability or further obligation on the part of
Parent, Offeror, Merger Sub or the Company or their respective stockholders,
officers or directors, except for expense reimbursement or payment of the
Termination Fee (discussed below), confidentiality obligations, and the
standstill obligations of the parties and (b) Offeror and Merger Sub shall
terminate the Offer, if still pending, without purchasing any Shares thereunder
and will not, subject to the Standstill Proviso of the of the Confidentiality
Agreement (see "Identity and Background -- Confidentiality Agreement" above),
for a period of two years following termination, commence a tender or exchange
offer for any capital stock of the Company without prior written consent of the
Company.
Expenses; Termination Fee. The Merger Agreement provides that the Company
will pay Parent, upon demand, $7,250,000 (the "Termination Fee"), to compensate
Parent, Offeror and Merger Sub for taking actions to consummate the Merger
Agreement, to reimburse them for the time and expense relating thereto and for
other direct or indirect costs in connection with the transactions contemplated
by the Merger Agreement, if the Merger Agreement is terminated for any of the
following reasons and upon the conditions set forth in the Merger Agreement:
(A) the Company's acceptance of a Bona Fide Offer (see "Merger
Agreement -- Non-Solicitation Obligations; Bona Fide Offers," above);
(B) the determination by the Company's Board of Directors that such
termination is necessary or advisable given the commencement of a
third-party tender offer for the Shares or the receipt by the Company of an
offer with respect to a business combination transaction;
(C) the Company's pursuit of any Alternative Acquisition or Equity
Transaction, the withdrawal or adverse modification of the favorable
recommendations of the Company's Board of Directors with respect to the
Offer and the Merger, a third-party acquisition of beneficial ownership of
more than 50% of the outstanding Shares, or the failure to adopt the Rights
Amendment by April 20, 1998 or to maintain the Rights Amendment in full
force and effect thereafter; or
(D) any reason other than a material breach of the Merger Agreement by
Parent, Offeror or Merger Sub if within four months thereafter either (x) a
definitive agreement is entered into between the Company and any third
party for the acquisition or disposition of a material amount of assets or
securities of the Company, or for a merger, consolidation or other
reorganization of the Company at a price equivalent to a price per Share in
excess of $10.00, and such transactions are subsequently consummated
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<PAGE> 12
at any time, or (y) any person or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) other than Offeror or any affiliate of
Offeror acquires or makes a public tender offer to acquire beneficial
ownership of at least 50% of the outstanding Shares at a price per Share in
excess of $10.00, and such transactions are consummated at any time.
If the Company fails to pay the Termination Fee promptly when due, the
Company has agreed to pay to Parent all reasonable out-of-pocket costs and
expenses (including reasonable attorneys' fees and expenses) incurred by Parent
in connection with the collection of the Termination Fee, together with interest
from the date the Termination Fee was due until such time as payment is received
by Parent at the lesser of 10% per annum or the maximum rate permitted by law
(the "Interest Rate").
The Merger Agreement further provides that, in addition to any damages
caused by conduct that constitutes a breach under the Merger Agreement by either
Parent, Offeror and Merger Sub, on the one hand, and the Company, on the other
hand, the breaching party, jointly and severally, will pay to the nonbreaching
party all reasonable out-of-pocket costs and expenses it incurs in connection
with its enforcement of its rights under the Merger Agreement, together with
interest from the date such damages are incurred until such time as payment is
received by the nonbreaching party at the Interest Rate.
Consent of Continuing Directors to Termination, Modification, Amendment or
Waiver. Notwithstanding anything in the Merger Agreement to the contrary, the
affirmative vote of a majority of the Continuing Directors will be required to
terminate, amend, modify or waive any provision of the Merger Agreement on
behalf of the Company, or to approve any other action by the Company with
respect to the Offer or the other transactions contemplated by the Merger
Agreement, or the Certificate of Incorporation or By-Laws of the Company which
adversely affects the interests of the stockholders of the Company (other than
Parent, Offeror or Merger Sub) with respect to such transactions.
THE STOCK OPTION AGREEMENT
Grant of Stock Option. Parent and the Company have entered into a Stock
Option Agreement, dated as of April 15, 1998 (the "Stock Option Agreement"),
pursuant to which the Company granted to Parent an option (the "Stock Option")
to purchase authorized and unissued shares of common stock of the Company
("Option Shares") in an aggregate amount of up to 15% of the Company's issued
and outstanding shares on the date of the Stock Option Agreement, at a price per
share equal to $10.00, payable in cash. The type and number of Option Shares and
the option exercise price will be adjusted to reflect any stock dividends,
split-ups, recapitalizations or the like. Further, if the Company enters into a
merger with another company in which the Company's shares of common stock are
converted into the right to receive cash, securities or other property, then the
Company will ensure that the Stock Option becomes an option to acquire the cash,
securities or other property that Parent would have received in such merger if
it had exercised the Stock Option immediately prior to such merger. The Company
has also agreed that, if at the time of issuance of any Option Shares, the
Company shall have issued any share purchase rights or similar securities to
holders of any class of the Company's common stock, then, subject to the terms
and conditions of any plan governing such rights or securities, each such Option
Share shall also represent rights that are substantially similar and at least as
favorable to Parent. The Stock Option may only be transferred to a direct or
indirect wholly owned subsidiary of Parent who agrees to be bound by the terms
of the Option Agreement.
Exercise of Stock Option. The Stock Option will be triggered upon a
"Purchase Event," meaning the termination of the Merger Agreement in connection
with (A) the Company's acceptance of a Bona Fide Offer (see "Merger
Agreement -- Non-Solicitation Obligations; Bona Fide Offers," above), (B) the
determination by the Company's Board of Directors that such termination is
necessary or advisable given the commencement of a third-party tender offer for
the Shares of offer with respect to a business combination (see "Termination of
Merger Agreement," clause (e)(iii), above), or (C) the Company's pursuit of any
Alternative Acquisition or Equity Transaction, the withdrawal or adverse
modification of the favorable recommendations of the Company's Board of
Directors with respect to the Offer and the Merger, a third-party acquisition of
beneficial ownership of more than 50% of the outstanding Shares, or the failure
to adopt the Rights Amendment by April 20, 1998 or to maintain the Rights
Amendment in full force and effect thereafter
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<PAGE> 13
(see "Termination of Merger Agreement," clause (c), above). Upon the occurrence
of a Purchase Event, Parent may exercise the Stock Option, in whole or in part,
during the period (the "Option Exercise Period") commencing on the Purchase
Event and terminating 180 days thereafter (the "Termination Date"), with such
period to be adjusted if any injunction, order or similar court restraint delays
the exercise of the Stock Option. The related closing will generally take place
on a date specified by Parent that is within 2 business days and 60 calendar
days after the date that Parent provides written notice of exercise of the Stock
Option (the "Notice Date"), subject to adjustment if the closing is delayed by
any applicable law or because prior notification to or approval of any
governmental authority is required.
Repurchase of Stock Option and Option Shares. If Parent notifies the
Company of its intention to exercise a portion of the Stock Option, but the
related closing has not occurred, then the Company may, by providing written
notice to Parent not less than two business days prior to the date scheduled for
such closing, elect to repurchase the Stock Option in its entirety from Parent
together with all Option Shares previously purchased by Parent as to which
Parent then has beneficial ownership (as used in Rule 13d-3 under the Exchange
Act). The repurchase will take place within three business days of such
election. The repurchase price will equal the sum of the following: (i) with
respect to the unexercised portion of the Stock Option, the difference between
(A) the "Market/Tender Offer Price" (defined below) for shares of the Company's
common stock and (B) the option exercise price of $10.00 (subject to adjustment
as provided above), multiplied by the number of Option Shares subject to the
unexercised portion of the Stock Option, but only if such Market/Tender Offer
Price is greater than such exercise price; and (ii) with respect to Option
Shares, the greater of the Market/Tender Offer Price and the purchase price paid
for any Option Shares acquired upon exercise of any portion of the Stock Option,
multiplied by the number of Option Shares so acquired. "Market/Tender Offer
Price" means the higher of (x) the highest price per share at which a tender or
exchange offer has been made and not withdrawn for shares of the Company's
common stock during the Option Exercise Period or (y) the highest closing price
per such share as reported by the Nasdaq National Market for any day within the
period beginning on the Notice Date and preceding the date the Company gives
notice of its election to repurchase.
Limitation on Total Profit. If Parent (or any of its affiliates) sells any
of the Option Shares or any rights therein, Parent may keep the proceeds of such
sale until the proceeds exceed by more than $14,250,000 the aggregate purchase
price paid for such Option Shares (the "Profit Limitation"). Any proceeds in
excess of the Profit Limitation (whether in cash or in kind, valued at fair
market) will be paid to the Company. The Profit Limitation applies to all sales
and dispositions by Parent and its affiliates, including a sale to the Company
pursuant to its repurchase rights.
Termination. The Stock Option Agreement will terminate, but only if a
Purchase Event has not occurred, on (i) the date on which Offeror purchases all
Shares tendered in the Offer and not withdrawn pursuant to the Offer, or (ii)
the termination of the Merger Agreement pursuant to its terms (unless terminated
by the occurrence of a Purchase Event).
Registration Rights; Listing. The Company has granted to the holders and
beneficial owners of the Option Shares certain registration rights that may be
exercised at any time after the closing of a sale of Option Shares. Registration
will be at the Company's expense except for underwriting commissions and the
fees and disbursements of counsel to such holders and beneficial owners. Upon
receiving any request to exercise such registration rights, the Company will
send a copy thereof to any other person known to the Company to be entitled to
such registration rights. In no event will the Company be required to effect
more than one registration pursuant to such rights. Also, if the Option Shares
are then listed on any national securities exchange, the Company, upon the
request of Parent, will promptly file an application to list the Option Shares
on all such exchanges and will use its best efforts to obtain approval of such
listings as soon as practicable.
Representations and Warranties; Covenants. Under the Stock Option
Agreement, the Company made customary representations and warranties to Parent,
including with respect to the Company's authority to enter into and perform its
obligations under the Stock Option Agreement, the due execution and delivery by
the Company of the Stock Option Agreement, the Company's taking of all corporate
actions necessary to authorize and reserve for issuance the Option Shares, and
the valid issuance of such fully paid and
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<PAGE> 14
nonassessable Option Shares, free and clear of all encumbrances. The Company
also agreed that no provision of the Rights Agreement will be triggered solely
by virtue of any ownership, exercise or purchase under the Stock Option
Agreement.
Parent has also made customary representations and warranties under the
Stock Option Agreement, including with respect to Parent's authority to enter
into and perform its obligations under the Stock Option Agreement, the due
execution and delivery by Parent of the Stock Option Agreement, and the Parent's
representation that it will not transfer or dispose of the Option Shares except
in compliance with the Securities Act.
The foregoing is a summary of certain provisions of the Merger Agreement
and the Stock Option Agreement, copies of which have been filed as exhibits to
this Schedule 14D-9. Such summary is qualified in its entirety by reference to
the text of such agreements.
DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, (a) issue, sell, pledge, dispose of or
encumber (or permit any of its subsidiaries to issue, sell, pledge, dispose of
or encumber) any shares of, or any options, warrants, conversion privileges or
rights of any kind to acquire any shares of any capital stock of the Company or
any of its subsidiaries (other than shares issuable upon exercise of the
outstanding (as of the date of the Merger Agreement) options or rights under the
Employee Stock Purchase Plans to acquire Shares in accordance with their terms
in effect on the date of the Merger Agreement); (b) split, combine or reclassify
any outstanding Shares, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect to the
Shares other than pursuant to the Rights Agreement; or (c) other than pursuant
to the Rights Agreement, redeem, purchase or acquire or offer to acquire (or
permit any of its subsidiaries to redeem, purchase or acquire or offer to
acquire) any Shares or other securities of the Company or any of its
subsidiaries other than as contemplated by the Merger Agreement and other than
for the repurchase by the Company, pursuant to existing agreements, of any
outstanding Shares upon termination of any employment, director or consulting
relationship with the Company. "Merger Agreement -- Conduct of Company's
Business Pending Merger."
CERTAIN CONDITIONS TO OFFEROR'S OBLIGATIONS.
In the Merger Agreement, Offeror has agreed that if all of the conditions
to the Offer are not satisfied by the Expiration Date then, provided that all
such conditions are reasonably probable of being satisfied by the date which is
30 business days after the commencement of the Offer, Offeror shall extend the
Offer (up to such 30th business day) until such conditions are satisfied or
waived. Subject to such obligation to extend the Offer, Offeror shall not be
required to accept for payment, purchase or pay for any Shares tendered, or may
postpone the acceptance, purchase or payment for Shares, or may amend or
terminate (to the extent permitted by the Merger Agreement) the Offer, (1) if
the Minimum Condition is not satisfied as of the expiration of the Offer; (2) if
any applicable waiting period under the Hart-Scott-Rodino Act in respect of the
Offer shall not have expired or have been terminated prior to the expiration of
the Offer or (3) if, upon the Expiration Date and before acceptance of such
Shares for payment, any of the following conditions exists or is continuing
(each of paragraphs (a) through (g) providing a separate and independent
condition to Offeror's obligations pursuant to the Offer):
(a) there is any statute, rule, injunction or other order by any court
or governmental agency or other agency or commission, domestic or foreign
of competent jurisdiction (other than the routine application of waiting,
review and investigation periods under the Hart-Scott-Rodino Act and
similar foreign antitrust laws and published rules, and routine application
of federal securities laws and published rules), (i) making the purchase of
some or all of the Shares pursuant to the Offer or the Merger illegal, or
resulting in a material delay in the ability of Offeror or the Merger Sub
to purchase some or all of the Shares, (ii) invalidating or rendering
unenforceable any material provision of the Merger Agreement, (iii)
imposing material limitations on the ability of Offeror or the Merger Sub
effectively to acquire or hold or to exercise full rights of ownership of
the Shares acquired by it, including voting rights,
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<PAGE> 15
(iv) imposing material limitations on the ability of any of Parent,
Offeror, or the Company to continue to own or operate effectively all or
any material portion of its respective assets as heretofore owned or
operated, (v) imposing material limitations on the ability of the Offeror
to continue effectively all or any material portion of the Company's
business as heretofore conducted or to own or operate effectively all or
any material portion of the Company's assets as heretofore operated, or
(vi) to the effect that the Offer or the Merger is violative of any
applicable law which would reasonably be expected to result in any of the
consequences described in clauses (i) through (vi) above;
(b) there is any law, statute, rule or regulation, domestic or
foreign, that results or would reasonably be expected to result in any of
the consequences referred to in paragraph (a) above, or any action, suit or
proceeding is commenced by a governmental or regulatory authority or body
seeking to restrain, enjoin or otherwise prohibit the Offer, the Merger, or
the completion of the transactions contemplated by the Merger Agreement;
(c) there is (i) any general suspension of, or limitation on prices
for, trading in securities on any national securities exchange or in the
over the counter market in the United States or on the London Stock
Exchange, (ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the United Kingdom,
(iii) any limitation by any governmental authority which would reasonably
be expected to materially adversely affect, the extension of credit by
banks or other lending institutions in the United States or the United
Kingdom, (iv) from the date of the Merger Agreement through the close of
business on the business day immediately prior to the Expiration Date, a
decline of at least 25% in the Standard & Poor's 500 Index, or (v) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof;
(d) except as set forth in reports heretofore filed by the Company
with the Commission or the disclosure schedule provided by the Company, any
change occurs or is threatened since the date of the Merger Agreement which
individually or in the aggregate has had or is continuing to have or would
reasonably be expected to have a Material Adverse Effect on the Company and
its subsidiaries, taken as a whole;
(e) any of the representations and warranties of the Company in the
Merger Agreement are not true and correct (i) in all material respects on
the date of the Merger Agreement or (ii) in all respects as if made on the
Expiration Date, except in the case of clause (ii) where the aggregate of
all inaccuracies would not have a Material Adverse Effect on the Company,
and except for those representations and warranties that address matters
only as of a particular date (which representations and warranties will be
true and correct except as would not have a Material Adverse Effect on the
Company as of such particular date) (for purposes of determining whether
inaccurate representations and warranties would have a Material Adverse
Effect on the Company, "Material Adverse Effect" and "materiality"
qualifications and limitations in the representations and warranties will
not be given effect); or
(f) the Company breaches in any material respect or does not perform
in all material respects each covenant and complied with each agreement to
be performed and complied with by it under the merger Agreement; or
(g) the Merger Agreement is terminated pursuant to its terms.
which, in the good faith judgment of Offeror, in any such case, and regardless
of the circumstances giving rise to any such condition (except in the case any
such condition is not satisfied as the direct result of a breach by Parent or
Offeror of obligations under the Merger Agreement), make it inadvisable to
proceed with acceptance for payment or purchase of or payment for the Shares.
The foregoing conditions are for the sole benefit of Offeror and Parent and
may be asserted by Offeror and Parent regardless of the circumstances (except in
the case any such condition is not satisfied as the direct result of a breach by
Parent or Offeror of obligations under the Merger Agreement) giving rise to such
conditions, or may be waived (except for the Minimum Condition) by Offeror or
Merger Sub in whole at any time or in part from time to time in their sole
discretion. The failure by Offeror or Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be
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deemed an ongoing right and may be asserted at any time and from time to time.
Any determination by Offeror concerning the conditions described in this Section
shall be final and binding upon all parties.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously approved the Offer
and the Merger and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the stockholders of the Company and
unanimously recommends that stockholders of the Company accept the Offer and
tender their Shares to the Offeror.
As set forth in the Offer, the Merger Agreement and the Letter of
Transmittal (the "Offer Documents"), the Purchaser will purchase shares tendered
prior to the close of the Offer (and not validly withdrawn) if the Conditions to
the Offer have been satisfied (or waived). Stockholders considering not
tendering their shares in order to wait for the Merger should note that if the
Minimum Condition is not satisfied or any of the other conditions to the Offer
are not satisfied, the Purchaser is not obligated to purchase any Shares, and
can terminate the Offer and the Merger Agreement and not proceed with the
Merger. Under Delaware Law, the approval of the Board and the affirmative vote
of the holders of a majority of the outstanding shares are required to approve
the Merger. Accordingly, if the Conditions to the Offer are satisfied, the
Purchaser will have sufficient voting power to cause the approval of the Merger
without the affirmative vote of any other stockholder. Under Delaware Law, if
Offeror acquires, pursuant to the Offer or otherwise, at least 90% of the then
outstanding Shares, Offeror will be able to approve and adopt the merger
Agreement and the Merger, without a vote of the Company's stockholders. Siebe,
Offeror and the Company have agreed to use their best efforts to take, or cause
to be taken, actions necessary, proper or advisable to consummate and make
effective in the most expeditious manner possible the Merger and the
transactions contemplated by the Merger Agreement. If Offeror does not acquire
at least 90% of the then outstanding Shares pursuant to the Offer or otherwise
and a vote of the Company's stockholders is required under Delaware Law, a
significantly longer period of time will be required to effect the Merger.
The Offer will expire upon the Expiration Date. The term "Expiration Date"
means 12:00 midnight, New York City time, on Monday, May 18, 1998, unless the
Offeror shall have extended the period of time for which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Offeror, shall expire. A copy of the press
releases issued by the Company and Siebe on April 15, 1998 announcing the Merger
and the Offer is filed as Exhibit 99.2 to this Schedule 14D-9 and is
incorporated herein by reference in its entirety.
(B) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION.
Background of the Offer
In October 1997, the Company's Executive Vice President of Sales, Marketing
and Engineering Services, Dirk Pfeiffer, met with Mark Davidson, Director of
Product Marketing of The Foxboro Company ("Foxboro"), an affiliate of Siebe, at
the Company's principal executive offices in Brea, California to discuss
generally, and exchange information regarding, their respective businesses,
technologies and products.
On February 13, 1998, Gary Foster, President, Software Services and
Corporate Marketing of Foxboro, telephoned Mr. Harris to discuss the possibility
of a strategic alliance with the Company, including a possible joint venture.
On March 3, 1998, Mr. Harris and other representatives of the Company met
with representatives of Siebe, including Bruce Robinson, President of Foxboro,
in Houston, Texas. At the meeting, both companies discussed their respective
businesses, products and growth strategies. The parties noted the synergies
between their respective technologies and discussed the possibility of a
strategic technology alliance, including the possibility of Foxboro becoming a
member of the Company's group of engineering service providers.
15
<PAGE> 17
On March 26, 1997, Mr. Harris telephoned Mr. Robinson of Foxboro to
indicate the Company's willingness to continue their discussions regarding a
strategic alliance, and indicated a willingness to pursue a possible expansion
of that relationship.
On March 27, 1998, Allen Yurko, Managing Director and Chief Executive
Officer of Siebe, and Mr. Harris spoke regarding a possible acquisition of the
Company by Siebe and Mr. Yurko shared with Mr. Harris his views on the general
structure of the transaction and the role that the Company would play in the
combined entity. On March 31, 1997, Dr. George W. Sarney, President and Chief
Operating Officer of the Control Systems Division of Siebe, telephoned Mr.
Harris, at which time they agreed to set a date to have more in-depth
discussions regarding a possible combination and to further conduct due
diligence.
On April 7, 1998, representatives of the Company, including Mr. Harris,
Robert E. Grice, Jr., the Company's Executive Vice President, Finance and Chief
Financial Officer, and key technical personnel, and Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, the Company's financial advisor ("DRW")
met with representatives of Siebe, including Dr. Sarney and Mr. Robinson, and
Morgan Stanley & Co. Incorporated, Siebe's financial advisor ("Morgan Stanley"),
in Orange County, California to discuss a possible acquisition of the Company by
Siebe. Prior to the meeting, the parties executed the Mutual Nondisclosure
Agreement. See Item 3(b)(ii) above for a description of the Mutual Nondisclosure
Agreement, a copy of which is filed as Exhibit 99.1 hereto and incorporated
herein by reference. At the meeting, the Company provided Siebe with financial
information about the Company, including non-public information regarding the
Company's preliminary findings with respect to its operating results for the
quarter ended March 31, 1998, as well as information regarding its business,
products and strategies. At the meeting, Dr. Sarney indicated Siebe's continued
desire to acquire the Company and indicated that, subject to its due diligence
review, including a review of the Company's revised and reduced forecast for the
1998 fiscal year, it intended to propose a cash offer for the Company on April
10, 1998. Early in the morning on April 10, 1998, the Company provided Parent
with its preliminary revised and reduced forecast for the 1998 fiscal year.
From April 8, 1998 to April 14, 1998, Siebe and its legal and financial
advisors conducted legal, financial and technical due diligence of the Company.
On April 9, 1998, legal counsel for Siebe sent a draft Merger Agreement and
draft Option Agreement to legal counsel for the Company.
On April 10, 1998, Morgan Stanley contacted DRW and indicated that, subject
to further due diligence, including a review of the Company's revised and
reduced estimates for its 1998 fiscal year, Siebe was prepared to offer $10.00
per share in cash for the Company.
Thereafter, commencing on April 10, 1998, the Company, Siebe and their
respective legal and financial advisors engaged in negotiations with respect to
a possible acquisition of the Company by Siebe.
On April 13, 1998, Siebe informed the Company that it would withdraw its
proposal if there were not a final agreement on or before the opening of the
U.S. trading markets on April 15, 1998.
The Merger Agreement and the Stock Option Agreement were executed and
delivered in the early morning on April 15, 1998.
During March and early April 1998, the Company held discussions and
exchanged information with two other parties that expressed an interest in a
business combination with the Company, and the Company's Board evaluated the
proposal with Siebe in light of these potential alternatives.
Reasons for the Recommendation.
At a meeting on April 15, 1998, the Board of Directors of the Company
unanimously approved the Offer and the Merger and determined that the terms of
the Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company, and unanimously resolved to recommend that
stockholders accept the Offer and tender their Shares.
In arriving at its decision to approve the Transactions and to recommend
acceptance of the Offer, the Board of Directors considered, among other things,
(i) the terms and conditions of the Merger Agreement, including the amount and
form of the consideration; (ii) the fact that the $10.00 per Share price
represents a
16
<PAGE> 18
premium of approximately 24.1% over the closing sale price of $8.06 per Share as
reported on the Nasdaq National Market on April 14, 1998, the last trading day
prior to the date the Board of Directors authorized and approved the
Transactions; (iii) the Board of Directors' knowledge of the recent operating
results of the Company, including the fact that the Company's revenues during
the quarter ended March 31, 1998 were significantly lower than expected and that
the Company would incur a substantial loss in that quarter; (iv) the Company's
expectations regarding fiscal 1998 operating results and the fact that such
expectations were significantly lower than previous expectations; (v) the effect
that the public announcement of March 31, 1998 quarterly operating results would
have on future customer prospects and on the Company's stock price and the
likelihood that the Company's near term operating results would further
negatively affect such stock price; (vi) the effect that the public announcement
of March 31, 1998 quarterly operating results would have on the Company's
relationships with its employees, partners and customers; (vii) the likelihood
that the proposed Merger would be consummated, based on the experience,
reputation and financial condition of Siebe and the conditions to the Offer as
set forth in the Merger Agreement; (viii) the uncertainty of whether Siebe's
$10.00 offer would be withdrawn after the April 15, 1998 deadline set by Siebe;
(ix) the uncertainty of the timing and economic value of a proposal from any
third party and the uncertainty of whether there would be a transaction with any
third party that would yield greater value for the Company's stockholders than
the Offer and the Merger; (x) the effect that a potential lower stock price
following public announcement of March 31, 1998 operating results could have on
the price levels that other potential third party acquirors would be willing to
pay for the Company; (xi) the advantages in a competitive environment of
strategically aligning with a large, well-capitalized company; (xii) the fact
that pursuant to the Merger Agreement, the Company is not prohibited from
responding to certain unsolicited offers to acquire the Company; and (xiii) the
opinion of DRW dated April 15, 1998, to the effect that as of such date and
based upon and subject to the various assumptions and limitations set forth
therein, the cash consideration to be received by the holders of Shares in the
Offer and the Merger is fair from a financial point of view to such
stockholders.
THE FULL TEXT OF DRW'S FAIRNESS OPINION IS FILED AS EXHIBIT 99.5 TO THIS
SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX B. STOCKHOLDERS ARE URGED TO
READ SUCH OPINION IN ITS ENTIRETY.
The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current stockholders of the Company of the opportunity to
participate in the future growth prospects of the Company and, therefore, in
reaching its conclusion to approve the Transactions, determined that the recent
historical results of operations and future prospects of the Company are
adequately reflected in the $10 price per Share. In addition, the Board of
Directors considered the possibility that, in the event the Offer but not the
Merger is consummated, the number of stockholders could be reduced, which could
adversely affect the liquidity and market value of the Shares.
In light of all the factors set forth above, the Board of Directors
approved the Transactions. In view of the variety of factors considered in
connection with its evaluation of the Transactions, the Board of Directors did
not assign relative weights to the specific factors considered in reaching its
decision.
It is expected that if Shares are not accepted for payment by the Purchaser
in the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Directors, will continue
to manage the Company as an on-going business. However, the Company may, under
these circumstances, continue to explore other possible methods of maximizing
stockholder value.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained DRW to provide financial advisory services in
connection with a possible business transaction for the Company. Pursuant to a
letter agreement dated April 4, 1998 between the Company and DRW, the Company,
as compensation for such services, has agreed to pay DRW, a transaction fee
equal to 1.25% of the total consideration paid directly or indirectly to or by
the Company to its stockholders in connection with the Offer and the Merger.
Additionally, the Company has agreed to pay to DRW a fee in the amount of
$250,000 upon the delivery to the Company of the opinion of DRW attached to this
Schedule 14D-9 as Annex B. Such $250,000 fee shall be credited against the
transaction fee described above. The
17
<PAGE> 19
Company has also agreed to reimburse DRW for its reasonable out of pocket
expenses incurred in connection with rendering financial advisory services,
including fees and disbursements of its legal counsel, up to a maximum aggregate
amount of $50,000. In addition, the Company has agreed to indemnify and hold
harmless DRW, its managing directors, employees, agents, affiliates and
controlling persons for certain claims, damages and liabilities related to or
arising in any manner out of any transaction, proposal or any other matter
contemplated by its engagement as financial advisor.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the Company's knowledge, by any of its executive officers,
directors, affiliates or subsidiaries, except as follows:
1. The Company has granted options to, and sold stock upon exercise of
stock options held by employees and consultants under its stock plans.
2. On March 2, 1998, the Company's Board of Director's authorized an
option exchange program pursuant to which employees (excluding executive
officers and directors) were offered to exchange outstanding options under
the 1996 Stock Plan (the "Old Options") for new options (the "New Options")
having an exercise price equal to the closing sale price of the Company's
Common Stock as reported on the Nasdaq National Market on March 20, 1998,
which was $8.44 per share. The New Options were on the same terms as the
Old Options, except for the exercise price, the vesting schedule (which is
postponed by six months) and the New Options would not be exercisable until
September 22, 1998, except that such options may be exercised in the event
of a change of control.
3. On March 2, 1998 the Company's Board of Directors granted to Robert
E. Grice, Jr., Executive Vice President, Finance and Chief Financial
Officer of the Company, an option to purchase 50,000 shares of the
Company's Common Stock at an exercise price of $10.25 per share.
4. On March 16, 1998 the Company granted to Lawrence Gozzard,
Executive Vice President, Research and Development of the Company, an
option to purchase 100,000 shares of the Company's Common Stock at an
exercise price of $9.31 per share.
5. Certain of the Company's executive officers participate in the
Company's Employee Stock Purchase Plan for U.S. Employees pursuant to which
such officers purchase Common Stock of the Company through payroll
deductions.
(b) To the Company's knowledge, all of the Company's executive officers and
directors who own Shares currently intend to tender all of their Shares (other
than Shares, if any held by such person that if tendered, could cause such
person to incur liability under the provisions of Section 16(b) of the Exchange
Act of 1934, as amended) pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relate
to or would result in one or more of the events referred to in Item 7(a) above.
18
<PAGE> 20
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Not applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
99.1 Form of Mutual Nondisclosure Agreement between Simulation
Sciences Inc. and Siebe plc dated April 7, 1998.
99.2 Press releases issued by the Company and Siebe plc on April
15, 1998.
99.3 Letter of Transmittal.*
99.4 Letter to Stockholders dated April 21, 1998 from Charles R.
Harris, President and Chief Executive the Company.*
99.5 (1) Opinion of Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, dated April 15, 1998.*
99.6 Offer to Purchase dated April 21, 1997.*
99.7 Agreement and Plan of Merger dated as of April 15, 1998,
among the Company, Siebe plc, S Acquisition Corp. and S Sub
Corp.
99.8 Stock Option Agreement dated as of April 15, 1998 between
the Company and Siebe plc.
99.9 (2) Certificate of Incorporation of the Company, as amended to
date.
99.10 (3) Certificate of Designations of Rights, Preferences and
Privileges of Series A Participating Preferred Stock.
99.11 (4) The Bylaws of the Company.
99.12 (5) Form of Indemnification Agreement.
99.13 (6) Form of Separation Agreement.
99.14 (7) 1994 Stock Option Plan and related agreements.
99.15 (8) 1996 Stock Plan and related agreements.
99.16 (9) Employee Stock Purchase Plan for U.S. Employees and related
agreements.
99.17 (10) Employee Stock Purchase Plan for Non-U.S. Employees and
related agreements.
99.18 (11) Director Option Plan and related agreements.
99.19 (12) The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Incorporated by reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(3) Incorporated by reference to the Company's Registration Statement on Form
8-A filed on August 14, 1997 (File No. 000-21283), as amended by Form 8-A/A
filed on April 21, 1998.
(4) Incorporated by reference to Exhibit 3.4 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(5) Incorporated by reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(6) Incorporated by reference to Exhibit 10.15 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(7) Incorporated by reference to Exhibit 10.3 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(8) Incorporated by reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-8 (Registration No. 333-42697), as amended.
19
<PAGE> 21
(9) Incorporated by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(10) Incorporated by reference to Exhibit 10.6 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(11) Incorporated by reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(12) Attached hereto as Annex A.
20
<PAGE> 22
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
SIMULATION SCIENCES INC.
By: /s/ CHARLES R. HARRIS
------------------------------------
Charles R. Harris
Chief Executive Officer
Dated: April 21, 1998
21
<PAGE> 23
ANNEX A
SIMULATION SCIENCES INC.
601 VALENCIA AVENUE, SUITE 100
BREA, CALIFORNIA 92823.
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about April 21, 1998, as a
part of Simulation Sciences Inc.'s (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
shares of Common Stock, par value $0.001 per share, of the Company (the
"Shares") at the close of business on or about April 16, 1998. You are receiving
this Information Statement in connection with the possible election of persons
designated by Offeror (as defined below) to a majority of the seats on the Board
of Directors of the Company.
On April 15, 1998, the Company, Siebe plc, a United Kingdom public limited
company ("Siebe"), S Acquisition Corp., a Delaware corporation and an indirect
wholly owned subsidiary of Siebe ("Offeror") and S Sub Corp., a Delaware
corporation and wholly owned subsidiary of Offeror ("Merger Sub") entered into
an Agreement and Plan of Merger (the "Merger Agreement") in accordance with the
terms and subject to the conditions of which (i) Siebe will cause the Offeror to
commence a tender offer (the "Offer") for all outstanding Shares at a price of
$10 per Share to the stockholders of the Company in cash and without interest
thereon, and (ii) Merger Sub will be merged with and into the Company (the
"Merger"). As a result of the Offer and the Merger, the Company will become a
wholly owned subsidiary of Siebe.
The Merger Agreement requires the Company to use all reasonable efforts to
cause the directors designated by Siebe to be elected to the Board of Directors
under the circumstances described therein. See "Board of Directors and Executive
Officers."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Offeror commenced the Offer on April
21, 1998. The Offer is scheduled to expire at 12:00 midnight, New York City
time, on Monday May 18, 1998, unless the Offer is extended.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of April 15, 1998, there were
14,146,608 Shares outstanding. The Board of Directors currently consists of one
class with three members. At each annual meeting of stockholders, all three
directors are elected for one-year terms. The officers of the Company serve at
the discretion of the Board.
The Merger Agreement provides that promptly upon the payment by Offeror or
any of Siebe's indirect subsidiaries pursuant to the Offer for such number of
Shares which represents at least a majority of the outstanding Shares, the
Company will increase the size of its Board of Directors to seven members, and
Offeror shall be entitled to designate members of the Board of Directors such
that Offeror, subject to the provisions of Section 14(f) of the Exchange Act,
will have a number of representatives on the Board of Directors, rounded up to
the next whole number, equal to the product obtained by multiplying seven by the
percentage of Shares beneficially owned by Siebe and any of its subsidiaries.
The Company has agreed, upon the request of Offeror, to promptly increase the
size of the Board of Directors as permitted in accordance with
A-1
<PAGE> 24
the Certificate of Incorporation of the Company and/or use its reasonable
efforts to secure the resignation of such number of directors as is necessary to
enable Offeror's designees to be elected to the Board of Directors and has
agreed to use its best efforts to cause Offeror's designees to be so elected.
Notwithstanding the foregoing, if Offeror's designees at any time prior to the
Effective Time constitute a majority of the Company's Board of Directors of the
Company, then the Board of Directors shall have at least two Continuing
Directors. The Company has agreed, at the request of Offeror and at its expense,
to take all actions necessary to effect the foregoing.
DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND OFFEROR
Siebe has informed the Company that it currently intends to designate a
majority of the directors of the Company following the consummation of the Offer
from the list of individuals set forth above. It is currently anticipated that
Siebe will designate Allen M. Yurko, Dr. George W. Sarney, Roger Mann, Colin P.
Bonsey and/or James C. Bays, or such other persons listed above as Siebe shall
determine (collectively the "Siebe Designees"). The names and ages of the
directors and executive officers of Parent and Offeror, and their present
principal occupations, are set forth below. Unless otherwise indicated, each
individual is a citizen of the United Kingdom and his business address is Saxon
House, 2-4 Victoria Street, Windsor, Berkshire SL4 1EN, United Kingdom.
SIEBE PLC
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT WITH SIEBE, PLC; MATERIAL POSITIONS
NAME AND AGE HELD DURING THE PAST FIVE YEARS
------------ ----------------------------------------------
<S> <C>
Sir Philip Beck (63)(a)........ Chairman since March 1, 1998, and a member of the Board of
Directors for more than the past five years. Formerly
Chairman and Chief Executive Officer of John Mowlern and
Company plc.
Sir Colin Marshall(64)(b)...... Deputy Chairman, and a member of the Board of Directors
since January 1, 1998. Chairman of British Airways plc since
1993; Deputy Chairman and Chief Executive Officer prior to
1993. Also Chairman of Inchcape since 1996; Deputy Chairman
of British Telecommunications plc since 1995 and Board
Director of the New York Stock Exchange Inc. since 1994.
Allen M. Yurko(46)(c).......... Member of the Board of Directors, Managing Director and
Chief Executive Officer since January 1, 1994; Managing
Director and Chief Operating Officer from October 1, 1992 to
December 31, 1993.
Dr. George W. Sarney(58)(d).... Member of the Board of Directors since January 1994;
President and Chief Operating Officer, Siebe Control
Systems, since September 1993; Director, President and Chief
Operating Officer, Siebe Temperature and Appliance Controls
from June to September 1993. Director, Bowthorpe plc, since
1996; Senior Vice President, Energy and Environmental Group,
Raytheon Company, prior to 1993.
Roger Mann(58)................. Member of the Board of Directors and Group Finance Director
for more than the past five years.
Colin P. Bonsey(51)............ Member of the Board of Directors and Director of Planning
for more than the past five years.
James C. Bays(48)(c)........... Vice President, General Counsel and Chief Legal Officer
since March 1996. Vice President, Law and Assistant General
Counsel, GenCorp Inc., from April 1993 to March 1996.
R.P.A. Coles(55)............... Director of Legal Affairs and Company Secretary for more
than the past five years.
Sir Richard Lloyd, Member of the Board of Directors for more than the past five
Bt.(69)(f)................... years.
Lord Triefgarne PC(57)(g)...... Member of the Board of Directors since 1991. Chairman of the
Engineering Training Authority since 1994; President of the
Mechanical and Metals Trades Confederation since 1990;
former Minister of State.
</TABLE>
A-2
<PAGE> 25
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT WITH SIEBE, PLC; MATERIAL POSITIONS
NAME AND AGE HELD DURING THE PAST FIVE YEARS
------------ ----------------------------------------------
<S> <C>
Mr. Peter A. M. Curry(67)(h)... Member of the Board of Directors since June 1996. Executive
Chairman of Unitech plc prior to May 1996.
Mr. Timothy K. Member of the Board of Directors since 1995. Director of
Thornton(63)(i).............. Kleinwort Benson Securities Limited prior to 1995.
Mr. James Mueller(51)(j)....... Member of the Board of Directors since April 1996; President
and Chief Operating Officer of Siebe Temperature and
Appliance Controls since 1993; President of Ranco Inc., an
indirect wholly owned subsidiary of Parent, briefly in early
1993.
Allen M. Yurko................. Chairman and Member of the Board of Directors (see notation
above for age and employment history).
Dr. George W. Sarney........... Member of the Board of Directors and President (see notation
above for age and employment history).
James C. Bays.................. Member of the Board of Directors and Vice President (see
notation above for age and employment history).
Thomas G. Foley(56)(k)......... Vice President; Executive Vice President and Chief Financial
Officer, Siebe Control Systems and Executive Vice President
and Chief Financial Officer, The Foxboro Company, since
September 1990.
Gregory M. Miller(49)(l)....... Vice President and Treasurer; Vice President of
International Finance, Parent, since January 1998; Vice
President, Finance and Administration, Siebe Inc. (a holding
company for Siebe plc's U.S. investments) since September
1990.
R.P.A. Coles................... Secretary (See notation above for age and employment
history).
</TABLE>
- ---------------
(a) Sir Philip Beck's business address is Pylle Manor, Pylle, Shepton Mallet,
Somerset, BA4 6TD, United Kingdom
(b) Sir Colin Marshall's business address is British Airways, Berkeley Square
House, Berkeley Square, London, W1X 6BA, United Kingdom.
(c) Mr. Yurko is a citizen of the United States.
(d) Dr. Sarney is a citizen of the United States and his business address is 33
Commercial Street, Bristol Park, Foxboro, Massachusetts 02035.
(e) Mr. Bays is a citizen of the United States.
(f) Sir Richard Lloyd's business address is Sundridge Place, Sundridge,
Sevenoaks, Kent TN14 6DD, United Kingdom.
(g) Lord Trefgarne's business address is The Old Barn, Kettlewell Close,
Horsell Nr. Working, Surrey GU 21 4HZ, United Kingdom.
(h) Mr. Curry's business address is The Old Vicarage, Valley End, Chobham,
Surrey, GU24 8TB, United Kingdom.
(i) Mr. Thornton's business address is Juthware Hall, Halstock, Nr. Yeovil,
Somerset, BA 229SG, United Kingdom.
(j) Mr. Mueller is a citizen of the United States and his business address is
8161 US Route 42N, Plain City, Ohio 43064.
(k) Mr. Foley is a citizen of the United States and his business address is 33
Commercial Street, Foxboro, Massachusetts 02035.
(l) Mr. Miller is a citizen of the United States and his business address is 33
Commercial Street, Foxboro, Massachusetts 02035.
A-3
<PAGE> 26
None of the Siebe Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any of the
directors or executive officers of the Company or (iii) to the best of Siebe's
knowledge, beneficially owns any securities (or rights to acquire any
securities) of the Company. The Company has been advised by Siebe that, to the
best of Siebe's knowledge, none of the Siebe Designees has been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission" or
"SEC"),Commission, except as may be disclosed herein or in the Schedule 14D-9.
Biographical information concerning each of the Company's current directors
and executive officers as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Charles R. Harris............. 48 President, Chief Executive Officer and Director
Dr. Narendra K. Gupta(1)(2)... 49 Director
Walter G. Kortschak(1)(2)..... 38 Director
Katherine Sullivan Abrams..... 58 Executive Vice President, Research and Development
Robert E. Grice, Jr........... 38 Executive Vice President, Finance and Chief Financial
Officer
Daniel T. Nichols............. 49 Executive Vice President, Human Resources and
Administration
Dirk M. Pfeiffer.............. 40 Executive Vice President, Sales, Marketing and
Engineering Services
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Charles R. Harris has served as President and Chief Executive Officer and
as a director of the Company since July 1995. From September 1994 to June 1995,
Mr. Harris was an independent consultant. From April 1993 to August 1994, Mr
Harris was employed by Computervision Corp., a computer modeling equipment
provider ("Computervision"), as Vice President of the Industry Business Group
and a Member of the Management Committee. From 1980 to 1993, Mr. Harris was
employed by Hewlett-Packard Company, a computer and instrument manufacturer
("Hewlett-Packard"), as Global Account Manager for General Motors/Electronic
Data Systems. Mr. Harris holds a B.A. degree and an M.S. degree from Emory
University in Georgia.
Dr. Narendra K. Gupta has been a director of the Company since March 1994.
Dr. Gupta co-founded Integrated Systems, Inc., a real-time software company, in
April 1980 and currently serves as its Chairman of the Board. Dr. Gupta is also
a director of Digital Link Corp., a data communications equipment manufacturer.
Dr. Gupta holds an M.S. degree from California Institute of Technology and a
Ph.D. from Stanford University.
Walter G. Kortschak has been a director of the Company since December 1993.
Since August 1991, he has been a general partner of Summit Partners L.P. where
he has been employed since June 1989. Summit Partners L.P. and its affiliates
manage a number of venture capital funds, including Summit Ventures III, L.P.
and Summit Investors II, L.P., which were principal stockholders of the Company
from 1993 to 1997. He is also a director of Diamond Multimedia Systems, Inc.,
HMT Technology Corporation and SteriGenics International, Inc. and serves as a
director of several privately-held companies. Mr. Kortschak received a B.S.
degree from Oregon State University, an M.S. degree from California Institute of
Technology and an M.B.A. degree from University of California, Los Angeles.
Katherine Sullivan Abrams has served as Executive Vice President, Research
and Development of the Company since July 1997, Vice President, Research and
Development of the Company from November 1995 to July 1997, and a consultant to
the Company from August 1995 to November 1995. From 1984 to February 1995, Ms.
Abrams held senior management positions with Computervision's Software
Development business unit, most recently as Director of Corporate Strategic
Account Management. Previously she had ten years of
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<PAGE> 27
field and product development experience with IBM. Ms. Abrams holds a B.S.
degree from Cornell University.
Robert E. Grice, Jr. has served as Executive Vice President, Finance and
Chief Financial Officer of the Company since October 1997. Prior to joining the
Company, Mr. Grice was employed as Vice President, Finance and Chief Financial
Officer of Smith Micro Software, Inc., a software company, from March 1996 to
October 1997. From July 1993 to August 1994, Mr. Grice was employed as Chief
Financial Officer of Newport Solutions, Inc., a privately owned networking
company, until its acquisition by Cisco Systems, Inc., after which Mr. Grice
served as Director of Finance at Cisco Systems, Inc. from August 1994 to March
1996. Mr. Grice is a certified public accountant and holds a B.S. degree from
California Polytechnic University.
Daniel T. Nichols has served as Executive Vice President, Human Resources
and Administration of the Company since July 1997 and Vice President, Human
Resources and Administration of the Company from February 1996 to July 1997.
From February 1995 to February 1996, Mr. Nichols was employed by Aspen
Technology, Inc., a process simulation software company, as Director of Human
Resources. From April 1990 to December 1994, Mr. Nichols was employed at
Computervision, most recently as Director of Technical and Professional Support.
Mr. Nichols holds a B.S. degree from University of Massachusetts.
Dirk M. Pfeiffer has served as Executive Vice President, Sales, Marketing
and Engineering Services of the Company since July 1997 and Vice President,
Sales, Marketing and Engineering Services of the Company from September 1995 to
July 1997. From January 1993 to June 1995, Mr. Pfeiffer was employed by SAP AG,
an enterprise software company, as Director of Sales and Marketing for the oil
and gas industry. From September 1987 to December 1992, Mr. Pfeiffer was
employed by Hewlett-Packard as the European Account Manager for General
Motors/Electronic Data Systems. Mr. Pfeiffer holds an M.B.A. degree from the
University of Cologne in Germany.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eleven meetings
during fiscal 1997, of which none were by unanimous written consent. No director
attended fewer than 75% of the meetings of the Board of Directors and committees
thereof, if any, upon which such director served. The Board of Directors has a
Compensation Committee and an Audit Committee. The Board of Directors has no
nominating committee or any committee performing such functions.
The Compensation Committee, which consisted of directors Dr. Narendra K.
Gupta and Walter G. Kortschak at the end of fiscal 1997, met two times during
the fiscal year. This Committee is responsible for determining salaries,
incentives and other forms of compensation for directors and officers of the
Company and administers various incentive compensation and benefit plans.
The Audit Committee, which consisted of directors Dr. Narendra K. Gupta and
Walter G. Kortschak, met three times during fiscal 1997. This Committee is
responsible for overseeing actions taken by the Company's independent auditors
and reviews the Company's internal financial controls.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Compensation Committee consisted of Dr. Narendra K.
Gupta and Walter G. Kortschak. The Compensation Committee makes recommendations
to the Board of Directors concerning salaries and incentive compensation for
directors and officers of the Company. Mr. Harris, President and Chief Executive
Officer of the Company, is not a member of the Compensation Committee and cannot
vote on matters decided by the Committee. He does participate in all discussions
and decisions regarding salaries and incentive compensation for all employees of
and consultants to the Company, except that Mr. Harris is excluded from
discussions and decisions regarding his own salary and incentive compensation.
No interlocking relationship exists between any member of the Company's
board of directors or the Compensation Committee and any member of the board of
directors or compensation committee of any company, nor has any such
interlocking relationship existed in the past. Mr. Kortschak, a director of the
Company, is an employee and general partner of Summit Partners L.P. which,
together with its affiliates,
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<PAGE> 28
manage a number of venture capital funds, including Summit Ventures III, L.P.
and Summit Investors II, L.P. See "Executive Compensation and Other
Matters -- Certain Transactions" for a discussion of transactions between the
Company and Summit Ventures III, L.P. and Summit Investors II, L.P.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's four other executive officers
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during the years ended December 31, 1995, 1996 and
1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
- ----------------------------------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($)(1) SAR'S(#) ($)(2)
--------------------------- ---- --------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Harris.............. 1997 $ 200,000 $105,000 $ -- 75,000 $9,247
President and 1996 193,749 100,000 79,684(4) 91,666 8,092
Chief Executive Officer 1995 86,413(3) 37,500 148,670(4) 250,000 4,583
Dirk M. Pfeiffer............... 1997 150,000 78,750 -- 35,000 9,097
Executive Vice President, 1996 150,000 75,000 214,714(4) 25,000 7,321
Sales, Marketing and 1995 43,750(3) 37,500 -- 125,000 --
Engineering Services
Katherine Sullivan Abrams...... 1997 150,000 47,250 -- 40,000 6,666
Executive Vice President, 1996 135,693 45,000 -- 46,666 3,449
Research and Development 1995 18,667(3) 8,800 22,500(5) 20,000 --
Daniel T. Nichols.............. 1997 150,000 47,250 43,846(4) 25,000 6,822
Executive Vice President, 1996 127,307(3) 45,000 54,186(4) 66,666 7,315
Human Resources and
Administration
L. Ronald Trepp................ 1997 129,907(6) -- -- -- 4,833
Vice President, Finance and 1996 86,665(3) 12,000 -- 66,666 2,766
Chief Financial Officer
</TABLE>
- ---------------
(1) In accordance with the SEC rule, other annual compensation in the form of
perquisites and other personal benefits has been omitted in those cases
where the aggregate amount of such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for the Named Executive Officer for such year.
(2) Represents premiums paid by the Company on a life insurance policy and a
health insurance policy for the benefit of the Named Executive Officer.
(3) Amounts based on annual salary of $175,000 for Charles R. Harris from July
1, 1995 through December 31, 1995, $150,000 for Dirk M. Pfeiffer from
September 15, 1995 through December 31, 1995, $110,000 for Katherine
Sullivan Abrams from November 1, 1995 through December 31, 1995, $150,000
for Daniel T. Nichols from February 26, 1996 through December 31, 1996, and
$160,000 for L. Ronald Trepp from June 18, 1996 through December 31, 1996.
(4) Represents amounts paid in connection with the reimbursement by the Company
of certain relocation expenses.
(5) Represents compensation for services rendered as a consultant to the
Company.
(6) Amounts based on an annual salary of $160,000 from January 1, 1997 through
September 30, 1997, the date L. Ronald Trepp resigned from the Company. Such
amount includes $9,907 paid for vacation earned but not taken.
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<PAGE> 29
OPTION GRANTS DURING FISCAL 1997
The following table provides information with respect to stock option
grants in fiscal 1997 to the Named Executive Officers.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
---- ------------ -------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Harris............ 75,000 6.42% $12.75 7/22/07 $601,380 $1,524,016
Dirk M. Pfeiffer............. 35,000 3.00 12.75 7/22/07 280,644 711,208
Katherine Sullivan Abrams.... 40,000 3.42 12.75 7/22/07 320,736 812,809
Daniel T. Nichols............ 25,000 2.14 12.75 7/22/07 200,460 508,005
L. Ronald Trepp(3)........... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Based on options to purchase 1,168,392 shares of Common Stock granted during
fiscal 1997.
(2) Potential realizable value is based on the assumption that the price of the
Common Stock appreciates at the annual rate shown, compounded annually, from
the date of grant until the end of the 10-year option term. The 5% and 10%
assumed annual compound rates of stock price appreciation are mandated by
SEC rules and do not represent the Company's estimate or projection of
future Common Stock prices.
(3) Mr. Trepp resigned from the Company in September 1997.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the number of
options and the aggregate value of in-the-money options held by each Named
Executive Officer at December 31, 1997.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS($)(1)
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Harris......... 75,000 902,250 43,333 298,333 $511,080 $2,954,580
Dirk M. Pfeiffer.......... 35,000 487,800 20,000 130,000 248,450 1,307,500
Katherine Sullivan 17,333 153,891 -- 89,333 -- 666,970
Abrams..................
Daniel T. Nichols......... 8,000 62,100 5,333 78,333 51,730 598,580
L. Ronald Trepp(2)........ 26,666 283,549 -- -- -- --
</TABLE>
- ---------------
(1) Calculated by determining the difference between the fair market value of
the securities on December 31, 1997 of $16.00 (as reported on the Nasdaq
National Market), less the exercise price of the option.
(2) Mr. Trepp resigned from the Company in September 1997.
SEPARATION AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into separation agreements (the "Separation
Agreements") with certain of its executive officers, including its Chief
Executive Officer. Each Separation Agreement provides for a two-year term of
employment, subject to early termination as provided therein, a base salary,
bonus, inclusion in the Company's benefit plans and reimbursement for
out-of-pocket expenses reasonably incurred. The Separation Agreements further
provide that if, prior to a Change in Control (as defined) the executive resigns
from his employment for Good Reason (as defined), or following a Change of
Control, the executive is terminated without Cause (as defined) or resigns for
Good Reason, the Company will (i) pay the executive severance
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<PAGE> 30
payments of one month's salary for a period of six months, subject to one-month
extensions for up to six months if the executive has not obtained subsequent
employment, (ii) cause the accelerated vesting of all options exercisable within
one year from the date of the resignation, (iii) continue to effect the
executive's benefits through the Severance Period, including any extensions
thereof, and (iv) pay outplacement fees of up to $10,000 for the purpose of
assisting the executive in securing re-employment. If following a Change of
Control, the executive is terminated without Cause or resigns for Good Reason,
the Company is obligated to cause the accelerated vesting of all restricted
stock, stock options and other equity-based compensation, held on the date of
termination, so that they become 100% vested. If the executive resigns without
Good Reason or is terminated by the Company for Cause (as defined therein), the
executive is entitled only to payment of all amounts earned or owed to the
executive and the vesting of equity compensation through the date of such
resignation. In connection with the Offer, effective April 15, 1998, the
Company's Board authorized an amendment to the separation agreements (i) to
extend the terms of the agreement for one year, (ii) to provide (effective upon
the purchase of Shares pursuant to the Offer) for a six-month employment period
during which the agreements will not be terminable by the Company except for
cause, and (iii) to provide that, at the end of such six-month period, each such
agreement may be terminated by the employee in his or her sole discretion and
such employee shall be entitled to severance payments under the agreement.
Generally, such severance payments are equal to six months salary. However, if
the employee has not found new employment at the end of six months, the employee
may continue to receive his or her salary for additional one month periods, not
to exceed an additional six months, until the employee has found new employment.
Such obligation to pay severance will terminate immediately if the officer
accepts employment, directly or indirectly, with a competitor of Foxboro or the
Company's business.
STOCK PLANS
1994 Stock Option Plan. The Company's executive officers and directors were
eligible to receive, and did receive, stock option grants under the Company's
1994 Stock Option Plan (the "1994 Plan") prior to the Company's initial public
offering in October 1996. The 1994 Plan was approved by the Board of Directors
in March 1994 and by the stockholders in May 1994. A total of 1,666,667 shares
of Common Stock were reserved for issuance pursuant to the 1994 Plan. Unless
terminated sooner, the 1994 Plan will terminate automatically in March 2004. The
1994 Plan may be administered by the Board of Directors or a committee of the
Board (the "Committee"). The Committee has the power to determine the terms of
the options granted, including exercise price, the number of shares subject to
each option and the exercisability thereof, and the form of consideration
payable upon exercise. In addition, the Board has the authority to amend,
suspend or terminate the 1994 Plan, provided that no such action may affect any
share of Common Stock previously issued and sold or any option previously
granted under the 1994 Plan. Options granted under the 1994 Plan must be
exercised within thirty days of the end of optionee's status as an employee or
consultant of the Company, within six months of such optionee's termination by
death or disability and within ninety days of such optionee's termination by
retirement. In no event may an option granted under the 1994 Plan be exercised
later than the expiration of the option's ten-year term. The exercise price of
options granted under the 1994 Plan is determined by the Committee, but may not
be less than 85% of the fair market value of the common Stock on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting power of all classes of the Company's outstanding capital stock,
the exercise price of any option granted must equal at least 110% of the fair
market value on the date of grant. The term of options granted under the 1994
Plan may not exceed ten years. The 1994 Plan provides that in the event of a
merger of the Company with or into another corporation, a sale of substantially
all of the Company's assets or a like transaction involving the Company, each
optionee shall have the right to exercise his or her option to the extent that
it has vested as of the date of such transaction. In addition, if the successor
corporation does not assume or substitute for the options granted under the 1994
Plan, each optionee shall have the right to exercise prior to such transaction
50% of the unvested portion of his or her option. In connection with the Merger
Agreement, the 1994 Plan was amended, contingent upon the purchase of the Shares
pursuant to the Offer, to provide that all outstanding options under the 1994
Plan will accelerate and become exercisable following the purchase of the Shares
pursuant to the Offer.
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<PAGE> 31
1996 Stock Plan. The Company's executive officers and directors are
eligible to receive stock option grants under the Company's 1996 Stock Plan (the
"1996 Plan"), which provides for the granting to employees of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Internal Revenue Code"), and for the granting to employees and
consultants of nonstatutory stock options and stock purchase rights ("SPRs").
The 1996 Plan was approved by the Board of Directors in May 1996 and by the
stockholders in October 1996. The 1996 Plan was subsequently amended by the
Board in October 1997. Unless terminated sooner, the 1996 Plan will terminate
automatically in May 2006. A total of 2,000,000 shares of Common Stock are
currently reserved for issuance pursuant to the 1996 Plan.
The 1996 Plan may be administered by the Board of Directors or a committee
of the Board (the "Committee"), which Committee shall, in the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, consist of two or more "outside directors" within
the meaning of Section 162(m) of the Code. The Committee has the power to
determine the terms of the options or SPRs granted, including the exercise
price, the number of shares subject to each optionor SPR, the exercisability
thereof, and the form of consideration payable upon such exercise. In addition,
the Committee has the authority to amend, suspend or terminate the 1996 Plan,
provided that no such action may affect any share of Common Stock previously
issued and sold or any option previously granted under the 1996 Plan. Options
and SPRs granted under the 1996 Plan are not generally transferable by the
optionee, and each option and SPR is exercisable during the lifetime of the
optionee only by such optionee. Options granted under the 1996 Plan must
generally be exercised within three months of the end of optionee's status as an
employee or consultant of the Company, or within twelve months after such
optionee's termination by death or disability, but in no event later than the
expiration of the option's ten-year term. In the case of SPRs, unless the
Committee determines otherwise, the Restricted Stock Purchase Agreement shall
grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Committee. The exercise price of all incentive stock
options granted under the 1996 Plan must be at least equal to the fair market
value of the Common Stock on the date of grant. The exercise price of
nonstatutory stock options and SPRs granted under the 1996 Plan is determined by
the Committee, but with respect to nonstatutory stock options intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the exercise price must at least be equal to the fair market value
of the Common Stock on the date of grant. With respect to any participant who
owns stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital stock, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant
date and the term of such incentive stock option must not exceed five years. The
term of all other options granted under the 1996 Plan may not exceed ten years.
The 1996 Plan provides that in the event of a merger of the Company with or into
another corporation, a sale of substantially all of the Company's assets or a
like transaction involving the Company, each option shall be assumed or an
equivalent option substituted by the successor corporation. If the outstanding
options are not assumed or substituted for as described in the preceding
sentence, the Committee shall provide for the Optionee to have the right to
exercise the option or SPR as to all of the optioned stock, including shares as
to which it would not otherwise be exercisable. If the plan administrator makes
an option or SPR exercisable in full in the event of a merger or sale of assets,
the plan administrator shall notify the optionee that the option or SPR shall be
fully exercisable for a period of fifteen (15) days from the date of such
notice, and the option or SPR will terminate upon expiration of such period. In
connection with the Merger Agreement, the 1996 Plan was amended, contingent upon
the purchase of the Shares pursuant to the Offer, to provide that all
outstanding options under the 1996 Plan will accelerate and become exercisable
immediately following the purchase of the Shares pursuant to the Offer.
1996 Employee Stock Purchase Plan. The Company has adopted employee stock
purchase plans for U.S. and non-U.S. employees, including the Company's
executive officers. Each plan provides for the grant of 200,000 shares of Common
Stock, less the number of shares granted under the other plan, so that the total
number of shares of Common Stock subject to both plans is 200,000 shares. The
Company's 1996 Employee Stock Purchase Plan for U.S. Employees (the "U.S.
Purchase Plan") was adopted by the Board of Directors
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<PAGE> 32
in May 1996 and approved by the Stockholders in October 1996. The Company's 1996
Employee Stock Purchase Plan for Non-U.S. Employees (the "Foreign Purchase
Plan") was adopted by the Board of Directors in May 1996. Stockholder approval
for the Foreign Purchase Plan is not required.
The U.S. Purchase Plan, which is intended to qualify under Section 423 of
the Code, has two six-month offering periods each year beginning on the first
trading day on or after January 1 and July 1, respectively, except for the first
such offering period which commences on the first trading day on or after the
effective date of this Offering and ends on the last trading day on or before
June 30, 1997. The U.S. Purchase Plan is administered by the Board of Directors
or by a committee appointed by the Board. Employees are eligible to participate
if they are customarily employed by the Company or any participating subsidiary
for at least 20 hours per week and more than five months in any calendar year.
The U.S. Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions of up to 10% of an employee's compensation (including
commissions and overtime, but excluding other bonuses and incentive
compensation), up to a maximum of $25,000 for all offering periods ending within
the same calendar year. The price of stock purchased under the U.S. Purchase
Plan is 85% of the lower of the fair market value of the Common Stock at the
beginning or at the end of each offering period. Employees may end their
participation at any time during an offering period, and they will be repaid
their payroll deductions to date. Participation ends automatically upon
termination of employment with the Company.
Rights granted under the U.S. Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the U.S. Purchase Plan. The U.S. Purchase Plan provides
that, in the event of a merger of the Company with or into another corporation
or a sale of substantially all of the Company's assets, the Board of Directors
shall shorten the offering period then in progress (so that employees' rights to
purchase stock under the Plan are exercised prior to the merger or sale of
assets). The U.S. Purchase Plan will terminate in May 2006. The Board of
Directors has the authority to amend or terminate the U.S. Purchase Plan, except
that no such action may adversely affect any outstanding rights to purchase
stock under the U.S. Purchase Plan. The Foreign Purchase Plan is not intended to
qualify under Section 423 of the Code but contains terms substantially similar
to those of the U.S. Purchase Plan. In connection with the Merger Agreement, the
Company agreed to set a new "Exercise Date" under its Employee Stock Purchase
Plans so that (a) any Shares to be purchased under the Employee Stock Purchase
Plans will be purchased on an "Exercise Date" that is a date no later than the
last trading day immediately prior to the consummation of the Offer, and (b)
immediately following such purchase, each of the Employee Stock Purchase Plans
will terminate.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's charter limits the monetary liability of its directors to the
Company or its stockholders for breach of such director's fiduciary duty to the
fullest extent permitted by the Delaware General Corporation Law (the "DGCL")
or, if the DGCL is not applicable, to the fullest extent permissible under
applicable law. However, the Company's charter does not limit directors'
monetary liability under the federal securities laws. The DGCL does not permit
such a limitation on the personal liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under section 174 of the DGCL; or (iv) for any
transaction from which the director derived an improper personal benefit. Under
the Company's bylaws, each person who was or is a party or is threatened to be
made a party to, or is involved in, any proceeding by reason of the fact that he
or she is or was a director or officer of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation or other enterprise, shall be indemnified and held harmless by the
Company to the fullest extent permitted by the DGCL against all costs, charges,
expenses, liabilities and losses (including attorneys' fees) reasonably incurred
or suffered by such person in connection with such proceeding. Such right to
indemnification includes the right to be paid by the Company the expenses
incurred in defending any such proceeding in advance of its final disposition.
The Board of Directors has discretion to provide indemnification to employees
and agents of the Company with the same scope and effect as the foregoing
indemnification of directors and officers. The foregoing right to
indemnification and advancement of expenses under the Company's bylaws is not
exclusive of any other right which any person
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<PAGE> 33
may have or acquire under the Company's charter, any statute, agreement or
otherwise. In addition, the Company's charter authorizes the Company by bylaw,
agreement or otherwise to indemnify directors, officers, employees and agents in
excess of the indemnification permitted by applicable law.
In addition, the Company has entered into indemnification agreements with
each of its directors and executive officers and has obtained a directors' and
officers' liability insurance policy that insures such persons against the cost
of defense, settlement or payment of judgments under certain circumstances. As
of the date of this Proxy Statement, there is no pending litigation or
proceeding involving a director or officer of the Company as to which
indemnification is being sought, nor is the Company aware of any pending or
threatened litigation that may result in claims for indemnification by any
director or officer.
DIRECTOR COMPENSATION
Other than Dr. Gupta, members of the Company's Board of Directors do not
receive compensation for their service as directors. Dr. Gupta receives $500 for
each Board or committee meeting he attends. In addition, Dr. Gupta is reimbursed
for his out-of-pocket expenses incurred in attending Board and committee
meetings. Directors have in the past been granted stock options under the
Company's 1994 Stock Option Plan.
In addition, non-employee directors are entitled to participate in the 1996
Director Option Plan (the "Director Plan"). The Director Plan provides for the
automatic grant of an option for 20,000 shares of Common Stock (the "First
Option") to each non-employee director on the earlier of: (i) the effective date
of the Director Plan, or (ii) the date on which the person first becomes a
non-employee director, unless immediately prior to becoming a non-employee
director, such person was a director of the Company. After the First Option is
granted to the non-employee director, he or she shall automatically be granted
an option to purchase 5,000 shares (a "Subsequent Option") each year on the date
of the annual stockholders' meeting of the Company at which such non-employee
director is re-elected as a director, if on such date he or she shall have
served on the Board for at least six months. Each first Option and each
Subsequent Option shall have a term of 10 years and the shares subject to the
option shall vest and become exercisable at a rate of 25% on the first
anniversary date of grant and at a rate of 1/48th of the shares per month
thereafter. The exercise prices of the First Option and each Subsequent Option
shall be 100% of the fair market value per share of the Common Stock, generally
determined with reference to the closing price of the Common Stock as reported
on the Nasdaq National Market on the date of grant. In connection with the
Merger Agreement, the Director Plan was amended, contingent upon the purchase of
the Shares pursuant to the Offer, to provide that all outstanding options under
the Director Plan will accelerate and become exercisable immediately following
the purchase of the Shares pursuant to the Offer.
CERTAIN TRANSACTIONS
In September 1992, the Company entered into a lease agreement with respect
to its Brea, CA headquarters with Brea Partners, a limited partnership in which
the Company has a 10% limited partnership interest and BVW Investments has a
34.6% limited partnership interest. BVW Investments is a general partnership
among the Company's founders, N. Fred Brannock, Vincent S. Verneuil, Jr. and Dr.
Yui L. Wang. Mr. Brannock and Dr. Wang are former directors of the Company. The
Company believes that the lease agreement is on terms no less favorable to the
Company than could be obtained from an independent third party. In October 1997,
Brea Partners sold the Brea, CA building to a third party.
In February 1997, Summit Ventures III, L.P. and Summit Investors II, L.P.
(the "Summit Entities") exercised warrants for the purchase of an aggregate of
350,879 shares of the Company's Common Stock pursuant to a net exercise
provision contained in such warrant agreements, as amended. Mr. Kortschak, a
director of the Company, is an employee and general partner of Summit Partners
L.P. which, together with its affiliates, manage a number of venture capital
funds, including the Summit Entities. Upon the net exercise of such warrants,
the Company issued an aggregate of 284,434 shares of Common Stock to the Summit
Entities.
A-11
<PAGE> 34
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of the Record Date as to (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and each nominee for
director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table in "Executive Compensation and Other Matters" below
and (iv) all directors and executive officers as a group. Except as otherwise
indicated, the address of each of the persons in this table is as follows: c/o
Simulation Sciences Inc., 601 Valencia Ave., Suite 100, Brea, CA 92823.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
PERCENTAGE
5% STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS NUMBER OWNERSHIP
------------------------------------------------- --------- ----------
<S> <C> <C>
Putnam Investments, Inc.(2)
One Post Office Square
Boston, MA 02109.......................................... 1,714,467 12.1%
Massachusetts Financial Services Co.(3)
500 Boylston Street, 15th Floor
Boston, MA 02116.......................................... 1,677,900 11.9%
INVESCO PLC(4)
1315 Peachtree Street NE
Atlanta, GA 30309......................................... 946,620 6.7%
George D. Bjurman & Associates
10100 Santa Monica Boulevard, Suite 1200
Los Angeles, CA 90067..................................... 725,990 5.1%
401(k) Plan(5).............................................. 994,013 7.0%
Charles R. Harris(6)........................................ 62,537 *
Dirk M. Pfeiffer(7)......................................... 25,000 *
Katherine Sullivan Abrams(8)................................ 9,333 *
Daniel T. Nichols(9)........................................ 20,096 *
Dr. Narendra K. Gupta(10)................................... 28,885 *
Walter G. Kortschak(11)..................................... 12,101 *
All Directors & Executive Officers as a group (7
persons)(12).............................................. 157,952 1.1%
</TABLE>
- ---------------
* Less than one percent of the outstanding Common Stock.
(1) Applicable percentage of ownership is based on 14,143,609 shares of the
Company's Common Stock outstanding as of the Record Date, together with any
applicable stock options held by such stockholder. Beneficial ownership is
determined in accordance with the rules of the Commission, and includes
voting and dispositive power with respect to shares. Shares of Common Stock
subject to options exercisable within 60 days of the Record Date are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
for any other person. Unless otherwise indicated, the persons named in the
table have sole voting and dispositive power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2) Certain entities affiliated with Putnam Investments, Inc. ("Putnam") claim
beneficial ownership of an aggregate of 1,714,467 shares. Putnam claims (i)
shared voting power with respect to 277,800 of the 1,714,467 shares, (ii)
shared dispositive power with respect to the 1,714,467 shares and (iii) no
sole voting or dispositive power with respect to the 1,714,467 shares.
Information provided herein is based upon certain information contained in
a Schedule 13G filed by Putnam and certain affiliated entities with the SEC
in March 1998.
(3) Massachusetts Financial Services Co. ("MFS") claims (i) sole voting power
as to 1,633,000 of the 1,677,900 shares, (ii) sole dispositive power as to
the 1,677,900 shares and (iii) no shared voting or dispositive power with
respect to the 1,677,900 shares. Information provided herein is based upon
certain information contained in a Schedule 13G filed by MFS with the
Commission in March 1998.
A-12
<PAGE> 35
(4) Certain entities affiliated with INVESCO PLC (collectively the "INVESCO
Entities") claim beneficial ownership of an aggregate of 946,620 shares.
The INVESCO Entities claim (i) shared voting and dispositive power with
respect to the 946,620 shares and (ii) no sole voting or dispositive power
with respect to such shares. Information provided herein is based upon
certain information contained in a Schedule 13G filed by INVESCO PLC and
the INVESCO Entities with the SEC in February 1998.
(5) Represents shares of Common Stock held of record by the Company's 401(k)
Plan which are beneficially owned by employees and former employees of the
Company.
(6) Includes 61,666 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date.
(7) Represents 25,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date.
(8) Represents 9,333 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date.
(9) Includes 18,666 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date.
(10) Includes 28,541 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date.
(11) Represents 12,101 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date.
(12) Includes 155,307 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of the Record Date. See footnotes 6
through 11.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership on Form 3 and changes in ownership on Form 4 and
Form 5 with the Commission and the National Association of Securities Dealers,
Inc. Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely in its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that, during fiscal 1997, all filing requirements applicable to
its executive officers and directors were complied with.
A-13
<PAGE> 36
ANNEX B
April 15, 1998
CONFIDENTIAL
The Board of Directors
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, CA 92823
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of Simulation Sciences Inc., a Delaware corporation
(the "Company"), of the cash consideration to be received by the stockholders
pursuant to the terms of the proposed Agreement and Plan of Merger (the
"Agreement") dated as of April 15, 1997 by and among Siebe plc, a United Kingdom
public limited company (the "Parent"), S Acquisition Corp., a Delaware
corporation and an indirect wholly-owned subsidiary of Parent (the "Purchaser"),
S Sub Corp., a Delaware corporation and a wholly-owned subsidiary of the
Purchaser (the "Merger Sub"), and the Company.
We understand that the terms of the Agreement provide, among other things,
that (i) the Purchaser shall, not later than one business day after execution of
the Agreement, publicly announce the transactions contemplated hereby, and not
later than five business days after execution of the Agreement, commence an
offer (the "Offer") to purchase all shares of common stock at a price of $10.00
per share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Agreement and certain ancillary documents to be
filed with the Securities and Exchange Commission; and (ii) the Merger Sub will
subsequently be merged (the "Merger") with and into the Company in a transaction
which will provide all remaining holders of shares of Common Stock (other than
the Company, Parent, the Purchaser, the Merger Sub or their respective
subsidiaries, and the holders who have perfected their appraisal rights, if any,
under Delaware law) with $10.00 per share in cash. The Offer and the Merger
constitute the "Proposed Transaction."
Dain Rauscher Wessels, a Division of Dain Rauscher Incorporated ("Dain
Rauscher Wessels"), as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. We have acted as financial
advisor to the Board of Directors of the Company in connection with the proposed
transaction, and will receive a fee for our services, including the rendering of
this opinion. In the past, we have provided investment banking and other
financial advisory services to the Company and have received fees for rendering
those services. In the ordinary course of business, Dain Rauscher Wessels acts
as a market maker and broker in the publicly traded securities of the Company
and receives customary compensation in connection therewith, and also provides
research coverage for the Company. In addition, Dain Rauscher Wessels actively
trades in the publicly traded securities of the Company for its own account and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have: (i) reviewed and analyzed the financial terms of the
Agreement and the related Stock Option Agreement; (ii) reviewed and analyzed
certain publicly available financial and other data with respect to the Company
and Parent and certain other relevant historical and operating data relating to
the Company made available to us from published sources and from the internal
records of the Company; (iii) reviewed and analyzed certain internal financial
statements and other financial and operating data concerning the Company
prepared by the management of the Company; (iv) reviewed and analyzed certain
financial projections concerning the Company prepared by the management of the
Company; (v) conducted discussions with members of the senior management of the
Company with respect to the business and prospects of the Company relative to
published industry analyst estimates; (vi) reviewed the reported prices and
trading activity for the Company's
B-1
<PAGE> 37
Common Stock; (vii) compared the financial performance of the Company and the
prices of the Company's Common Stock with that of certain other comparable
publicly-traded companies and their securities; and (viii) reviewed the
financial terms, to the extent publicly available, of certain comparable
transactions. In addition, we have conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as we have deemed necessary in arriving at our opinion.
With respect to the Company's financial forecasts, we have assumed that
such forecasts have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company. In addition, in the course
of our discussions with the Company management, we reviewed the most recently
published analyst earnings estimates for the Company with respect to the first
quarter and entire year of fiscal 1998, and discussed the significant difference
between the expected earnings and the actual performance of the Company. In
addition, we reviewed publicly available information regarding the size and
forecasted growth rates for the markets served by the Company's products, and
discussed with Company management various trends affecting or expected to affect
the Company's future operating results and financial condition.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial, legal, tax, operating and other information
provided to us by the Company and the Parent (including, without limitation, the
financial statements and related notes thereto of the Company), and have not
independently verified such information. We have not performed an independent
evaluation or appraisal of any of the assets or liabilities of the Company or
the Parent and we have not been furnished with any such valuations or
appraisals.
It is understood that this letter is for the information of the Board of
Directors of the Company, and this letter shall not be published or otherwise
used and no public references to Dain Rauscher Wessels shall be made without our
prior written consent, which consent shall not be unreasonably withheld;
provided, however, that this letter may be included in its entirety in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9. Further, our
opinion speaks only as of the date hereof, is based on the conditions as they
exist and information which we have been supplied as of the date hereof, and is
without regard to any market, economic, financial, legal or other circumstance
or event of any kind or nature which may exist or occur after such date.
Based on our experience as investment bankers and subject to the foregoing,
including the various assumptions and limitations set forth herein, it is our
opinion that, as of the date hereof, the cash consideration to be received by
the holders of the Company's Common in the Proposed Transaction is fair, from a
financial point of view, to the holders of the Company's Common Stock.
Very truly yours,
Dain Rauscher Wessels
A Division of Dain Rauscher Incorporated
By: /s/ JOHN M. BREW
--------------------------------------------------------
John M. Brew
Managing Director
B-2
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
99.1 Form of Mutual Nondisclosure Agreement between Simulation
Sciences Inc. and Siebe plc dated April 7, 1998.
99.2 Press releases issued by the Company and Siebe plc on April
15, 1998.
99.3 Letter of Transmittal.*
99.4 Letter to Stockholders dated April 21, 1998 from Charles R.
Harris, President and Chief Executive the Company.*
99.5 (1) Opinion of Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, dated April 15, 1998.*
99.6 Offer to Purchase dated April 21, 1997.*
99.7 Agreement and Plan of Merger dated as of April 15, 1998,
among the Company, Siebe plc, S Acquisition Corp. and S Sub
Corp.
99.8 Stock Option Agreement dated as of April 15, 1998 between
the Company and Siebe plc.
99.9 (2) Certificate of Incorporation of the Company, as amended to
date.
99.10 (3) Certificate of Designations of Rights, Preferences and
Privileges of Series A Participating Preferred Stock.
99.11 (4) The Bylaws of the Company.
99.12 (5) Form of Indemnification Agreement.
99.13 (6) Form of Separation Agreement.
99.14 (7) 1994 Stock Option Plan and related agreements.
99.15 (8) 1996 Stock Plan and related agreements.
99.16 (9) Employee Stock Purchase Plan for U.S. Employees and related
agreements.
99.17 (10) Employee Stock Purchase Plan for Non-U.S. Employees and
related agreements.
99.18 (11) Director Option Plan and related agreements.
99.19 (12) The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Incorporated by reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(3) Incorporated by reference to the Company's Registration Statement on Form
8-A filed on August 14, 1997 (File No. 000-21283), as amended by Form 8-A/A
filed on April 21, 1998.
(4) Incorporated by reference to Exhibit 3.4 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(5) Incorporated by reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(6) Incorporated by reference to Exhibit 10.15 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(7) Incorporated by reference to Exhibit 10.3 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(8) Incorporated by reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-8 (Registration No. 333-42697), as amended.
(9) Incorporated by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
<PAGE> 39
(10) Incorporated by reference to Exhibit 10.6 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended.
(11) Incorporated by reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-1 (Registration No. 333-11017), as amended
(12) Attached hereto as Annex A.
<PAGE> 1
EXHIBIT 99.1
MUTUAL NONDISCLOSURE AGREEMENT
In connection with consideration of a possible negotiated transaction
between Simulation Sciences Inc. (the "Company") and Siebe plc ("Siebe"), the
Company and Siebe expect to make available to one another certain non-public
information concerning their respective businesses, subsidiaries, financial
condition, operations, assets and liabilities. As a condition to such
information being furnished to each party and its directors, officers,
employees, agents or advisors (including, without limitation, attorneys,
accountants, consultants, bankers and financial advisors) (collectively,
"Representatives"), each party agrees to treat any non-public information
concerning the other party (whether prepared by the disclosing party, its
Representatives or otherwise and irrespective of the form of communication)
which is furnished hereunder to a party or to its Representatives (the
"Recipient") now or in the future by or on behalf of the disclosing party
(herein collectively referred to as the "Evaluation Material") in accordance
with the provisions of this Mutual Nondisclosure Agreement ("Agreement"), and to
take or abstain from taking certain other actions hereinafter set forth.
1. Evaluation Material. The term "Evaluation Material" also means all
information that is furnished to a Recipient or its Representatives by a party
or its Representatives (the "Discloser") that concerns the Discloser, its
affiliates or subsidiaries, and which is either confidential, proprietary or
otherwise not generally available to the public. The term "Evaluation Material"
also shall be deemed to include all notes, analyses, compilations, studies,
interpretations or other documents prepared by each party or its Representatives
which contain, reflect or are based upon, in whole or in part, the information
furnished to such party or its Representatives pursuant hereto which is not
available to the general public. The term "Evaluation Material" does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by the receiving party or its Representatives, (ii)
was within the receiving party's knowledge or possession prior to its being
furnished to the receiving party by or on behalf of the disclosing party
pursuant hereto, provided that the source of such information was not known by
the receiving party to be in breach of an applicable confidentiality agreement
with or other contractual, legal or fiduciary obligation of confidentiality to
the disclosing party or any other party with respect to such information, (iii)
becomes available to the receiving party on a non-confidential basis from a
source other than the disclosing party or any of its Representatives, provided
that such source is not known by the receiving party to be in breach of an
applicable confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the disclosing party or any other
party with respect to such information, or (iv) is independently invented,
conceived or discovered by the receiving party or its employees or agents
without access to the Evaluation Materials.
2. Purpose of Disclosure of Evaluation Material. It is understood and agreed by
each party that any exchange of information under this Agreement shall be solely
for the purpose of evaluating a potential transaction between the parties and
that such information exchange is not to affect, in any way, either party's
relative competitive position regarding the other party or other entities. It is
further agreed that the information to be disclosed by each party shall only be
that information which is reasonably necessary to evaluate a proposed
transaction and that information which is not reasonably necessary for such
purposes shall not be disclosed or exchanged. In addition, competitively
sensitive information such as information concerning product development or
marketing plans, product prices or pricing plans, cost data, customers or
similar information which has been determined to be reasonably necessary to a
potential transaction, shall be limited only to each party's "Control Group."
For purposes of this Agreement, a party's "Control Group" means only those
senior executives and Representatives who are involved in evaluating or
negotiating a potential transaction or approving the value of a potential
transaction and who have a need to know such competitively sensitive information
for purposes of such evaluation, negotiation or approval.
<PAGE> 2
3. Use of Evaluation Material. Each party hereby agrees that it and its
Representatives shall use the other's Evaluation Material solely for the purpose
of evaluating a possible transaction between the parties, and that the
Discloser's Evaluation Material will be kept confidential; provided, however,
that (i) the Recipient may make any disclosure of such information as to which
the Discloser gives its prior written consent and (ii) any of such information
may be disclosed to the Recipient's Representatives who (x) need to know such
information for the sole purpose of evaluating a possible transaction between
the parties and who (y) agree to keep such information confidential. The
Recipient will not disclose the Evaluation Material to any person other than as
permitted hereby and will use its best efforts to safeguard the Evaluation
Material from unauthorized disclosure. Nothing in this Agreement shall obligate
either party, however, to use any greater care in the protection of the
Evaluation Material against disclosure than the care it uses generally with
respect to information relating to it which is similar in type to the Evaluation
Material. The term "person" as used in this Agreement shall be broadly
interpreted to include without limitation any corporation, company, partnership
or individual.
4. Nondisclosure. In addition, each party agrees that, without the prior written
consent of the other party, neither it nor its Representatives will disclose to
any other person the fact that any Evaluation Material has been made available
hereunder, that discussions or negotiations are taking place concerning a
possible transaction involving the parties or any of the terms, conditions or
other facts with respect thereto (including the status thereof); provided, that
a party may make such disclosure pursuant to the procedures set forth herein if,
in the written opinion of a party's outside counsel, such disclosure is
necessary to avoid committing a violation of law. In such event, the disclosing
party shall use its best efforts to give advance notice to the other party.
5. Required Disclosure. In the event that a party or its Representatives are
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) to disclose any of the other party's Evaluation
Material, the party requested or required to make the disclosure shall provide
the other party with prompt written notice of any such request or requirement so
that the other party may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by such other party,
the party requested or required to make the disclosure or any of its
Representatives are nonetheless legally compelled to disclose the other party's
Evaluation Material to any tribunal or else stand liable for contempt or suffer
other significant censure or penalty, the party requested or required to make
the disclosure or its Representative may, without liability hereunder, disclose
to such tribunal only that portion of the other party's Evaluation Material that
is legally required to be disclosed, provided that the party requested or
required to make the disclosure exercises its best efforts to preserve the
confidentiality of the other party's Evaluation Material, including, without
limitation, by cooperating with the other party to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the other party's Evaluation Material by such tribunal.
6. Termination of Discussions. If either party decides that it does not wish to
proceed with a transaction with the other party, the party so deciding will
promptly inform the other party by way of a notice of that decision. The written
Evaluation Material, except for that portion of the Evaluation Material that may
be found in analyses, compilations, studies or other documents prepared by or
for the Recipient, will be returned to the Discloser immediately upon the
Discloser's request, and no copies shall be retained by the Recipient or its
Representatives. Recipient shall certify
-2-
<PAGE> 3
in writing within five (5) business days that all such Evaluation Material has
been returned and that the other provisions of this material Nondisclosure
Agreement have been complied with by it. For the purposes of this Agreement,
"written" Evaluation Material shall include, without limitation, information
contained in printed, magnetic or other tangible media, or in information
storage and retrieval systems. That portion of the Evaluation Material that may
be found in analyses, compilations, studies or other documents prepared by or
for a Recipient, oral Evaluation Material and written Evaluation Material not so
requested or returned will be held by the Recipient and kept subject to the
terms of this Agreement, or destroyed. Notwithstanding the return or destruction
of the Evaluation Material, each party and its Representatives will continue to
be bound by its obligations of confidentiality and other obligations hereunder.
7. No Representation of Accuracy. Each party understands and acknowledges that
although the agreements and covenants of the parties contained herein shall be
binding, neither party nor any of its Representatives makes any representation
or warranty, express or implied, as to the accuracy or completeness of the
Evaluation Material made available to it. Only those representations or
warranties that are made in a final definitive agreement regarding any
transaction contemplated hereby, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect. Each party agrees that, except as contemplated by the preceding
sentence, neither party nor any of its Representatives shall have any liability
to the other party or to any of its Representatives relating to or resulting
from the use by the other of the providing party's Evaluation Material or any
errors therein or omissions therefrom.
8. Definitive Agreements. Each party understands and agrees that no contract or
agreement providing for any transaction involving the parties shall be deemed to
exist between the parties unless and until a final definitive agreement has been
executed and delivered. Each party also agrees that unless and until a final
definitive agreement regarding a transaction between the parties has been
executed and delivered, neither party will be under any legal obligation of any
kind whatsoever with respect to completing or negotiating such a transaction by
virtue of this Agreement or any written or oral expression with respect to such
a transaction by any of its respective directors, officers, employees, agents or
any other Representatives except, in the case of this Agreement, for the matters
specifically agreed to herein. Both parties further acknowledge and agree that
each party reserves the right, in its sole discretion, to provide or not provide
Evaluation Material to the receiving party under this Agreement, to reject any
and all proposals made by the other party or any of its Representatives with
regard to a transaction between the parties, and to terminate discussions and
negotiations at any time.
9. Ownership of Evaluation Material. All information, and any Derivatives (as
defined below) thereof whether created by Discloser or Recipient, remains the
property of Discloser and no license or other rights to information is granted
or implied hereby. For purposes of this Agreement, "Derivatives" shall mean: (i)
for copyrightable or copyrighted material, any translation, abridgment, revision
or other form in which an existing work may be recast, transformed or adapted;
(ii) for patentable or patented material, any improvement thereon and (iii) for
material which is protected by trade secret, any new material derived from such
existing trade secret material, including new material which may be protected by
copyright, patent or trade secret. For the purposes of this Section 9,
"information" is deemed to include all information furnished by either party to
the other, whether or not Evaluation Material.
-3-
<PAGE> 4
10. Independent Development. Each party understands that the other party may
currently or in the future be developing information internally or receiving
information from other parties that may be similar to that received from a
Discloser. Accordingly, nothing in this Agreement will be construed as a
representation, inference or agreement that either party will not develop
products, or have products developed for it, that, without violation of this
Agreement, compete with the products or systems contemplated by the other's
Evaluation Material.
11. No License. Nothing in this Agreement is intended to grant any rights to
either party under any patent, mask work right or copyright of the other party,
nor shall this Agreement grant any party any rights in or to the Evaluation
Material of the other party except as expressly set forth herein.
12 Waiver. It is understood and agreed that no failure or delay by either party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
13. Standstill. Beginning on the date of this letter and continuing for a period
of 12 months after the date of a notice of termination under Section 6 above,
each party and its affiliates will not (and each party and its affiliates will
not assist or encourage others to), directly or indirectly, unless specifically
requested to do so in writing in advance by the other party's Board of
Directors:
(a) acquire or agree, offer, seek or propose to acquire, or cause
to be acquired, ownership (including, but not limited to, beneficial ownership
as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of any of the other party's assets (other than in the
ordinary course of business) or businesses or any voting securities issued by
the other party, or any rights or options to acquire such ownership, including
from a third party; or
(b) make, or in any way participate, in any solicitation of
proxies or consents with respect to any securities of the other party which are,
or may be, entitled to vote in the election of the other party's directors
("Voting Securities"), become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to
the other party; or seek to advise, encourage or influence any person or entity
with respect to the voting of any Voting Securities; or demand a copy of the
other party's stock ledger, list of its stockholders or other books and records;
or call or attempt to call any meeting of the stockholders of the other party;
or
(c) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the matters described
in (a) or (b) above; provided, however, that the restrictions contained in this
Section 13 shall not apply if (i) another person or entity (including the
Company) shall have commenced a tender or exchange offer for 50% or more of the
Company's securities or (ii) another person or entity or the Company has made
public disclosure of a transaction to acquire 50% or more of the securities of
the Company.
14 No Market Disclosures. Each party understands and agrees that information
"leaks" or rumors of a potential transaction between the parties would be
disruptive to stock market transactions, customer relationships and potential
customer transactions. Accordingly, each party specifically agrees to take all
commercially reasonable actions to prevent any such disclosure (including by
specifically notifying its directors, officers, employees and Representatives
that have knowledge of
-4-
<PAGE> 5
this transaction of the requirements of this paragraph), to notify the other
party immediately of any such "leak" or rumor of which it becomes aware, to
assist in tracing the source of any such "leak" or rumor and providing that
information to the other party, and to being held legally responsible, at law,
in equity, in arbitration or otherwise, for any breach of the provisions of this
Agreement.
15 No Solicitation. From and after the date of this Agreement until its
termination under Section 6 hereof, neither party nor any of their respective
Representatives shall (i) solicit, encourage or take any other action which is
intended to induce any employee of the other party to terminate its employment
with such other party, or (ii) interfere in any manner with any contractual or
employment relationship between such other party and its employees; provided,
however, that nothing in this paragraph shall preclude either party from hiring
or offering employment to any employee of the other as a consequence of such
employee's unsolicited response to a general public advertisement of employment
or such employee being identified as a candidate as part of a non-directed
executive search.
16. Injunctive Relief. It is further understood and agreed that money damages
would not be a sufficient remedy for any breach of this Agreement by either
party or any of its Representatives and that the non-breaching party shall be
entitled to equitable relief, including injunction and specific performance, as
a remedy for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach of this Agreement but shall be in addition to
all other remedies, if any, available at law or equity. In the event of
litigation relating to this Agreement, if a court of competent jurisdiction
determines that either party or any of its Representatives have breached this
Agreement, then the breaching party shall be liable and pay to the non-breaching
party the reasonable legal fees incurred in connection with such litigation,
including any appeal therefrom.
17. Successors and Assigns. This Agreement shall bind and inure to the benefit
of the parties hereto and their successors and assigns.
18. Jurisdiction and Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to the conflicts of laws doctrine thereof.
19. Miscellaneous. Each party agrees to be responsible for any breach of this
agreement by any of its Representatives. No failure or delay by either party or
any of its Representatives in exercising any right, power or privileges under
this Agreement shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege hereunder. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of the agreement shall not in any way be affected or
impaired thereby.
20. Counterparts. This Agreement may be executed in counterparts, each of which
shall be enforceable as against the party actually signing, and all of which
together shall constitute one agreement.
-5-
<PAGE> 6
In witness of the foregoing agreements, the undersigned parties have
entered into this Agreement as of April 7, 1998.
SIMULATION SCIENCES INC. SIEBE PLC
By: /s/ Charles R. Harris By: /s/ George Sarney
------------------------- ----------------------------
Title: President and Title: President and
Chief Executive Officer Chief Operation Officer
----------------------- --------------------------
-6-
<PAGE> 1
EXHIBIT 99.2
CONTACT: Robert E. Grice, Jr. Fiona Ross
Chief Financial Officer Financial Relations Board
(714) 579-0412 (310) 442-0599
FOR IMMEDIATE RELEASE
SIMULATION SCIENCES INC.
ANNOUNCES AGREEMENT TO BE ACQUIRED BY SIEBE PLC
AND EXPECTED FIRST QUARTER 1998 RESULTS
Brea, California, April 15, 1998--Simulation Sciences Inc. (Nasdaq:
SMCI), a worldwide supplier of software and services to the process industries,
today announced a definitive agreement to be acquired for $10 per share in cash
by Siebe plc, one of the United Kingdom's largest diversified engineering groups
with fiscal 1997 annual revenue of approximately $4.9 billion. The agreement has
been unanimously approved by the Company's Board of Directors. Under the
agreement, Siebe will commence a cash tender offer within 5 business days for
all of the Company's outstanding shares. The tender offer is subject to
customary conditions, including that at least a majority of the outstanding
fully diluted shares are validly tendered and not withdrawn. The agreement is
also subject to regulatory approval. If the tender offer is successful, it will
be followed as promptly as possible by a merger in which any remaining shares of
SimSci's stock will be converted into the right to receive US$10.00 per share in
cash.
Charles R. Harris, President and Chief Executive Officer of Simulation
Sciences Inc. said: "As a result of this combination with Siebe, SimSci's
customers will benefit from a fully integrated range of industrial automation
software products, improved distribution channels and greater levels of
service."
Allen M. Yurko, Chief Executive Officer of Siebe plc said: "SimSci is a
recognized global leader in process optimization and simulation software and
this acquisition will allow us to significantly extend our presence into the
rapidly growing process simulation and modeling market. Furthermore, SimSci will
enhance Foxboro's engineering and service product offering by incorporating
process plant design and simulation to optimize plant performance."
(more)
<PAGE> 2
Simulation Sciences Inc.
Fourth Quarter and Year End 1997 Results
2-2-2
The Company also announced that it expects to report total revenue of
$9.0 million to $9.6 million and a net loss of $0.38 to $0.48 per share, for its
quarter ended March 31, 1998, which were significantly below the Company's
expectations. Operating results for the quarter were adversely impacted by a
number of factors, including but not limited to economic conditions in the
petroleum and petrochemical industries and longer sales cycles associated with
larger contracts that resulted in delays and deferrals of customer purchase
commitments. The Company believes these factors will continue and the Company
will experience revenue levels at lower than historic levels through the quarter
ending December 31, 1998 and an operating loss in the quarter ending June 30,
1998.
Simulation Sciences Inc. (SIMSCI) is a leading provider of application
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 Belgium, Brazil, Egypt, Germany,
Japan, Singapore, the United Kingdom, the United States, and Venezuela and
provides support and service to more than 650 customers in over 65 countries.
For more information about SIMSCI, visit the SIMSCI Website at
http://www/simsci.com.
This press 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
with respect to the completion of the acquisition by Siebe plc and the Company's
anticipated operating results. Actual results could differ materially from those
projected in the forward-looking statements as a result of the need to satisfy
closing conditions and obtain regulatory approval for the acquisition,
completion of the financial statements for the quarter ended March 31, 1998, the
impact of the economic conditions in the petroleum and petrochemical industries
on the Company's customers, the length of the Company's sales cycles for the
Company's customers, the size and timing of customer orders, delays in renewals
or failure of existing customers to renew their licenses with the Company, the
Company's ability to control and reduce costs and operating expenses, market
acceptance of the Company's products and service offerings, timing of new
product announcements and introductions by the Company, competition and the
impact, if any, of the announcement of the acquisition on the Company's
business; and fluctuating economic conditions. For additional information
regarding factors that could affect the Company's future financial performance,
see the Company's prospectus and periodic reports on file with the Securities
and Exchange Commission.
# # #'
<PAGE> 3
[For Release in U.S.]
21 April, 1998
SIEBE PLC COMMENCES TENDER OFFER
FOR SIMULATION SCIENCES INC.
SIEBE plc is today commencing its tender offer for all outstanding shares of
Common Stock of Simulation Sciences Inc. (NASDAQ: SMCI) ("SimSci"), at a price
of $10.00 per share, payable in cash. The offer, which has been unanimously
approved and recommended by SimSci's Board of Directors, is being made pursuant
to the merger agreement between the companies. The merger was announced on April
15, 1998.
The tender offer, which is currently scheduled to expired at 12:00 midnight, New
York City time Monday May 18, 1998 unless extended, is subject to the tender by
SimSci shareholders of that number of shares of SimSci which would represent a
majority of the outstanding shares of SimSci on a fully diluted basis and other
customary conditions.
Siebe is one of Britain's largest diversified engineering and electronics
groups, incorporating over 200 companies and employing over 50,000 people
worldwide. The Group designs and manufactures temperature and appliance
controls, process automation and control systems, and industrial equipment.
Founded in 1967, SimSci is a leading international software provider to the
petroleum, petrochemical and related process industries. The Company's process
simulation software is designed to optimise productivity and management decision
making in the operation of petrochemical, chemical plants and refineries.
Morgan Stanley & Co. Incorporated is acting as dealer manager for the tender
offer, D.F. King & Co., Inc. is acting as information agent, and Bankers Trust
Company is acting as depositary.
- Ends -
For further information, contact:
Barry Francis, Siebe plc
Ceri Williams, Siebe plc
Telephone: 01753 855411 International Telephone: +44 1753 855411
Daniel M. Sullivan, D.F. King & Co. Inc.
Telephone: 001 212 493 6927 International Telephone: +1 212 493 6927
<PAGE> 4
SIEBE PLC TO ACQUIRE SIMULATION SCIENCES INC.
WINDSOR, England--(BUSINESS WIRE)--April 15, 1998--SIEBE plc and
Simulation Sciences Inc. (SimSci) (Nasdaq: SMCI) announced today that Siebe has
entered into a definitive agreement to acquire SimSci for US$10 per share in
cash, or approximately US$147 million (88 million pounds). Net cash cost to
Siebe will be US$101 million (60 million pounds) when deducting Simulation
Sciences Inc.'s US$46 million in cash.
The offer was unanimously approved by SimSci's Board of Directors and
the Board of Directors of Siebe plc. Siebe expects to initiate a cash tender
offer within 5 business days. The transaction is due to be completed in May
1998.
Founded in 1967, SimSci is a leading international software provider to
the petroleum, petrochemical and related process industries. The Company's
process simulation software is designed to optimize productivity and management
decision making in the operation of petrochemical and chemical plants and
refineries. SimSci reported 1997 revenues of US$61 million (37 million pounds)
with a loss before tax of US$8.7 million (5.3 million pounds) after charging in
process research and development costs of US$17.5 million (10.7 million pounds)
relating to companies acquired in 1997. Net assets were US$86 million (51.5
million pounds). SimSci employs about 380 people.
Allen M. Yurko, Chief Executive Officer of Siebe plc, said: "SimSci is a
recognized global leader in process optimization and simulation software and
this acquisition will allow us to significantly extend our presence into the
rapidly growing, US$650 million (400 million pounds) process simulation and
modeling market. Furthermore, SimSci will also enhance Foxboro's engineering and
services product offering by incorporating process plant design and simulation
services into our portfolio."
Dr. George W. Sarney, President and Chief Operating Officer of Siebe
Control Systems, said: "Foxboro's wide range of I/A Series automation systems
software offerings have generated significant market share growth in all market
segments but most notably in the chemical, oil and gas segments.
SimSci's Pro/II, Romeo and other simulation software products will
complement Foxboro's advanced control and information technology software, such
as Connoisseur, BOSS blend optimization and I/A Plant Asset Optimization. SimSci
will therefore further strengthen Siebe's world leading software solutions for
the automation of buildings, factories and the process industries."
Charles Harris, President and Chief Executive Officer of Simulation
Sciences Inc., said: "This alliance with Siebe plc allows our customers to
benefit from a fully integrated range of industrial automation software
products, improved distribution channels and greater levels of service."
<PAGE> 5
Siebe plc intends to finance the acquisition of Simulation Sciences Inc.
with existing lines of credit. Siebe expects to promptly commence a tender offer
at US$10 per share for all outstanding shares of Simulation Sciences Inc. The
offer is subject to the condition that a majority of the shares are tendered and
other customary conditions. If the tender offer is successful, it will be
followed as promptly as possible by a merger in which any remaining shares of
SimSci's stock will be converted into the right to receive US$10 per share in
cash. Siebe was advised in the acquisition by Morgan Stanley & Co. Incorporated.
Siebe plc is one of the United Kingdom's largest diversified engineering
groups and incorporates over 200 companies worldwide, employing over 50,000
people. The Group designs and manufactures temperature and appliance controls,
electronic power controls, process automation and building control systems, and
engineered industrial equipment.
The Group generated a profit before tax of 221.7 million pounds
(approximately $358 million) on a turnover of 1,706.5 million pounds
(approximately $2,757 million) for the six months ended September 30, 1997, up
16.4% and 16.0% respectively over the comparable period in the prior year. For
the prior year ended April 5, 1997, the Group generated a profit before tax of
424.1 million pounds on a turnover of 3,005.3 million pounds.
Note:
The purchase price and assets are translated at $1.67/pound (being the
spot rate at April 13, 1998) and sales and profits being translated at
$1.64/pound (being the average rate for the twelve months ended March 31, 1998).
Siebe's ordinary shares trade on the London Stock Exchange. In the US,
Siebe's American Depositary Receipts (ADRs), each representing two ordinary
shares, trade over the counter under the symbol SIBEY. Additional information on
Siebe is available on Siebe's home page: http://www.siebe.com
CONTACT: Ceri Williams
Siebe plc
[email protected]
011-44-1753-839-288
-or-
James P. Prout
Taylor Rafferty Associates
212-889-4350
13:35 EDT April 15, 1998
-Ends-
2
<PAGE> 1
EXHIBIT 99.3
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SIMULATION SCIENCES INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED APRIL 21, 1998
BY
S ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SIEBE PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MAY 18, 1998, UNLESS EXTENDED.
The Depositary for the Offer is:
BANKERS TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Mail or Courier:
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Unit
Nashville, TN 37229-2737 123 Washington Street, 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
Facsimile Copy Number:
(615) 835-3701
(For Eligible Institutions Only)
For Confirmation Telephone:
(615) 835-3572
For Information Telephone:
(800) 735-7777
</TABLE>
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of Simulation Sciences Inc. (the "Stockholders") if certificates
evidencing Shares ("Certificates") are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery
of Shares is to be made by book-entry transfer to an account maintained by the
Depositary at The Depository Trust Company ("DTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
<PAGE> 2
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates for, or a Book-Entry Confirmation (as defined in
Section 2 of the Offer to Purchase) with respect to, their Shares and all other
required documents to the Depositary prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
See Instruction 2 hereof.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDERS(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE CERTIFICATE NUMBER OF SHARES NUMBER OF SHARES
NUMBER(S)* REPRESENTED BY CERTIFICATE(S)* TENDERED**
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account No.:
- ----------------------------------------------------------------------------- at
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code No.:
- --------------------------------------------------------------------------------
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Shareholder(s):
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if any):
Name of Institution which Guaranteed Delivery:
If delivery is by book-entry transfer:
Name of Tendering Institution:
Account No.:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code Number:
---------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to S Acquisition Corp., a Delaware
corporation ("Offeror") and an indirect wholly owned subsidiary of Siebe plc, a
public limited company organized under the laws of the United Kingdom
("Parent"), the above-described shares of Common Stock, $0.001 par value per
share, of Simulation Sciences Inc., a Delaware corporation (the "Company"),
including the associated preferred stock purchase rights issued pursuant to the
Preferred Shares Rights Agreement, dated as of August 13, 1997, as amended
through the date hereof, by and between the Company and Harris Trust Company of
California, as Rights Agent (collectively, the "Shares") for $10.00 per share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated April 21, 1998 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer"). The Offer is being made in connection
with the Agreement and Plan of Merger, dated as of April 15, 1998, among the
Parent, Offeror, S Sub Corp., a Delaware corporation and a wholly owned
subsidiary of Offeror, and the Company (the "Merger Agreement"). The undersigned
understands that Offeror reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of its or Parent's affiliates, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Offeror of its
obligations under the Offer or prejudice the rights of tendering holders of the
Shares ("Stockholders") to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, Offeror all right, title
and interest in and to all of the Shares that are being tendered hereby and any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date of the Offer (a "Distribution"), and constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any Distributions), with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver Certificates evidencing such Shares
(and any Distributions), or transfer ownership of such Shares (and any
Distributions) on the account books maintained by a Book-Entry Transfer Facility
together, in any such case, with all accompanying evidences of transfer and
authenticity to, or upon the order of, Offeror, upon receipt by the Depositary,
as the undersigned's agent, of the purchase price with respect to such Shares,
(ii) present such Shares (and any Distributions) for transfer on the books of
the Company and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distributions), all in accordance
with the terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of Offeror as the
attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to all
Shares tendered hereby and accepted for payment and paid for by Offeror (and any
Distributions), including, without limitation, the right to vote such Shares
(and any Distributions) in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper. All such powers of
attorney
3
<PAGE> 4
and proxies, being deemed to be irrevocable, shall be considered coupled with an
interest in the Shares tendered herewith. Such appointment will be effective
when, and only to the extent that, Offeror accepts such Shares for payment. Upon
such acceptance for payment, all prior powers of attorney and proxies given by
the undersigned with respect to such Shares (and any Distributions) will be
revoked, without further action, and no subsequent powers of attorney and
proxies may be given (and, if given, will be deemed ineffective). The designees
of Offeror will, with respect to the Shares (and any Distributions) for which
such appointment is effective, be empowered to exercise all voting and other
rights of the undersigned with respect to such Shares (and any Distributions) as
they in their sole discretion may deem proper. Offeror reserves the absolute
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, Offeror or its
designees are able to exercise full voting rights with respect to such Shares
(and any Distributions).
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions) and that, when the same are accepted for
payment and paid for by Offeror, Offeror will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances including irrevocable proxies, and that the Shares tendered
hereby (and any Distributions) will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or Offeror to be necessary or desirable to complete the
sale, assignment and transfer of Shares tendered hereby (and any Distributions).
In addition, the undersigned shall promptly remit and transfer to the
Depositary, for the account of Offeror, all Distributions issued to the
undersigned on or after April 15, 1998, in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer; and pending such
remittance and transfer or appropriate assurance thereof, Offeror shall be
entitled to all rights and privileges as owner of any such Distributions and may
withhold the entire purchase price or deduct from the purchase price the amount
of value thereof, as determined by Offeror in its sole discretion.
The undersigned understands that Offeror's acceptance for payment of any
Shares tendered hereby will constitute a binding agreement between the
undersigned and Offeror with respect to such Shares upon the terms and subject
to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Offeror may not be required to accept for payment any of
the Shares tendered hereby or may accept for payment fewer than all of the
Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Shares Tendered." In the event that both the
"Special Payment Instructions" and the "Special Delivery Instructions" are
completed, please issue the check and/or return any such Certificates evidencing
Shares not tendered or not accepted for payment in the name(s) of, and deliver
such check and/or return such Certificates to, the person(s) so indicated.
Unless otherwise indicated herein under "Special Payment Instructions," in the
case of a book-entry delivery of Shares, please credit the account maintained at
the Book-Entry Transfer Facility indicated above with respect to any Shares not
accepted for payment. The undersigned recognizes that Offeror has no obligation
pursuant to the "Special Payment Instructions" to transfer any Shares from the
name of the registered holder thereof if Offeror does not accept for payment any
of the Shares tendered hereby.
4
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if Certificates not tendered or not accepted for
payment and/or the check for the purchase price of Shares accepted for payment
are to be issued in the name of someone other than the undersigned, or if
Shares delivered by book-entry transfer that are not accepted for payment are
to be returned by credit to an account maintained at a Book-Entry Transfer
Facility, other than to the account indicated above.
Issue: [ ] Check [ ] Certificate(s) to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------
------------------------------------------------
------------------------------------------------
(ZIP CODE)
------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
[ ] Credit Shares by book-entry transfer and not purchased to the account set
forth below
Check appropriate Box:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Acct No.:
---------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if Certificates not tendered or not accepted for
payment and/or the check for the purchase price of Shares accepted for payment
are to be sent to someone other than the undersigned or to the undersigned at
an address other than that shown above.
Mail check and/or certificates to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------
------------------------------------------------
------------------------------------------------
(ZIP CODE)
------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on this Letter of Transmittal need not be guaranteed by a member firm of a
registered national securities exchange (registered under Section 6 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or by a member
firm of the National Association of Securities Dealers, Inc., by a commercial
bank or trust company having an office or correspondent in the United States or
by any other "Eligible Guarantor Institution" (bank, stockholder, savings and
loan association or credit union with membership approved signature guarantee
medallion program) as defined in Rule 17Ad-15 under the Exchange Act (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered hereby are tendered (i) by the registered holder (which term, for
purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of Shares) of such Shares who has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" herein
or (ii) as noted in the following sentence. If the Certificates are registered
in the name of a person other than the signer of this Letter of Transmittal, or
if payment is to be made to, or Certificates evidencing unpurchased Shares are
to be issued or returned to, a person other than the registered owner, then the
tendered Certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name(s) of the registered owner(s)
appear(s) on the Certificates, with the signatures on the Certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See Instruction
5.
2. Requirements of Tender. This Letter of Transmittal is to be completed
by Stockholders if Certificates evidencing Shares are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
if delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth in Section 3 of the Offer to Purchase. For a Stockholder to
validly tender Shares pursuant to the Offer, either (a) a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof),
with any required signature guarantees and any other required documents, or an
Agent's Message in the case of a book-entry delivery, must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration Date
and either (i) Certificates for tendered Shares must be received by the
Depositary at one of such addresses prior to the Expiration Date or (ii) Shares
must be delivered pursuant to the procedures for book-entry transfer set forth
in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Date or (b) the tendering
Stockholder must comply with the guaranteed delivery procedures set forth below
and in Section 3 of the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary or
complete the procedures for book-entry transfer prior to the Expiration Date may
tender their Shares by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution, (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by Offeror, must be received by the Depositary prior to the Expiration
Date, and (iii) the Certificates representing all tendered Shares in proper form
for transfer, or a Book-Entry Confirmation with respect to all tendered Shares,
together with a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Letter of Transmittal, must be received by
the Depositary within five Nasdaq National Market trading days after the date of
such Notice of Guaranteed Delivery. If Certificates are forwarded separately to
the Depositary, a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY
<PAGE> 7
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted. All
tendering Stockholders, by execution of this Letter of Transmittal (or a
facsimile thereof), waive any right to receive any notice of the acceptance of
their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
information required under "Description of Shares Tendered" should be listed on
a separate signed schedule attached hereto.
4. Partial Tenders. If less than all of the Shares represented by any
Certificates delivered to the Depositary herewith is to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such case, a new Certificate for the remainder of the
Shares that were evidenced by the old Certificate(s) will be sent, without
expense, to the person(s) signing this Letter of Transmittal, unless otherwise
provided in the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on this Letter of Transmittal, as soon as
practicable after the Expiration Date. All Shares represented by Certificate(s)
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal, Instruments of Transfer and
Endorsements. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Certificates. To
obtain additional Letters of Transmittal, you may either make a photocopy of
this Letter of Transmittal or call D.F. King & Co., Inc., the Information Agent,
at (800) 769-6414.
If this Letter of Transmittal or any Certificates or instruments of
transfer are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Offeror of such person's authority to so act
must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on the Certificate(s).
Signature(s) on such Certificate(s) and such endorsements or instruments of
transfer must be guaranteed by an Eligible Institution.
6. Transfer Taxes. Except as set forth in this Instruction 6, Offeror will
pay or cause to be paid any transfer taxes with respect to the transfer and sale
of purchased Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or (in the circumstances
permitted hereby) if Certificates for Shares not tendered or not purchased are
to be registered in the name of, any person other than the registered holder(s),
or if tendered Certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any transfer
taxes (whether imposed on the registered holder(s) or such person) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted herewith.
<PAGE> 8
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check and/or
Certificates for unpurchased Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be sent
and/or such Certificates are to be returned to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. If any
tendered Shares are not purchased for any reason and such Shares are delivered
by book-entry transfer to a Book-Entry Transfer Facility, such Shares will be
credited to an account maintained at the appropriate Book-Entry Transfer
Facility.
8. Requests for Assistance or Additional Copies. Questions and requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses or telephone numbers set forth below and requests for
additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent or
brokers, dealers, commercial banks and trust companies and such materials will
be furnished at Offeror's expense.
9. Waiver of Conditions. The conditions of the Offer may be waived by
Offeror, in whole or in part, at any time or from time to time, at Offeror's
sole discretion, subject to the terms of the Offer and the Merger Agreement.
10. Backup Withholding Tax. Each tendering Stockholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided under "Important Tax Information" below.
FAILURE TO PROVIDE THE INFORMATION ON THE SUBSTITUTE FORM W-9 MAY SUBJECT THE
TENDERING STOCKHOLDER TO 31% FEDERAL INCOME TAX BACKUP WITHHOLDING ON THE
PAYMENT OF THE PURCHASE PRICE FOR THE SHARES. The tendering Stockholder should
indicate in the box in Part III of the Substitute Form W-9 if the tendering
Stockholder has not been issued a TIN and has applied for or intends to apply
for a TIN in the near future, in which case the tendering Stockholder should
complete the Certificate of Awaiting Taxpayer Identification Number provided
below. If the Stockholder has indicated in the box in Part III that a TIN has
been applied for and the Depositary is not provided a TIN within 60 days, the
Depositary will withhold 31% of all payments of the purchase price, if any, made
thereafter pursuant to the Offer until a TIN is provided to the Depositary.
11. Lost or Destroyed Certificates. If any Certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify the
Depositary. The holders will then be instructed as to the procedure to be
followed in order to replace the Certificate(s). This Letter of Transmittal and
related documents cannot be processed until the procedures for replacing lost or
destroyed Certificate(s) have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH CERTIFICATES OR A
BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
Stockholder's correct TIN on Substitute Form W-9 below. If such Stockholder is
an individual, the TIN is his social security number. If the tendering
Stockholder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future, such Stockholder should so indicate on
the Substitute Form W-9 and should complete the Certificate of Awaiting Taxpayer
Identification Number provided below. See Instruction 10. If the Depositary is
not provided with the correct TIN, the Stockholder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Stockholders with respect to Shares purchased pursuant to the Offer
may be subject to federal income tax backup withholding.
<PAGE> 9
Certain Stockholders (including among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Forms for such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the Stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent federal income tax backup withholding with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, a Stockholder
must provide the Depositary with his correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such Stockholder is awaiting a TIN) and that (1) such
Stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified the Stockholder that
he is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report.
<PAGE> 10
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Name(s)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------------------------------------
Area Code and Telephone Number
--------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
----------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
Dated:
--------------------------------- , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
Authorized Signature(s)
--------------------------------------------------------------------------
Name
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------------------------------
Dated:
--------------------------------- , 1998
<PAGE> 11
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: BANKERS TRUST COMPANY
- -----------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT PART III -
FORM W-9 THE RIGHT AND CERTIFY BY SIGNING AND DATING TIN:
BELOW. Social Security Number
or Employer Identification Number
-------------------------------------------------------------------------------------------
DEPARTMENT OF THE PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines for
TREASURY, Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
INTERNAL REVENUE instructed therein.
SERVICE
-------------------------------------------------------------------------------------------
PAYOR'S REQUEST Certification -- Under penalties of perjury, I certify that:
FOR TAXPAYER (1) The number shown on this form is my correct TIN (or I am waiting for a number to be
IDENTIFICATION issued to me); and
NUMBER ("TIN") (2) I am not subject to backup withholding because (a) I am exempt from backup withholding
AND CERTIFICATION or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
-------------------------------------------------------------------------------------------
Signature: ________________________________________________________ Date: ______________
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see the instructions in the
enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to
me, and either (1) I have mailed or delivered an application to receive a TIN
to the appropriate IRS Center or Social Security Administration Officer or
(2), I intend to mail or deliver an application in the near future. I
understand that if I do not provide a TIN by the time of payment, 31% of all
payments pursuant to the Offer made to me thereafter will be withheld until I
provide a number.
<TABLE>
<C> <S> <C>
Signature: ______________________________________________________________________________ Date: ______________
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Call Toll Free
(800) 769-6414
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
(212) 761-7239
<PAGE> 1
LOGO
April 21, 1998
To Our Stockholders:
I am pleased to inform you that Simulation Sciences Inc. ("SimSci"), Siebe
plc ("Siebe"), S Acquisition Corp. ("Offeror"), an indirect wholly owned
subsidiary of Siebe, and S Sub Corp., a wholly owned subsidiary of Offeror
("Merger Sub"), have entered into an Agreement and Plan of Merger dated April
15, 1998 (the "Merger Agreement") pursuant to which Offeror has commenced a cash
tender offer (the "Offer") to purchase all of the outstanding shares of SimSci
common stock (the "Shares") for $10.00 per share. Under the Merger Agreement,
the Offer, if consummated, will be followed by a merger of Merger Sub into
SimSci (the "Merger") in which any remaining Shares (other than Shares as to
which appraisal rights have been properly exercised and perfected, Shares held
in treasury by SimSci or Shares owned by Offeror or its affiliates) will be
converted into the right to receive $10.00 per Share in cash, without interest.
Your Board of Directors has unanimously determined that the Offer and the
Merger are fair to and in the best interests of SimSci stockholders and
recommends that stockholders accept the Offer and tender their Shares pursuant
to the Offer. You are encouraged to consult with your financial or tax advisor
regarding the impact thereof on you prior to tendering your Shares in the Offer
or voting to approve the Merger.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that has been filed with the Securities and Exchange Commission, including,
among other things, the opinion of Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, the financial advisor retained by the Board of Directors,
to the effect that the $10.00 in cash to be received by the holders of Shares in
the Offer and Merger is fair to such holders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated April 21, 1998, of Offeror, together
with related materials, including a Letter of Transmittal to be used for
tendering your Shares. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions as to how to tender your Shares.
We urge you to read the enclosed material carefully.
Sincerely,
LOGO
Charles R. Harris
Chairman of the Board, President
And Chief Executive Officer
<TABLE>
<S> <C>
SIMULATION SCIENCES INC.
601 VALENCIA AVE.
SUITE 100
BREA, CA 92823, USA
PHONE: (714) 579-0412
FAX: (714) 579-0236
BREA - HOUSTON - PHILADELPHIA - MANCHESTER - MANNHEIM - TOKYO - CARACAS - SINGAPORE - CAIRO HTTP://WWW.SIMSCI.COM
</TABLE>
<PAGE> 1
EXHIBIT 99.6
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SIMULATION SCIENCES INC.
AT
$10.00 NET PER SHARE
BY
S ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SIEBE PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MAY 18, 1998, UNLESS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES OF COMMON STOCK, $.001 PAR VALUE PER SHARE, OF SIMULATION
SCIENCES INC. (THE "COMPANY"), INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE
RIGHTS (COLLECTIVELY, THE "SHARES"), WHICH WOULD REPRESENT, ON A FULLY DILUTED
BASIS (EXCLUDING "OUT OF THE MONEY OPTIONS" AS DEFINED IN THE INTRODUCTION TO
OFFER), AT LEAST A MAJORITY OF THE OUTSTANDING SHARES. THE OFFER IS ALSO SUBJECT
TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE
INTRODUCTION AND SECTIONS 1 AND 15 HEREOF.
THIS OFFER (THE "OFFER") IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND
PLAN OF MERGER, DATED AS OF APRIL 15, 1998 (THE "MERGER AGREEMENT"), AMONG SIEBE
PLC, S ACQUISITION CORP., S SUB CORP., AND THE COMPANY. THE BOARD OF DIRECTORS
OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED
THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
Any stockholder of the Company desiring to tender Shares should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in accordance
with the instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary
(as defined herein) or follow the procedures for book-entry transfer set forth
in Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any stockholder of the Company who desires to tender Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary, in each case prior
to the expiration of the Offer, must tender such Shares pursuant to the
guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to Morgan Stanley &
Co. Incorporated, the Dealer Manager, or to D.F. King & Co., Inc., the
Information Agent, at their respective addresses and telephone numbers set forth
on the back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be obtained from the Information Agent or from brokers,
dealers, commercial banks and trust companies.
------------------------
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
April 21, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
Introduction........................................................... 1
1. Terms of the Offer.......................................... 2
2. Acceptance for Payment and Payment for Shares............... 4
3. Procedure for Tendering Shares.............................. 5
4. Withdrawal Rights........................................... 7
5. Certain Federal Income Tax Consequences..................... 8
6. Price Range of Shares; Dividends on the Shares.............. 9
7. Effect of Offer on Nasdaq National Market Listing, Market
for Shares and SEC Registration............................. 9
8. Certain Information Concerning the Company.................. 10
9. Certain Information Concerning Offeror...................... 12
10. Source and Amount of Funds.................................. 14
11. Background of Offer......................................... 15
12. Purpose of the Offer; The Merger; Plans for the Company..... 16
13. The Transaction Documents................................... 19
14. Dividends and Distributions................................. 29
15. Certain Conditions to Offeror's Obligations................. 29
16. Certain Regulatory and Legal Matters........................ 31
17. Fees and Expenses........................................... 32
18. Miscellaneous............................................... 33
Annex I. Certain Information Concerning the Directors and Executive
Officers of Parent and Offeror.............................. I-1
Annex II. Summary of Significant Differences Between UK GAAP and US
GAAP........................................................ II-1
</TABLE>
i
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK OF SIMULATION SCIENCES INC.:
INTRODUCTION
S Acquisition Corp., a Delaware corporation ("Offeror") and an indirect
wholly owned subsidiary of Siebe plc, a public limited company organized under
the laws of the United Kingdom ("Parent"), hereby offers to purchase all of the
outstanding shares of common stock, par value $0.001 per share, of Simulation
Sciences Inc., a Delaware corporation (the "Company"), including the associated
preferred stock purchase rights (the "Rights") issued pursuant to the Preferred
Shares Rights Agreement, dated as of August 13, 1997, as amended by the "Rights
Amendment" as of April 17, 1998 (as so amended, the "Rights Agreement"), between
the Company and Harris Trust Company of California, as Rights Agent
(collectively, the "Shares"), at a purchase price of $10.00 per share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). Tendering stockholders will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by Offeror
pursuant to the Offer. Offeror will pay all charges and expenses of Morgan
Stanley & Co. Incorporated ("Morgan Stanley" or the "Dealer Manager"), Bankers
Trust Company (the "Depositary"), and D.F. King & Co., Inc. (the "Information
Agent") for their respective services in connection with the Offer and the
Merger (as hereinafter defined). See Section 17.
Offeror is a corporation newly formed by Parent in connection with the
Offer and the transactions contemplated by the Merger Agreement (as hereinafter
defined).
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE BOARD OF DIRECTORS HAS RECEIVED THE OPINION OF DAIN RAUSCHER WESSELS, A
DIVISION OF DAIN RAUSCHER INCORPORATED, THE COMPANY'S FINANCIAL ADVISOR ("DRW"),
DATED APRIL 15, 1998, TO THE EFFECT THAT, AS OF SUCH DATE AND SUBJECT TO THE
VARIOUS ASSUMPTIONS AND LIMITATIONS SET FORTH THEREIN, THE CASH CONSIDERATION TO
BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE
MERGER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO SUCH HOLDERS. A COPY OF THAT
OPINION IS SET FORTH IN FULL AS AN EXHIBIT TO THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WHICH IS BEING MAILED TO
THE COMPANY'S STOCKHOLDERS, AND STOCKHOLDERS ARE URGED TO READ THE OPINION IN
ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES (THE "MINIMUM NUMBER OF SHARES") WHICH WOULD REPRESENT AT LEAST A
MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS (EXCLUDING "OUT OF
THE MONEY OPTIONS," MEANING ANY OPTION, WARRANT OR OTHER CONTRACTUAL RIGHT TO
PURCHASE SHARES OF THE COMPANY'S COMMON STOCK WHICH ON APRIL 15, 1998 HAD AN
EXERCISE PRICE PER SHARE THAT WAS EQUAL TO OR GREATER THAN $10.00)(THE "MINIMUM
CONDITION"). SEE SECTION 15.
The Company has represented to Parent and Offeror that, as of April 15,
1998, there were 14,146,608 Shares issued and outstanding and 2,086,249 Shares
reserved for issuance in connection with outstanding stock options. The Company
has advised Parent and Offeror that there are 301,550 Shares reserved for
issuance in connection with Out of the Money Options and approximately 60,000
Shares reserved for issuance under the Company's Stock Plans (as hereinafter
defined). Based on the foregoing, Offeror believes that approximately 7,995,654
Shares must be validly tendered and not withdrawn prior to the expiration of the
Offer in order for the Minimum Condition to be satisfied. See Section 1.
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The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 15, 1998 (the "Merger Agreement"), by and among Parent, Offeror, S
Sub Corp., a Delaware corporation and a wholly owned subsidiary of Offeror
("Merger Sub"), and the Company. The Merger Agreement provides, among other
things, for the making of the Offer by Offeror, and further provides that, upon
the terms and subject to certain conditions of the Merger Agreement, Merger Sub
or another direct or indirect subsidiary of Parent will be merged with and into
the Company (the "Merger"). The Merger Agreement is more fully described in
Section 13. The Merger is subject to a number of conditions, including the
approval and adoption of the Merger Agreement by stockholders of the Company, if
such approval is required by applicable law. See Section 12. In the Merger, each
outstanding Share shall automatically be cancelled and extinguished and each
outstanding Share (other than Shares owned by the Company as treasury stock, by
Parent, or any subsidiary thereof, or Shares held by stockholders who perfect
their appraisal rights under Delaware law) will be converted into and represent
the right to receive $10.00 (or any higher price that may be paid for each Share
pursuant to the Offer) in cash, without interest thereon (the "Offer Price").
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
This Offer to Purchase contains forward-looking statements that involve
risks and uncertainties, including the risks associated with satisfying the
various conditions to the Offer. Certain of these factors as well as additional
risks and uncertainties, are detailed in the Company's periodic filings with the
Securities and Exchange Commission (the "Commission").
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
extension or amendment), Offeror will accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 midnight, New
York City time, on May 18, 1998, unless Offeror shall have extended the period
of time for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by
Offeror, shall expire.
In the Merger Agreement, Offeror has agreed that if all of the conditions
to the Offer are not satisfied by the Expiration Date then, provided that all
such conditions are reasonably probable of being satisfied by the date which is
30 business days after the commencement of the Offer, Offeror shall extend the
Offer (up to such 30th business day) until such conditions are satisfied or
waived. Otherwise, Offeror has agreed in the Merger Agreement that, without the
prior written approval of the Company, it will not extend the period during
which the Offer is open, except (subject to the Company's right of termination,
discussed under Section 13, "Merger Agreement -- Termination," below) (A) as
required to comply with any rule, regulation or interpretation of the
Commission, (B) until such time as all such conditions described under Section
15, "Certain Conditions to Offeror's Obligations," below, have been satisfied or
waived or (C) only if less than 90% of the outstanding Shares have been
tendered, for one or more times for a total number of days in the aggregate for
any extension in accordance with this clause (C) not to exceed 10 business days
for any reason other than those specified in the immediately preceding clauses
(A) and (B). Subject to the foregoing restrictions, Offeror reserves the right
(but will not be obligated), in its sole discretion, to extend the period during
which the Offer is open by giving oral or written notice of such extension to
the Depositary and by making a public announcement of such extension. There can
be no assurance that Offeror will exercise its right to extend the Offer.
If Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and, if at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier
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<PAGE> 5
than the expiration of a period ending on the tenth business day from, and
including, the date that such notice is first so published, sent or given, then
the Offer will be extended until the expiration of such period of ten business
days. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15. As
described in the Introduction to this Offer to Purchase, Offeror believes the
Minimum Number of Shares is approximately 7,995,654. Offeror reserves the right
(but shall not be obligated), in accordance with applicable rules and
regulations of the Commission, to waive or reduce the Minimum Condition or to
waive any other condition to the Offer; provided, however, that pursuant to the
Merger Agreement, Offeror has agreed that it will not, without the consent of
the Company, waive the Minimum Condition if such waiver would result in less
than a majority of the outstanding Shares (on a fully-diluted basis excluding
Out of the Money Options) being accepted for payment or paid for pursuant to the
Offer. If the Minimum Condition or any of the other conditions set forth in
Section 15 has not been satisfied by 12:00 midnight, New York City time, on May
18, 1998 (or any other time then set as the Expiration Date), Offeror may elect
to (1) subject to the qualifications above with respect to the extension of the
Offer, extend the Offer and, subject to applicable withdrawal rights, retain all
tendered Shares until the expiration of the Offer, as extended, subject to the
terms of the Offer, (2) subject to complying with applicable rules and
regulations of the Commission and to the terms of the Merger Agreement, accept
for payment all Shares so tendered and not extend the Offer or (3) subject to
the terms of the Merger Agreement, terminate the Offer and not accept for
payment any Shares and return all tendered Shares to tendering stockholders.
Subject to the applicable rules and regulations of the Commission, Offeror
expressly reserves the right, in its sole discretion, to delay payment for any
Shares regardless of whether such Shares were theretofore accepted for payment,
or, subject to the limitations set forth in the Merger Agreement, to terminate
the Offer and not to accept for payment or pay for any Shares not theretofore
accepted for payment or paid for, upon the occurrence of any of the conditions
set forth in Section 15 by giving oral or written notice of such delay or
termination to the Depositary. Offeror's right to delay payment for any Shares
or not to pay for any Shares theretofore accepted for payment is subject to the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
relating to Offeror's obligation to pay for or return tendered Shares promptly
after the termination or withdrawal of the Offer.
In the Merger Agreement, Offeror has also agreed that it will not, without
the prior written approval of the Company, (1) reduce the cash price per Share
to be paid pursuant to the Offer, (2) reduce the number of Shares to be
purchased pursuant to the Offer, (3) change the form of consideration to be paid
in the Offer, (4) increase the Minimum Number of Shares, (5) impose additional
conditions to the Offer, or (6) otherwise amend the terms of the Offer in a
manner that is materially adverse to the stockholders of the Company.
Except as set forth above, and subject to the applicable rules and
regulations of the Commission, Offeror expressly reserves the right, in its sole
discretion, to amend the Offer in any respect. Any extension of the period
during which the Offer is open, or delay in acceptance for payment or payment,
or termination or amendment of the Offer, will be followed, as promptly as
practicable, by public announcement thereof, such announcement in the case of an
extension to be issued not later than 9:00 a.m. New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
the public announcement requirements of Rule 14d-4(c) under the Exchange Act.
Without limiting the obligation of Offeror under such rule or the manner in
which Offeror may choose to make any public announcement, Offeror currently
intends to make announcements by issuing a press release to the Dow Jones News
Service and making any appropriate filing with the Commission.
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<PAGE> 6
If Offeror makes a material change in the terms of the Offer or the
information concerning the Offer or if it waives a material condition of the
Offer (including a waiver of the Minimum Condition), Offeror will disseminate
additional tender offer materials and extend the Offer if and to the extent
required by Rules 14d-4(c), 14d-6(d) and 14(e)-1 under the Exchange Act or
otherwise. The minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer,
other than a change in price or a change in percentage of securities sought,
will depend upon the facts and circumstances, including the relative materiality
of the terms or information changes. With respect to a change in price or a
change in percentage of securities sought, a minimum ten business day period is
generally required to allow for adequate dissemination to stockholders and
investor response.
The Company has provided Offeror with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will be
mailed to record holders of the Shares and will be furnished to brokers,
dealers, commercial banks and similar persons whose names, or the names of whose
nominees, appear on the list of stockholders or, if applicable, who are listed
as participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Offeror will purchase, by accepting for payment, and will pay
for, all Shares validly tendered prior to the Expiration Date (and not properly
withdrawn) promptly after the Expiration Date. Subject to compliance with Rule
14e-1(c) under the Exchange Act, Offeror expressly reserves the right to delay
payment for Shares in order to comply in whole or in part with any applicable
law. See Sections 1 and 15. In all cases, payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"),
pursuant to the procedures set forth in Section 3, (ii) a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof) with
all required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined below) and (iii) any other documents required by the
Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when Offeror gives oral or written notice to the Depositary of Offeror's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from Offeror and transmitting such payment to
tendering stockholders. If, for any reason whatsoever, acceptance for payment of
any Shares tendered pursuant to the Offer is delayed, or Offeror is unable to
accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to Offeror's rights under Section 15, the Depositary may,
nevertheless, on behalf of Offeror, retain tendered Shares, and such Shares may
not be withdrawn, except to the extent that the tendering stockholders are
entitled to withdrawal rights as described in Section 4 below and as otherwise
required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will
interest be paid on the purchase price for Shares by Offeror by reason of any
delay in making such payment.
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<PAGE> 7
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer to a Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Offeror increases the consideration
offered to stockholders pursuant to the Offer, such increased consideration will
be paid to all stockholders whose Shares are purchased pursuant to the Offer.
Offeror reserves the right to transfer or assign, in whole or from time to
time in part, to Parent or to one or more direct or indirect subsidiaries of
Parent, the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve Offeror of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date. In
addition, either (i) certificates representing such Shares must be received by
the Depositary or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
there must be compliance with the guaranteed delivery procedure set forth below.
No alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal need not be
guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act), by a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States or by any other "Eligible
Guarantor Institution," as defined in Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"), unless the Shares tendered thereby are
tendered (i) by a registered holder of Shares who has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) as noted in the following
sentence. If the certificates evidencing Shares are registered in the name of a
person or persons other than the signer of the Letter of Transmittal, or if
payment is to be made or certificates for unpurchased Shares are to be issued to
a person other than the registered owner or
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<PAGE> 8
owners, then the certificates must be endorsed or accompanied by appropriate
stock powers, in either case signed exactly as the name or names of the
registered owner or owners appear on the certificates, with the signatures on
the certificates or stock powers guaranteed as provided in the Letter of
Transmittal. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if such
tender complies with all of the following guaranteed delivery procedures:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Offeror herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), and any
required signature guarantees and any other documents required by the
Letter of Transmittal are received by the Depositary within five Nasdaq
National Market trading days after the date of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for the Shares (or a Book-Entry
Confirmation), a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME
TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST PROVIDE THE DEPOSITARY
WITH HIS CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT HE IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 SET FORTH IN
THE LETTER OF TRANSMITTAL.
Determinations of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Offeror, in its sole discretion,
and its determination will be final and binding on all parties. Offeror reserves
the absolute right to reject any or all tenders of any Shares that are
determined by it not to be in proper form or the acceptance of or payment for
which may, in the opinion of Offeror, be unlawful. Offeror also reserves the
absolute right to waive any of the conditions of the Offer (other than the
Minimum Condition, as described above) or any defect or irregularity in the
tender of any Shares. Offeror's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the Instructions to the
Letter of Transmittal) will be final and binding on all parties. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Offeror, the Dealer Manager,
the
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<PAGE> 9
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Offeror as such
stockholder's proxies, each with full power of substitution, in the manner set
forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Offeror (and any and all other Shares or other securities or rights
issued or issuable in respect of such Shares on or after April 15, 1998). All
such proxies shall be considered coupled with an interest in the tendered
Shares. This appointment is effective when, and only to the extent that, Offeror
deposits the payment for such Shares. Upon acceptance for payment, all prior
proxies given by the stockholder with respect to such Shares or other securities
or rights will, without further action, be revoked and no subsequent proxies may
be given (and, if given, will not be deemed effective). The designees of Offeror
will, with respect to the Shares and other securities or rights, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
judgment deem proper in respect of any annual or special meeting of the
Company's stockholders, or any adjournment or postponement thereof, or in
connection with any action by written consent in lieu of any such meeting or
otherwise. Offeror reserves the right to require that, in order for Shares to be
deemed validly tendered, immediately upon Offeror's payment for such Shares,
Offeror must be able to exercise full voting and other rights with respect to
such Shares and the other securities or rights, including voting at any meeting
of stockholders then scheduled.
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer as well as the tendering stockholder's representation
and warranty that (a) such stockholder has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 under the Exchange Act and (b)
the tender of such Shares complies with Rule 14e-4. It is a violation of Rule
14e-4 for a person, directly or indirectly, to tender Shares for such person's
own account unless, at the time of tender, the person so tendering (i) has a net
long position equal to or greater than the amount of (x) Shares tendered or (y)
other securities immediately convertible into or exchangeable or exercisable for
the Shares tendered and such person will acquire such Shares for tender by
conversion, exchange or exercise and (ii) will cause such Shares to be delivered
in accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. Offeror's acceptance for payment of Shares tendered pursuant to
the Offer will constitute a binding agreement between the tendering stockholder
and Offeror upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after June 19, 1998. If purchase of or payment for Shares is delayed for any
reason or if Offeror is unable to purchase or pay for Shares for any reason,
then, without prejudice to Offeror's rights under the Offer, tendered Shares may
be retained by the Depositary on behalf of Offeror and may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as set forth in this Section 4, subject to Rule 14e-1(c) under the
Exchange Act which provides that no person who makes a tender offer shall fail
to pay the consideration offered or return the securities deposited by or on
behalf of security holders promptly after the termination or withdrawal of the
Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which
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<PAGE> 10
the certificates representing such Shares are registered, if different from that
of the person who tendered the Shares. If certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and, unless such Shares
have been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer set forth in Section
3, any notice of withdrawal must also specify the name and number of the account
at the applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Offeror, in its sole discretion, and
its determination will be final and binding on all parties. None of Offeror, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be returned at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to cash in the Merger (including
pursuant to the exercise of appraisal rights). The discussion applies only to
holders of Shares in whose hands Shares are capital assets, and may not apply to
Shares received pursuant to the exercise of employee stock options or otherwise
as compensation, or to holders of Shares who are in special tax situations (such
as insurance companies, tax-exempt organizations or non-U.S. persons), or to
persons holding Shares as part of a "straddle," "hedge," or "conversion
transaction." This discussion does not address any aspect of state, local or
foreign taxation.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between the holder's adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Merger and the
amount of cash received therefor. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger. Such
gain or loss will be capital gain or loss (other than, with respect to the
exercise of appraisal rights, amounts, if any, which are or are deemed to be
interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be (i) long-term gain or loss if, on the date of sale
(or, if applicable, the date of the Merger), the Shares were held for more than
eighteen months, and (ii) mid-term gain or loss if, on the date of sale (or, if
applicable, the date of the Merger), the Shares were held for more than one year
but not more than eighteen months.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a 31% rate. Backup withholding generally applies if the
stockholder (a) fails to furnish his social security number or other taxpayer
identification number ("TIN"), (b) furnishes an incorrect TIN,
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<PAGE> 11
(c) fails properly to report interest or dividends or (d) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN provided is his correct number and that he is not subject
to backup withholding. Backup withholding is not an additional tax but merely an
advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are entitled to exemption from
backup withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder should consult with
his own tax advisor as to his qualification for exemption from withholding and
the procedure for obtaining such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (the "Company 10-K"), since October 25, 1996 the Shares
have traded on the Nasdaq National Market under the symbol "SMCI" and the
Company has not paid any cash dividends on the Shares for more than five years.
Pursuant to the Merger Agreement, the Company has agreed not to declare, set
aside for payment or pay any dividends or other distributions with respect to
the Shares prior to consummation of the Merger. The following table sets forth
the high and low sales prices per Share on the Nasdaq National Market for the
periods indicated, as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year Ended December 31, 1996:
Fourth Quarter (from October 25, 1996)................... $15.00 $ 9.25
Year Ended December 31, 1997:
First Quarter............................................ 18.63 10.00
Second Quarter........................................... 15.38 9.13
Third Quarter............................................ 19.88 12.25
Fourth Quarter........................................... 23.38 13.88
Year Ending December 31, 1998:
First Quarter............................................ 16.13 5.25
Second Quarter (through April 20, 1998).................. 9.97 7.75
</TABLE>
The closing sale price per Share on the Nasdaq National Market on April 14,
1998, the last full day of trading prior to the public announcement of Offeror's
intention to make the Offer, was $8.06. The closing sale price per Share on the
Nasdaq National Market on April 20, 1998, the last full day of trading prior to
the commencement of the Offer, was $9.81. Stockholders are urged to obtain
current market quotations for the Shares and to review all information received
by them from the Company, including the proxy materials and annual and quarterly
reports referred to in Section 8.
7. EFFECT OF OFFER ON NASDAQ NATIONAL MARKET LISTING, MARKET FOR SHARES AND SEC
REGISTRATION.
The purchase of the Shares by Offeror pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and may reduce the number
of holders of Shares, which could adversely affect the liquidity and market
value of the remaining Shares held by stockholders other than Offeror. The
Company 10-K states that, as of March 16, 1998, there were 74 stockholders of
record and approximately 2,800 beneficial owner of Shares.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion on the Nasdaq
National Market. If trading volume were lower than such standards, quotations
might continue to be published in the "additional list" or in one of the "local
lists," or such quotations might not be published at all. If the number of
holders of Shares (based on round lots) fell below 400, NASDAQ might cease to
provide
9
<PAGE> 12
quotations but quotations might still be available from other sources. Offeror
cannot predict whether NASDAQ trading volume standards for publication will be
met after the Offer.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of Shares. It is the intention of
Offeror to seek to cause an application for such termination to be made as soon
after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such registration were terminated, the
Company would no longer legally be required to disclose publicly in proxy
materials distributed to stockholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act; the officers, directors and 10% stockholders
of the Company would no longer be subject to the "short-swing" insider trading
reporting and profit recovery provisions of the Exchange Act or the proxy
statement requirements of the Exchange Act in connection with stockholders'
meetings; and the Shares would no longer be eligible for Nasdaq National Market
reporting or for continued inclusion on the Federal Reserve Board's "margin
list." Furthermore, if such registration were terminated, persons holding
"restricted securities" of the Company may be deprived of their ability to
dispose of such securities under Rule 144 promulgated under the Securities Act
of 1933, as amended.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as specifically set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or is based upon
publicly available documents and records on file with the Commission and other
public sources. Neither Parent nor Offeror has any knowledge that would indicate
that any statements contained herein based on such documents and records are
untrue. However, neither Parent nor Offeror assumes any responsibility for the
accuracy or completeness of the information concerning the Company, furnished by
the Company or contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or which may affect the
significance or accuracy of any such information but which are unknown to
Offeror.
The Company is a Delaware corporation with its principal executive offices
located at 601 Valencia Avenue, Suite 100, Brea, California 92823. According to
the Company 10-K, the Company is a leading provider of commercial application
software and related services to the petroleum, petrochemical, industrial
chemical and other process industries, as well as the engineering and
construction firms that support those industries.
Set forth below is certain summary consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
consolidated financial statements presented in the Company 10-K. More
comprehensive financial information is included in such reports and in other
documents filed by the Company with the Commission (which may be inspected or
obtained in the manner set forth below), and the following summary is qualified
in its entirety by reference to such reports and other documents and all of the
financial information and notes contained therein or incorporated therein by
reference.
10
<PAGE> 13
SIMULATION SCIENCES INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 60,575 $46,903 $33,119
Cost of Revenues............................................ 6,556 6,928 6,760
Operating Expenses.......................................... 64,608 35,791 24,152
Operating income (loss)..................................... (10,589) 4,184 2,207
Net income (loss)........................................... (11,121) 2,692 1,355
Per share:
Net income (loss) per share............................... (1.01) 0.37 0.20
Weighted average number of common and common
equivalents............................................ 11,004 7,250 6,667
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1997 1996
-------- -------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................... $ 58,088 $27,904
Total assets.............................................. 106,753 53,198
Total liabilities......................................... 20,993 14,379
Total stockholders' equity................................ 85,760 38,819
</TABLE>
Recent Developments. In a press release issued on April 15, 1998, the
Company announced that, for its first quarter ended March 31, 1998, it expected
to report total revenues of $9.0 million to $9.6 million and a net loss per
share of $0.38 to $0.48. The Company stated in the press release that the
results for its 1998 first quarter were significantly below its expectations,
and that operating results for the quarter were adversely impacted by a number
of factors, including economic conditions in the petroleum and petrochemical
industries and longer sales cycles associated with larger contracts that
resulted in delays and deferrals of customer purchase commitments. The Company
further stated in the press release that it believed such factors would continue
and that the Company would experience revenue levels at lower than historic
levels through the Company's fourth quarter ending December 31, 1998 and an
operating loss in the Company's second quarter ending June 30, 1998.
Certain Company Estimates. During the course of discussions between Parent
and the Company that led to the execution of the Merger Agreement (see Section
11), the Company provided Parent with certain information relating to the
Company which Offeror believes is not publicly available. This information
included a preliminary operating budget for the Company for fiscal years 1998,
1999 and 2000 developed by the Company's senior management following the end of
the Company's first quarter ended March 31, 1998 predicated on their then
preliminary assumptions for macroeconomic conditions, gross profits and
operating expenses. The Company's fiscal year 1998 operating budget estimated
revenues of $50.3 million, cost of revenues of $10.3 million, operating expenses
of $51.7 million, operating losses of $11.7 million, and a net loss of $8.4
million. The Company's fiscal year 1999 operating budget estimated revenues of
$64.0 million, cost of revenues of $10.3 million, operating expenses of $46.0
million, operating income of $7.7 million, and net income of $6.6 million. The
Company's fiscal year 2000 operating budget estimated revenues of $82.0 million,
cost of revenues of $11.5 million, operating expenses of $50.0 million,
operating income of $20.5 million, and net income of $14.5 million. The
foregoing information has been excerpted from the materials presented to Parent
and does not reflect consummation of the Offer or the Merger.
11
<PAGE> 14
The foregoing estimates constitute forward-looking statements that involve
risks and uncertainties, including, but not limited to, risks associated with
fluctuations in quarterly results, product introductions, competition, rapid
technological change, reliance on distribution channels, international sales and
other factors. These risks and uncertainties are discussed in greater detail in
the Company's periodic filings with the Commission.
The Company does not as a matter of course make public any estimates as to
future performance or earnings, and the estimates set forth above are included
in this Offer to Purchase only because the information was made available to
Parent by the Company. The Company has informed Parent that the estimates were
not prepared with a view to public disclosure or compliance with the published
guidelines of the Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding estimates or forecasts. The
Company has also informed Parent that its internal financial forecasts (upon
which the estimates provided to Parent were based in part) are, in general,
prepared solely for internal use and capital budgeting and other management
decision-making purposes and are subjective in many respects and thus
susceptible to various interpretations and periodic revision based on actual
experience and business developments. Projected information of this type is
based on estimates and assumptions that are inherently subject to significant
economic and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of the Company,
Offeror or Parent or their respective financial advisors. Many of the
assumptions upon which the estimates were based, none of which were approved by
Parent or Offeror, are dependent upon economic forecasting (both general and
specific to the Company's businesses), which is inherently uncertain and
subjective. The inclusion of the foregoing estimates should not be regarded as
an indication that the Company, Offeror, Parent or any other person who received
such information considers it an accurate prediction of future events, and
neither Offeror nor Parent has relied on them as such. None of Offeror or Parent
or their financial advisors assumes any responsibility for the accuracy or
validity of any of the estimates.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, is
obligated to file reports and other information with the Commission relating to
its business, financial condition, and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company, and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements, and other information should be
available for inspection at the Commission's Public Reference Room, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies should be obtainable
upon payment of the Commission's customary charges by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such material should also be available for inspection and copying at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York, 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission also maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission.
9. CERTAIN INFORMATION CONCERNING OFFEROR.
Offeror, a Delaware corporation, was recently incorporated for the purpose
of making the Offer and Merger Sub, a Delaware corporation, was recently
incorporated for the purpose of the Merger. All of the outstanding capital stock
of Merger Sub is owned by Offeror.
Until, with respect to Offeror, immediately prior to the time it purchases
Shares pursuant to the Offer, and, with respect to Merger Sub, immediately prior
to the Merger, it is not anticipated that Offeror or Merger Sub will have any
significant assets or liabilities or engage in activities other than those
incidental to their formation and capitalization and the transactions
contemplated by the Offer
12
<PAGE> 15
and the Merger. Since Offeror and Merger Sub are newly formed and have minimal
assets and capitalization, no meaningful financial information is available with
respect to either of them.
Parent is a holding company which, through its subsidiaries and related
companies, engages in the design, manufacture and marketing of process
automation and building control systems, temperature and appliance controls and
engineered industrial equipment.
The principal executive offices of Offeror and Merger Sub are located at
1013 Centre Road, Wilmington, Delaware 19805. The principal executive offices of
Parent are located at Saxon House, 2-4 Victoria Street, Windsor, Berkshire SL4
1EN, United Kingdom.
The name, business address, past and present principal occupations and
citizenship of each of the directors and executive officers of Offeror and
Parent are set forth in Annex I to this Offer to Purchase.
Set forth below is certain summary consolidated financial information with
respect to Parent. The summary below is qualified in its entirety by reference
to Parent financial information contained in Parent's 1997 Annual Report and
Accounts and 1997 Interim Report filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 with respect to the Offer filed by the Offeror and
Parent (the "Schedule 14D-1") which may be inspected and copies obtained at the
offices of the Commission as set forth in Section 8 (except that they will not
be available at the regional offices of the Commission), and such financial
information and related notes are incorporated herein by reference.
Neither Offeror nor Parent is subject to the informational filing
requirements of the Exchange Act. Offeror does not file reports or other
information with the Commission relating to its business, financial condition or
other matters. Parent files certain reports (including its Annual Report and
Accounts) and information pursuant to Rule 12g3-2(b)(1) under the Exchange Act,
which may be inspected and copies obtained at the offices of the Commission set
forth in Section 8 (except that they will not be available at the regional
offices of the Commission). In addition, stockholders of the Company may also
obtain copies of Parent's 1997 and 1996 Annual Reports and Accounts and 1997
Interim Report by contacting the Corporate Secretary of Parent at Parent's
principal executive offices in the United Kingdom set forth above.
Parent's consolidated financial statements have been prepared in accordance
with United Kingdom accounting practices ("UK GAAP") which practices are
described in the notes to such statements. UK GAAP are not the same as generally
accepted accounting principles in the United States ("US GAAP"). Parent has not
determined its financial position or results of operations for any period under
US GAAP. See Annex II hereto for a description of the material differences
between UK GAAP and US GAAP. Offeror believes that the differences between US
GAAP and UK GAAP are not, for purposes of this Offer, material to a decision by
a stockholder of the Company whether to sell, tender or hold any Shares since
any such differences would not affect the ability of Offeror to obtain all funds
necessary to pay for Shares to be acquired pursuant to the Offer and the Merger.
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, FISCAL YEAR ENDED
------------------------------------- --------------------------------------------------------
APRIL 5, APRIL 5, APRIL 6, APRIL 1,
1997* 1997* 1996* 1997 1997 1996 1995
--------------- -------- -------- --------------- -------- ---------------- --------
(US DOLLARS (POUNDS STERLING (US DOLLARS (POUNDS STERLING
IN MILLIONS)(2) IN MILLIONS) IN MILLIONS)(2) IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED PROFIT AND
LOSS ACCOUNT DATA:
Sales................... 2,747.5 1,706.5 1,471.4 4,838.5 3,005.3 2,599.1 2,146.2
Profit on ordinary
activities before
taxation.............. 356.9 221.7 190.4 682.8 424.1 331.1 275.1
Taxation on ordinary
activities............ (127.8) (79.4) (71.4) (252.6) (156.9) (126.8) (108.7)
Profit on ordinary
activities after
taxation.............. 229.1 142.3 119.0 430.2 267.2 204.3 166.4
Minority interests...... (8.7) (5.4) (6.9) (21.6) (13.4) (11.3) (6.1)
Attributable to Siebe... 220.4 136.9 112.1 408.6 253.8 193.0 160.3
CONSOLIDATED BALANCE SHEET
DATA (AT END OF PERIOD):
Cash at bank and in
hand.................. 403.0 250.3 270.3 339.4 210.8 282.3 280.1
Current assets excluding
cash.................. 2,826.7 1,755.7 1,435.7 2,265.3 1,407.0 1,240.3 1,113.0
Fixed assets............ 2,807.4 1,743.7 1,542.3 2,467.2 1,532.4 1,423.7 1,210.8
Current liabilities..... (1,809.3) (1,123.8) (869.3) (1,530.2) (950.4) (832.5) (809.3)
Other liabilities....... (2,060.7) (1,279.9) (1,116.1) (1,693.4) (1,051.8) (972.4) (749.4)
-------- -------- -------- -------- -------- ------- -------
BALANCE SHEET TOTAL....... 2,167.1 1,346.0 1,262.9 1,848.3 1,148.0 1,141.4 1,045.2
======== ======== ======== ======== ======== ======= =======
Capital and reserves.... 1,951.2 1,211.9 1,106.4 1,636.7 1,016.6 1,062.3 966.2
Minority interests...... 215.9 134.1 156.5 211.6 131.4 79.1 79.0
-------- -------- -------- -------- -------- ------- -------
BALANCE SHEET TOTAL....... 2,167.1 1,346.0 1,262.9 1,848.3 1,148.0 1,141.4 1,045.2
======== ======== ======== ======== ======== ======= =======
</TABLE>
- ---------------
* Unaudited.
(1) See Annex II for a description of certain differences between UK GAAP and US
GAAP.
(2) Pounds Sterling ("L") are translated into U.S. Dollars at L1 - $1.61, the
Noon Buying Rate on September 30, 1997.
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares (including Shares covered by options (other than Out of the
Money Options outstanding at April 15, 1998)) are tendered to and purchased by
Offeror, the aggregate purchase price and all estimated commissions, fees and
expenses will be approximately $162.5 million. Offeror intends to obtain all of
such funds from Parent which in turn would obtain such funds from Parent's
existing working capital, from drawings under Parent's currently existing
unsecured $1.5 billion revolving credit facility arranged by Bankers Trust
Company, Natwest Capital Markets Limited and SBC Warburg and from proceeds from
the exercise of the Company's outstanding stock options. As of the close of
business on April 20, 1998, the undrawn amount available to Parent under the
Banker's Trust facility was approximately $183.4 million. Amounts drawn under
the facility are unsecured, bear interest at an effective rate of 5.9% (as of
April 20, 1998) and mature on November 29, 2000. The Parent believes that all
such borrowings will be repayable from its operations and subsequent
refinancings which may be entered into from time to time in the ordinary course
of business. The Offer is not conditioned on the Offeror or Parent obtaining any
financing.
Parent will effect loans or contributions to capital in order to make funds
available to Offeror, as determined by Parent. Parent will prepare
documentation, on terms and conditions satisfactory to
14
<PAGE> 17
Parent and customary in such loans between Parent and its subsidiaries, to
evidence such intercompany loans or contributions to capital.
11. BACKGROUND OF OFFER.
The Company engages in lines of business similar or complimentary to those
of Parent and its affiliates. Accordingly, Parent and its affiliates have
followed the business activities of the Company for some time.
In October 1997, the Company's Executive Vice President of Sales, Marketing
and Engineering Services, Dirk Pfeiffer, met with Mark Davidson, the Director of
Product Marketing of The Foxboro Company ("Foxboro"), an affiliate of Siebe, at
the Company's principal executive offices in Brea, California to discuss
generally, and exchange information regarding, their respective businesses,
technology and products.
In December 1997, Morgan Stanley contacted Parent to discuss the advantages
of a business combination between Parent and the Company. Morgan Stanley advised
Parent that it had not been retained by, nor had it engaged in any discussions
with, the Company with respect to any such transaction. Thereafter, Morgan
Stanley and Parent periodically discussed the advantages of a business
combination between Parent and the Company.
On February 13, 1998, Gary Foster, President, Software Services and
Corporate Marketing of Foxboro, telephoned Mr. Harris to discuss the possibility
of a strategic alliance with the Company, including a possible joint venture
relationship.
On March 3, 1998, Mr. Harris and other representatives of the Company met
with representatives of Siebe, including Bruce Robinson, President of Foxboro,
in Houston, Texas. At the meeting, both companies discussed their respective
businesses, products and growth strategies. The parties noted the synergies
between their respective technologies and discussed the possibility of a
strategic technology alliance, including the possibility of Foxboro becoming a
member of the Company's group of engineering service providers.
On March 26, 1997, Mr. Harris telephoned Mr. Robinson to indicate the
Company's willingness to continue their discussions regarding a strategic
alliance, and indicated a willingness on the Company's part to pursue a possible
expansion of that relationship.
On March 27, 1998, Allen Yurko, Managing Director and Chief Executive
Officer of Siebe, spoke with Mr. Harris and discussed a possible acquisition of
the Company by Siebe and shared with Mr. Harris his views on the general
structure of such a transaction and the role that the Company would play in the
combined entity. On March 31, 1997, Dr. George W. Sarney, President and Chief
Operating Officer of the Control Systems Division of Siebe, telephoned Mr.
Harris at which time they agreed to set a date to have more in-depth discussions
regarding a possible combination and to further conduct due diligence.
On April 7, 1998, representatives of the Company, including Mr. Harris,
Robert E. Grice, Jr., Executive Vice President, Finance and Chief Financial
Officer of the Company, and key technical personnel, and DRW met with
representatives of Siebe, including Dr. Sarney and Mr. Robinson, and Morgan
Stanley & Co. Incorporated, Siebe's financial advisor ("Morgan Stanley"), in
Orange County, California to discuss a possible acquisition of the Company by
Siebe. Prior to the meeting, Parent and the Company executed a Mutual
Nondisclosure Agreement, effective as of April 7, 1998, that required Parent and
its representatives to maintain certain confidential information provided to
them by or on behalf of the Company confidential and also included customary
standstill restrictions. At the meeting, the Company provided Siebe with
financial information about the Company, including non-public information
regarding the Company's preliminary operating results for the quarter ended
March 31, 1998, as well as information regarding its business, products and
strategies. At the meeting, Dr. Sarney indicated Siebe's continued desire to
acquire the Company and indicated that, subject to its due diligence review,
including a review of the Company's preliminary revised and
15
<PAGE> 18
reduced forecast for the 1998 fiscal year, it intended to propose a cash offer
for the Company on April 10, 1998. Early in the morning on April 10, 1998, the
Company provided Parent with its revised and reduced forecast for the 1998
fiscal year.
From April 8, 1998 to April 14, 1998, Siebe and its legal and financial
advisors conducted legal, financial and technical due diligence of the Company.
On April 9, 1998, legal counsel for Siebe sent a draft Merger Agreement and
draft Stock Option Agreement to legal counsel for the Company.
On April 10, 1998, Morgan Stanley contacted DRW and indicated that, subject
to further due diligence review, including an analysis of the Company's
preliminary revised and reduced estimate for the 1998 fiscal year, Siebe was
prepared to offer $10.00 in cash per share of the Company.
Thereafter, commencing on April 10, 1998 and continuing through the early
morning on April 15, 1998, the Company and Parent and their respective legal and
financial advisors engaged in negotiations with respect to a possible
acquisition of the Company by Parent.
On April 13, 1998, Siebe informed the Company that it would withdraw its
proposal to acquire the Company if a definitive acquisition agreement was not
executed prior to the opening of the U.S. trading markets on April 15, 1998.
The Merger Agreement and the Stock Option Agreement were executed and
delivered in the early morning on April 15, 1998.
Following the Offer and the Merger, Parent intends to operate the Company
on a basis generally consistent with the Company's existing plans and programs.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
Purpose. The purpose of the Offer and the Merger is for Offeror to acquire
control of, and the entire equity interest in, the Company. The purpose of the
Merger is for Offeror to acquire all Shares not purchased pursuant to the Offer.
Upon consummation of the Merger, the Company will become a wholly owned
subsidiary of Offeror. The Offer is being made pursuant to the Merger Agreement.
Approval. Under the Delaware General Corporation Law (the "DGCL"), the
approval of the Board of Directors of the Company and the affirmative vote of
the holders of a majority of the outstanding Shares are required to approve and
adopt the Merger Agreement and the transactions contemplated thereby, including
the Merger. The Board of Directors of the Company has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby, and,
unless the Merger is consummated pursuant to the short-form merger provisions
under the DGCL described below, the only remaining required corporate action of
the Company is the approval and adoption of the Merger Agreement and the
transactions contemplated thereby by the affirmative vote of the holders of a
majority of the Shares. Accordingly, if the Minimum Condition is satisfied,
Offeror will have sufficient voting power to cause the approval and adoption of
the Merger Agreement and the transactions contemplated thereby without the
affirmative vote of any other stockholders.
Stockholder Meetings. In the Merger Agreement, the Company has agreed to
take all action necessary to convene a meeting of its stockholders as soon as
practicable after the consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby, if such action is required by the DGCL. Parent has agreed that all
Shares owned by it or any of its subsidiaries (including Offeror) will be voted
in favor of the Merger Agreement and the transactions contemplated thereby. The
Company has also agreed to postpone the holding of its Annual Meeting of
Stockholders indefinitely pending consummation of the Merger unless the Company
is otherwise required to hold such meeting by Delaware Law.
Board Representation. If Offeror purchases at least a majority of the
outstanding Shares pursuant to the Offer, the Merger Agreement provides that the
Company shall increase the size of
16
<PAGE> 19
its Board of Directors to seven (7) members and Offeror will be entitled to
designate representatives to serve on the Board in the same proportion as the
proportion of Shares beneficially owned by Parent and its subsidiaries
(including Offeror) following such purchase. See Section 13. Parent currently
intends to designate a majority of the directors of the Company following
consummation of the Offer. It is currently anticipated that Parent will
designate Allen M. Yurko, Dr. George W. Sarney, Roger Mann, Colin P. Bonsey
and/or James C. Bays, or such other persons listed on Annex I as Parent shall
determine, to serve as directors of the Company following consummation of the
Offer. See Annex I. Offeror expects that such representation would permit
Offeror to exert substantial influence over the Company's conduct of its
business and operations.
Short Form Merger. Under the DGCL, if Offeror acquires, pursuant to the
Offer, at least 90% of the outstanding Shares, Offeror will be able to approve
the Merger without a vote of the Company's stockholders. In such event, Parent
and Offeror anticipate that they will take all necessary and appropriate action
to cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's stockholders. If, however,
Offeror does not acquire at least 90% of the outstanding Shares pursuant to the
Offer or otherwise and a vote of the Company's stockholders is required under
the DGCL, a significantly longer period of time would be required to effect the
Merger. Pursuant to the Merger Agreement the Company has agreed to take all
action necessary under the DGCL and its certificate of incorporation and by-
laws to convene a meeting of its stockholders promptly following consummation of
the Offer to consider and vote on the Merger, if a stockholders' vote is
required.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders will have certain
rights under the DGCL to dissent and demand appraisal of, and to receive payment
in cash of the fair value of, their Shares. Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares, as of the day prior to the date on which the
stockholders' vote was taken approving the Merger or similar business
combination (excluding any element of value arising from the accomplishment or
expectation of the Merger), required to be paid in cash to such dissenting
holders for their Shares. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things,
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in an appraisal proceeding. Therefore, the value so determined in
any appraisal proceeding could be the same as, or more or less than, the
purchase price per Share in the Offer or the Merger consideration.
In addition, several decisions by Delaware courts have held that, in
certain circumstances, a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant
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to the Offer or otherwise in which Offeror seeks to acquire the remaining Shares
not held by it. Offeror believes, however, that Rule 13e-3 will not be
applicable to the Merger, if the Merger is consummated within one year after the
Expiration Date at the same per Share price as paid in the Offer. If applicable,
Rule 13e-3 requires, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to consummation of the transaction.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Company substantially as they
are currently being conducted. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period. Thereafter, Parent
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential in conjunction with Parent's
businesses, particularly the businesses conducted by Foxboro.
Confidentiality; Standstill. In connection with granting Parent and its
representatives access to certain confidential information of the Company,
Parent executed a Mutual Disclosure Agreement with the Company, dated as of
April 7, 1998 (the "Confidentiality Agreement"). Among other things, the
Confidentiality Agreement provides that, beginning on the date of the
Confidentiality Agreement and ending twelve (12) months after the date on which
Parent or the Company provides notice that it has decided not to proceed with a
transaction between the parties, neither Parent nor the Company (nor their
affiliates) will, without the prior written consent of the other party's Board
of Directors, do any of the following (the "Standstill Provisions"): (a) acquire
or agree, offer, seek or propose to acquire, or cause to be acquired, ownership
of any of the other party's assets (other than in the ordinary course of
business) or businesses or any voting securities issued by the other party, or
any rights to acquire such ownership; (b) make or participate in any
solicitation of proxies or consents with respect to any securities of the other
party that may be entitled to vote in the election of the other party's
directors, or seek to influence any person with respect to the voting of any
such securities, or become a participant in an election contest with respect to
the other party, or demand a copy of the other party's stock ledger, list of
stockholders or other books and records, or attempt to call any meeting of the
stockholders of the other party; or (c) enter into any discussions or
arrangements with any third parties with respect to any of the foregoing. Those
provisions shall not apply if another person (including the Company) commences a
tender offer for, or publicly discloses a transaction to acquire, at least 50%
of the Company's securities (the "Standstill Proviso").
The Company waived the Standstill Provisions with respect to the Offer and
the Merger, and such restrictions shall not apply following consummation of the
Offer. In addition, in the Merger Agreement, the Company has agreed that,
notwithstanding the Standstill Provisions, if any third party commences an
Alternative Acquisition (defined below) involving a change of control in the
Company or its business then, provided the Merger Agreement has been terminated,
Parent and its affiliates may propose or present any offer or offers, or take
other action it deems appropriate, in response thereto. See Section 13,
"Non-Solicitation Obligations; Bona Fide Offers," below.
Extraordinary Corporate Transactions. Except as indicated in this Offer to
Purchase, neither Parent nor Offeror have any present plans or proposals which
relate to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company or any subsidiary,
a sale or transfer of a material amount of assets of the Company or any
subsidiary or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business, or the composition of the Company's Board of Directors or management.
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13. THE TRANSACTION DOCUMENTS.
The Merger Agreement
Commencement. The Merger Agreement provides for the commencement of the
Offer not later than five business days after the execution of the Merger
Agreement, provided that the Merger Agreement has not theretofore been
terminated pursuant to its terms. Parent, Offeror and the Company are required
to use all reasonable efforts to take all action as may be necessary or
appropriate in order to effectuate the Offer and the Merger as promptly as
possible and to carry out the transactions provided for or contemplated by the
Merger Agreement.
Merger. The Merger Agreement provides that, as soon as practicable after
expiration of the Offer and the receipt of any required approvals and adoption
of the Merger Agreement by the stockholders of the Company, to the extent
required by the DGCL, and the satisfaction or waiver, if possible, of certain
other conditions contained in the Merger Agreement, Merger Sub (or another
direct or indirect Delaware subsidiary of Parent) will be merged with and into
the Company (the "Merger"), with the Company continuing as the surviving
corporation (the "Surviving Corporation") in the Merger under the corporate name
it possesses immediately prior to the effective time of the Merger (the
"Effective Time"). Notwithstanding the foregoing, the parties to the Merger
Agreement have agreed that Offeror may revise the structure of the Merger
(including merging the Company into Merger Sub or merging the Company with or
into another direct or indirect wholly-owned subsidiary of Parent) provided that
any such restructuring does not (i) cause a failure of a condition to the Offer
or the Merger, (ii) adversely affect the stockholders of the Company and (iii)
cause the Company to breach its representations and warranties under the Merger
Agreement.
Vote Required to Approve Merger. In the Merger Agreement, the Company has
agreed, if required by the DGCL, in order to consummate the Merger, to take all
action necessary in accordance with the DGCL to convene a meeting of its
stockholders promptly following consummation of the Offer for the purpose of
considering and approving the Merger. The Company, acting through its Board of
Directors, has further agreed that if a stockholders' meeting is convened, the
Board of Directors shall recommend that stockholders of the Company vote in
favor of the Merger and that such recommendation shall not be withdrawn or
adversely modified except by resolution of the directors who are directors of
the Company on the date of the Merger Agreement (the "Continuing Directors")
adopted in the exercise of applicable fiduciary duties, after consultation with
counsel. In the event that proxies are to be solicited from the Company's
stockholders, the Company shall, if and to the extent requested by Offeror, use
its best efforts to solicit from stockholders of the Company proxies in favor of
the Merger, and to take all other reasonable action necessary or, in the opinion
of Offeror, helpful to secure the vote of its stockholders in favor of the
Merger. At any such meeting, all of the Shares then owned by Parent, Offeror or
any subsidiary of Parent, and all Shares for which the Company has received
proxies to vote, will be voted in favor of the Merger.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be cancelled and extinguished and
each Share (other than Shares held in the treasury of the Company, Shares held
by Parent or any subsidiary thereof, and Shares with respect to which appraisal
rights are properly exercised ("Dissenting Shares")) shall, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of the Shares, be converted into the right to receive the Offer Price
upon the surrender of the certificate formerly representing such Share. Each
share of common stock of Merger Sub issued and outstanding immediately prior to
the Effective Time shall, at the Effective Time, by virtue of the Merger and
without any action on the part of Merger Sub, the Company or the holders of
Shares, be converted into and shall thereafter evidence one validly issued and
outstanding share of common stock of the Surviving Corporation.
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<PAGE> 22
Treatment of Stock Option Plans and Stock Purchase Plans. Following the
purchase of Shares pursuant to the Offer, the unvested portion of all
outstanding stock options, warrants or other rights to acquire shares under the
Company's 1994 Stock Option Plan, 1996 Stock Plan, 1996 Director Option Plan or
any other agreement or arrangement (collectively, the "Stock Plans") shall
automatically accelerate in accordance with the terms of the Stock Plans (the
"Accelerated Options"). In lieu of exercising such Accelerated Options, each
holder of an Accelerated Option shall, upon surrender for cancellation of the
same to the Company on or before the Effective Time, be entitled to receive from
the Company for each Share subject to such Accelerated Option an amount in cash
equal to the excess, if any, of (a) the product of the number of Shares covered
by such Accelerated Options multiplied by the Offer Price, over (b) the product
of the number of Shares covered by such Accelerated Options multiplied by the
per-Share exercise, purchase or conversion price payable upon exercise, purchase
or conversion, subject to any required withholding taxes. Any outstanding stock
options or warrants that shall not have been so exercised or surrendered for
payment shall terminate at the Effective Time.
Also in the Merger Agreement, the Company has agreed to amend its 1996
Employee Stock Purchase Plan for U.S. Employees and its 1996 Employee Stock
Purchase Plan for non-U.S. employees (together, the "Employee Stock Purchase
Plans") so that (a) any Shares to be purchased under the Employee Stock Purchase
Plans will be purchased no later than the last trading day immediately prior to
the consummation of the Offer, and (b) immediately following such purchase, each
of the Employee Stock Purchase Plans will terminate.
Except as set forth above, the Company has agreed in the Merger Agreement
not to modify or accelerate the exercisability of any stock options, rights or
warrants presently outstanding, or to amend, change or waive (or exempt any
person from the effect of) the Rights Agreement, except in the exercise of the
fiduciary duties of its Board of Directors after consultation with counsel.
Conditions to Obligations of All Parties to the Merger. The obligations of
each of the parties to effect the Merger following completion of the Offer are
subject to the following conditions:
(i) The Merger shall have been approved and adopted by the vote of the
stockholders of the Company to the extent required by the DGCL;
(ii) All waiting, review and investigation periods (and any extension
thereof) applicable to the consummation of the Merger under the Hart-Scott
Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act") shall have expired or been terminated;
(iii) There shall have been no law, statute, rule or order, domestic
or foreign, enacted or promulgated which would make consummation of the
Merger illegal;
(iv) No injunction or other order entered by a United States (state or
federal) court of competent jurisdiction shall have been issued and remain
in effect which would prohibit consummation of the Merger;
(v) The Merger Agreement shall not have been terminated as provided
therein (see Section 13, "Merger Agreement -- Termination," below); and
(vi) Offeror shall have been required to purchase Shares pursuant to
the Offer.
Schedule 14D-9. In the Merger Agreement, the Company has agreed that
simultaneously with, or as promptly as possible after, the commencement of the
Offer, it will file with the Commission and promptly mail to its stockholders, a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
containing the recommendation of the Board of Directors that the Company's
stockholders accept the Offer, tender their Shares thereunder to Offeror and, if
required by applicable law, approve the Merger; provided, that such
recommendation may not be withdrawn or modified except by resolution of the
Board of Directors adopted in the exercise of its fiduciary duties after
consultation with counsel.
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<PAGE> 23
Board of Directors. The Merger Agreement provides that promptly upon the
payment by Offeror or any of Parent's direct or indirect subsidiaries pursuant
to the Offer for such number of Shares which represents at least a majority of
the outstanding Shares, the Company shall increase the size of its Board of
Directors to seven (7) members, and Offeror shall be entitled to designate
members of the Board of Directors such that Offeror, subject to the provisions
of Section 14(f) of the Exchange Act, will have a number of representatives on
the Board of Directors, rounded up to the next whole number, equal to the
product obtained by multiplying seven (7) by the percentage of Shares
beneficially owned by Parent and any of its subsidiaries. The Company has
agreed, upon the request of Offeror, to promptly increase the size of the Board
of Directors as permitted in accordance with the Certificate of Incorporation of
the Company and/or use its reasonable efforts to secure the resignations of such
number of directors as is necessary to enable Offeror's designees to be elected
to the Board of Directors and has agreed to use its best efforts to cause
Offeror's designees to be so elected. Notwithstanding the foregoing, if
Offeror's designees at any time prior to the Effective Time constitute a
majority of the Company's Board of Directors of the Company, then the Board of
Directors shall have at least two Continuing Directors. The Company has agreed,
at the request of Offeror and at its expense, to take all actions necessary to
effect the foregoing, including the mailing to its stockholders of the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, in form and substance reasonably satisfactory to Offeror
and its counsel.
Parent currently intends to designate a majority of the directors of the
Company following consummation of the Offer. It is currently anticipated that
Parent will designate Allen M. Yurko, Dr. George W. Sarney, Roger Mann, Colin P.
Bonsey and/or James C. Bays, or such other persons listed on Annex I as Parent
shall determine, to serve as directors of the Company following consummation of
the Offer. See Annex I.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent, Offeror and Merger Sub,
including, but not limited to, representations and warranties relating to the
Company's organization and qualification, capitalization and authority to enter
into the Merger Agreement and the Stock Option Agreement (defined and discussed
under Section 13, "Stock Option Agreement," below) and carry out the
transactions contemplated thereby, the Company's subsidiaries, Commission
filings (including financial statements), the documents supplied by the Company
relating to the Offer, required consents and approvals, employee benefit plans,
litigation, the material liabilities of the Company and its subsidiaries,
environmental matters relating to the Company and its subsidiaries, labor
matters, trademarks, patents and other intellectual property, the payment of
taxes, arrangements with financial advisors, the Rights Agreement, the absence
of product liability claims, related party transactions, and the absence of
certain material adverse changes or events since December 31, 1997. The Company
has also represented that it has taken or will take all action necessary to
render Section 203 of the DGCL (see Section 16, "State Takeover Laws," below)
and the Rights Agreement inapplicable to Parent, Offeror or Merger Sub solely by
virtue of the Offer, the Merger, the Merger Agreement, the Stock Option
Agreement, the purchase of Shares pursuant to the Offer, the Merger or the Stock
Option Agreement, and the transactions contemplated thereby or therein. The
Company has also represented that the aggregate fees and expenses payable by the
Company and its subsidiaries in respect of the Merger Agreement and the
transactions contemplated thereby to any of its advisors will not exceed
$3,000,000, as long as the transactions are consummated without any related
litigation, and excluding any fees and expenses relating to certain antitrust
matters.
Parent, Offeror and Merger Sub have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to Parent's, Offeror's and Merger Sub's organization and
qualification, their authority to enter into the Merger Agreement and the Stock
Option Agreement and consummate the Offer and the Merger, required
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<PAGE> 24
consents and approvals, documents related to the Offer, the applicability of
certain margin rules and the availability of sufficient financing to consummate
the Offer.
Conduct of Company's Business Pending Merger. Pursuant to the Merger
Agreement, the Company has agreed that, prior to the Effective Time, unless
Offeror shall otherwise have agreed in writing or as otherwise contemplated by
the Merger Agreement, the Company will do the following:
(i) carry on the business of the Company and its subsidiaries only in,
and will maintain its and its subsidiaries facilities in, the ordinary
course of business and consistent with past practice;
(ii) use its reasonable efforts and shall cause its subsidiaries to
use reasonable efforts, to preserve intact their respective business
organizations and goodwill, keep available the services of their current
officers and employees as a group and maintain satisfactory relationships
with customers, suppliers, distributors and others having business dealings
with them;
(iii) as requested by Offeror and Merger Sub, confer on a regular and
frequent basis with representatives of Offeror and Merger Sub to report
operational matters and the general status of ongoing operations;
(iv) not take any action which would cause, or which reasonably may be
expected to cause, a failure to satisfy the conditions described in clause
(e) of Section 15, below; and
(v) notify Offeror and Merger Sub of any emergency or other change in
the normal course of the Company's or any of its subsidiaries' business or
in the operation of the Company's or the subsidiaries' properties and of
any governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would, individually
or in the aggregate, have a material adverse effect on the business,
revenues, assets, operations or financial conditions of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect") or would
reasonably be expected to impair any party's ability to consummate the
transaction contemplated by the Merger Agreement.
The Company has also agreed pursuant to the Merger Agreement that, prior to
the Effective Time, it will not directly or indirectly do, or permit any of its
subsidiaries to do, any of the following:
(i) issue, sell, pledge, dispose of or encumber (or permit any of its
subsidiaries to issue, sell, pledge, dispose of or encumber) any shares of,
or any options, warrants, conversion privileges or rights of any kind to
acquire any shares of any capital stock of the Company or any of its
subsidiaries (other than shares issuable upon exercise of the outstanding
(as of the date of the Merger Agreement) options or rights under the
Employee Stock Purchase Plans to acquire Shares in accordance with their
terms in effect on the date of the Merger Agreement);
(ii) amend or propose to amend the Certificate or Articles of
Incorporation or By-Laws of the Company or any of its subsidiaries;
(iii) split, combine or reclassify any outstanding Shares, or declare,
set aside or pay any dividend or other distribution payable in cash, stock,
property or otherwise with respect to the Shares other than pursuant to the
Rights Agreement;
(iv) other than pursuant to the Rights Agreement, redeem, purchase or
acquire or offer to acquire (or permit any of its subsidiaries to redeem,
purchase or acquire or offer to acquire) any Shares or other securities of
the Company or any of its subsidiaries other than as contemplated by the
Merger Agreement and other than for the repurchase by the Company, pursuant
to existing agreements, of any outstanding Shares upon termination of any
employment, director or consulting relationship with the Company; or
(v) enter into or materially modify any agreement, commitment or
arrangement with respect to any of the foregoing.
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Pursuant to the Merger Agreement, the Company has agreed that neither the
Company nor any of the subsidiaries will:
(i) sell, pledge, lease, dispose of or encumber any material assets
other than in the ordinary course of business consistent with past
practice;
(ii) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, partnership or other business organization
or enterprise or material assets thereof;
(iii) incur any indebtedness for borrowed money or issue any debt
securities except for borrowings in the ordinary course of business and
consistent with past practice;
(iv) guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person (other than a subsidiary of the Company or the Company) except
in the ordinary course of business consistent with past practice and in
amounts immaterial to the Company;
(v) enter into or materially modify any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(vi) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers or directors;
(vii) in the case of employees who are not officers or directors, take
any action other than in the ordinary course of business consistent with
past practice (none of which actions shall be unreasonable or unusual) with
respect to the grant of any bonuses, salary increases, severance or
termination pay or with respect to any increase of benefits in effect on
the date of the Merger Agreement; or
(viii) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust fund or arrangement for the benefit
or welfare of any employee.
In addition, the Company has agreed that it will not (i) except as is
necessary after consultation with counsel to comply with fiduciary duties of the
Board of Directors of the Company, call any meeting (other than as contemplated
by the Merger Agreement) of its stockholders or waive or modify any provision
of, or terminate any, confidentiality or standstill agreement entered into by
the Company with any person; and (ii) except as expressly contemplated in the
Merger Agreement, modify or accelerate the exercisability of any stock options,
rights or warrants presently outstanding, and shall not amend, change or waive
(or exempt any person from the effect of) the Rights Agreement, except in the
exercise of the fiduciary duties of the Company's Board of Directors or as
expressly contemplated by the Merger Agreement.
The Company has also agreed that neither it nor any of its subsidiaries
will: (i) adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; or (ii) make any material tax
election or settle or compromise any material federal, state, local or foreign
tax liability, except in the ordinary course of business consistent with past
practice. In addition, the Merger Agreement also requires the Company to use its
reasonable efforts to cause its current insurance (or reinsurance) policies not
to be cancelled or terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums are
in full force and effect.
Non-Solicitation Obligations; Bona Fide Offers. The Company agreed in the
Merger Agreement to immediately cease and terminate any existing activities,
discussions or negotiations with any parties with respect to any acquisition of
or sale of any equity interest in or substantial assets of the Company or any of
its subsidiaries. Also, from the date of the Merger Agreement until the
Effective
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Time or the termination of the Merger Agreement, the Company will not, directly
or indirectly, through any of its affiliates, officers, directors or agents, or
otherwise solicit, initiate, entertain or encourage any proposals or offers from
any other person other than Parent or its affiliates (a "third party") relating
to any possible acquisition of the Company or any of its subsidiaries (whether
by way of merger, purchase of capital stock, purchase of assets, or otherwise)
(an "Alternative Acquisition"), or engage in any recapitalization or sale of any
equity interest in or sale or assignment of substantial assets of the Company or
any of its subsidiaries (other than pursuant to the exercise of options and
Rights outstanding on the date of the Merger Agreement or granted afterwards
with Parent's written permission) to a third party (an "Equity Transaction"),
nor will the Company participate in any negotiations regarding, or furnish to
any third party any information with respect to, or otherwise cooperate with,
facilitate or encourage any effort or attempt by any third party to do or seek
an Alternative Acquisition or Equity Transaction ("Non-Solicitation
Obligations").
However, notwithstanding the Company's Non-Solicitation Obligations, the
Company may negotiate with or furnish information to a third party that provides
a "Bona Fide Offer," provided that the Company first notifies the Parent in
writing of its receipt of such proposal and of its material terms. A "Bona Fide
Offer" means any bona fide proposal made by a third party with respect to an
Alternative Acquisition on terms which the Board of Directors of the Company
determines in its good faith judgment (after consultation with its outside
financial advisors) to be more favorable to the Company's stockholders than the
Offer and the Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of the
Company (after consultation with its outside financial advisors) is highly
probable of being obtained by such third party. In addition, the Company may
terminate this Agreement and accept such Bona Fide Offer upon the payment to
Parent of the Termination Fee (defined under "Expenses; Termination Fee" below).
Indemnification. Parent has agreed in the Merger Agreement to cause the
Surviving Corporation to maintain, for three years from the date Parent, Offeror
and Merger Sub together acquire a majority of the Shares, all rights to
indemnification existing in favor of the directors, officers, employees and
agents of the Company pursuant to the Company's By-Laws at or prior to the
Effective Time, unless required by law. Parent has also agreed in the Merger
Agreement to use its reasonable efforts to cause the Surviving Corporation to
maintain in full force and effect for a period of at least three years from the
Effective Time directors' and officers' liability insurance with limits of at
least those currently in place containing terms and provisions comparable to the
terms and provisions of the current policy maintained by the Company, for the
benefit of existing and former officers, directors, employees and agents of the
Company, but the Surviving Corporation shall only be liable for annual premiums
of no more than 30% greater than that incurred by the Company on the date of the
Merger Agreement. Parent has further agreed that, from and after the
consummation of the Offer, it will fulfill and honor, and it will cause the
Company to fulfill and honor, all obligations of the Company pursuant to each
indemnification agreement in effect at such time between the Company and each
person who is or was a director, officer, employee or agent of the Company at or
prior to such time. Parent has further agreed to assume the foregoing
indemnification obligations during any period of time in which the Surviving
Corporation fails or is unable to perform such obligations.
Employment Agreements. In addition, Parent has agreed that it will cause
the Company or its successors to honor without modification all employment
agreements and severance agreements and policies in effect prior to the date of
the Merger Agreement between the Company and any employee of the Company. The
Company has advised Offeror that the Company has entered into separation
agreements with certain of its officers, including Charles R. Harris, its
President and Chief Executive Officer, and that, in connection with the Offer,
effective April 15, 1998, the Company's Board of Directors authorized an
amendment to the separation agreements (i) to extend the terms of the agreements
for one year, (ii) to provide (effective upon the purchase of Shares pursuant to
the Offer) for a six-month employment period during which the agreements will
not be
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<PAGE> 27
terminable by the Company except for cause, and (iii) to provide that, at the
end of such six-month period, each such agreement may be terminated by the
employee in his or her sole discretion and such employee shall be entitled to
severance payments under the agreement. Generally, such severance payments are
equal to six months salary. However, if the employee has not found new
employment at the end of six months, the employee may continue to receive his or
her salary for additional one month periods, not to exceed an additional six
months, until the employee has found new employment. Such obligation to pay
severance will terminate immediately if the officer accepts employment, directly
or indirectly, with a competitor of Foxboro or the Company's business.
Amendment to Preferred Shares Rights Agreement. Pursuant to the Merger
Agreement, the Company has agreed to effect an amendment to the Preferred Shares
Rights Agreement dated as of August 13, 1997 (the "Rights Agreement") entered
into between the Company and Harris Trust Company of California as Rights Agent
(the "Rights Agent") to exclude Parent and Affiliates and Associates (as such
terms are defined in the Rights Agreement), including Offeror and Merger Sub,
from the definition of "Acquiring Person" therein, with respect to the
beneficial ownership of the Shares which Parent, Offeror or any of their
respective Affiliates and Associates have obtained the right to acquire, or will
acquire, as a result of the transactions contemplated by the Merger Agreement
and the Stock Option Agreement. Such amendment has been effected by the
execution of a formal amendment to the Rights Agreement on April 17, 1998 (the
"Rights Amendment") by the Company and the Rights Agent, and the filing with the
Commission (and the effectiveness of) an amendment to the Company's Registration
Statement on Form 8-A on April 21, 1998 with respect to such Rights Amendment.
The Rights Amendment ensures that neither Parent, Offeror nor any of their
respective Affiliates and Associates will be considered an "Acquiring Person"
under the Rights Agreement, and prevents the occurrence of a "Distribution
Date," a "Shares Acquisition Date" or a "Triggering Event" (each as defined
therein) as a result of Offeror's acquisition of Shares upon consummation of the
Offer or Parent's or Offeror's acquisition of Shares, or rights to acquire same,
in connection with the Merger or otherwise pursuant to the Merger Agreement or
Stock Option Agreement or any of the transactions contemplated thereby.
Consents and Amendments. In the Merger Agreement, the Company has agreed
to use its commercially reasonable efforts to obtain, without the payment of any
fee or compensation, certain consents to the Offer, the Merger, and the
transactions contemplated by the Merger Agreement. Also, the Company has agreed
to use its best efforts to amend the Software License Agreement (the "Shell
License Agreement") dated September 15, 1997 by and between the Company and
Shell Oil Products Company, with Shell acting for itself and Shell Oil Company
(collectively "Shell"), on terms reasonably satisfactory to Parent.
Termination of Merger Agreement. The Merger Agreement provides grounds for
which it may be terminated at any time prior to the Effective Time, but only if
no Shares have been purchased pursuant to the Offer. The Merger Agreement may be
so terminated:
(a) by mutual consent of the Boards of Directors of Parent and the
Company;
(b) by either Offeror or the Company if the Offer shall not have been
consummated on or before October 31, 1998; provided, however, that a party
shall not be entitled to terminate the Merger Agreement pursuant to such
provision if such party is in material breach of its obligations under the
Merger Agreement;
(c) by Offeror if (i) the Company or any of its subsidiaries
authorizes, recommends or proposes, or has announced such an intention, or
has entered into an agreement with respect to, any Alternative Acquisition
or Equity Transaction, or the Company's board of directors withdraws or
adversely modifies its favorable recommendations with respect to the Offer
and the Merger, or any corporation, entity, "group" or "person" (as defined
in the Exchange Act) other than Parent, Offeror or the Merger Sub, acquires
beneficial ownership of more than 50% of the outstanding Shares, or (ii)
the Rights Amendment is not adopted by April 20, 1998 or does not remain in
full force and effect thereafter;
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(d) by Offeror upon any failure of any of the conditions to the Offer
set forth in Section 15 below; provided that if any and all such conditions
are and continue to be reasonably probable of being satisfied by the
thirtieth (30th) business day after commencement of the Offer, Offeror
shall not terminate the Merger Agreement as a result of such failures until
such thirtieth (30th) business day;
(e) by the Company if (i) the Offer has not commenced substantially in
accordance with its terms, or (ii) the Offer expires or is terminated
without any Shares having been purchased, or (iii) if a tender offer for
Shares is commenced by a person or entity, or the Company receives an offer
with respect to a merger, sale of assets or other business combination with
a person, any of which the Board of Directors determines, in the exercise
of its fiduciary duties and subject to its duties under the Merger
Agreement with respect to Bona Fide Offers, makes necessary or advisable
the termination of the Merger Agreement, or (iv) there has been a material
breach or failure to perform in any material respect by Parent, Offeror or
Merger Sub of any representation, warranty, covenant or other agreement
contained in the Merger Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to such
breaching party; or
(f) by Offeror if any governmental entity shall have issued an order,
decree or ruling or taken other action (in each case which is final and
nonappealable) permanently enjoining, restraining or otherwise prohibiting
acceptance or payment for Shares pursuant to the Offer or the Merger.
If the Merger Agreement is so terminated (a) the Merger Agreement will
become void and there will be no liability or further obligation on the part of
Parent, Offeror, Merger Sub or the Company or their respective stockholders,
officers or directors, except for expense reimbursement or payment of the
Termination Fee (discussed below), confidentiality obligations, and the
standstill obligations of the parties and (b) Offeror and Merger Sub shall
terminate the Offer, if still pending, without purchasing any Shares thereunder
and will not, subject to the Standstill Proviso of the of the Confidentiality
Agreement (see Section 12, "Confidentiality; Standstill," above), for a period
of two years following termination, commence a tender or exchange offer for any
capital stock of the Company without prior written consent of the Company.
Expenses; Termination Fee. The Merger Agreement provides that the Company
will pay Parent, upon demand, $7,250,000 (the "Termination Fee"), to compensate
Parent, Offeror and Merger Sub for taking actions to consummate the Merger
Agreement, to reimburse them for the time and expense relating thereto and for
other direct or indirect costs in connection with the transactions contemplated
by the Merger Agreement, if the Merger Agreement is terminated for any of the
following reasons and upon the conditions set forth in the Merger Agreement:
(A) the Company's acceptance of a Bona Fide Offer (see "Merger
Agreement -- Non-Solicitation Obligations; Bona Fide Offers," above);
(B) the determination by the Company's Board of Directors that such
termination is necessary or advisable given the commencement of a
third-party tender offer for the Shares or the receipt by the Company of an
offer with respect to a business combination transaction;
(C) the Company's pursuit of any Alternative Acquisition or Equity
Transaction, the withdrawal or adverse modification of the favorable
recommendations of the Company's Board of Directors with respect to the
Offer and the Merger, a third-party acquisition of beneficial ownership of
more than 50% of the outstanding Shares, or the failure to adopt the Rights
Amendment by April 20, 1998 or to maintain the Rights Amendment in full
force and effect thereafter; or
(D) any reason other than a material breach of the Merger Agreement by
Parent, Offeror or Merger Sub if within four months thereafter either (x) a
definitive agreement is entered into between the Company and any third
party for the acquisition or disposition of a material
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amount of assets or securities of the Company, or for a merger,
consolidation or other reorganization of the Company at a price equivalent
to a price per Share in excess of $10.00, and such transactions are
subsequently consummated at any time, or (y) any person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act) other than Offeror or
any affiliate of Offeror acquires or makes a public tender offer to acquire
beneficial ownership of at least 50% of the outstanding Shares at a price
per Share in excess of $10.00, and such transactions are consummated at any
time.
If the Company fails to pay the Termination Fee promptly when due, the
Company has agreed to pay to Parent all reasonable out-of-pocket costs and
expenses (including reasonable attorneys' fees and expenses) incurred by Parent
in connection with the collection of the Termination Fee, together with interest
from the date the Termination Fee was due until such time as payment is received
by Parent at the lesser of 10% per annum or the maximum rate permitted by law
(the "Interest Rate").
The Merger Agreement further provides that, in addition to any damages
caused by conduct that constitutes a breach under the Merger Agreement by either
Parent, Offeror and Merger Sub, on the one hand, and the Company, on the other
hand, the breaching party, jointly and severally, will pay to the nonbreaching
party all reasonable out-of-pocket costs and expenses it incurs in connection
with its enforcement of its rights under the Merger Agreement, together with
interest from the date such damages are incurred until such time as payment is
received by the nonbreaching party at the Interest Rate.
Consent of Continuing Directors to Termination, Modification, Amendment or
Waiver. Notwithstanding anything in the Merger Agreement to the contrary, the
affirmative vote of a majority of the Continuing Directors will be required to
terminate, amend, modify or waive any provision of the Merger Agreement on
behalf of the Company, or to approve any other action by the Company with
respect to the Offer or the other transactions contemplated by the Merger
Agreement, or the Certificate of Incorporation or By-Laws of the Company which
adversely affects the interests of the stockholders of the Company (other than
Parent, Offeror or Merger Sub) with respect to such transactions.
The Stock Option Agreement
Grant of Stock Option. Parent and the Company have entered into a Stock
Option Agreement, dated as of April 15, 1998 (the "Stock Option Agreement"),
pursuant to which the Company granted to Parent an option (the "Stock Option")
to purchase authorized and unissued shares of common stock of the Company
("Option Shares") in an aggregate amount of up to 15% of the Company's issued
and outstanding shares on the date of the Stock Option Agreement, at a price per
share equal to $10.00, payable in cash. The type and number of Option Shares and
the option exercise price will be adjusted to reflect any stock dividends,
split-ups, recapitalizations or the like. Further, if the Company enters into a
merger with another company in which the Company's shares of common stock are
converted into the right to receive cash, securities or other property, then the
Company will ensure that the Stock Option becomes an option to acquire the cash,
securities or other property that Parent would have received in such merger if
it had exercised the Stock Option immediately prior to such merger. The Company
has also agreed that, if at the time of issuance of any Option Shares, the
Company shall have issued any share purchase rights or similar securities to
holders of any class of the Company's common stock, then, subject to the terms
and conditions of any plan governing such rights or securities, each such Option
Share shall also represent rights that are substantially similar and at least as
favorable to Parent. The Stock Option may only be transferred to a direct or
indirect wholly-owned subsidiary of Parent who agrees to be bound by the terms
of the Option Agreement.
Exercise of Stock Option. The Stock Option will be triggered upon a
"Purchase Event," meaning the termination of the Merger Agreement in connection
with (A) the Company's
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acceptance of a Bona Fide Offer (see "Merger Agreement -- Non-Solicitation
Obligations; Bona Fide Offers," above), (B) the determination by the Company's
Board of Directors that such termination is necessary or advisable given the
commencement of a third-party tender offer for the Shares or the Company
receives an offer with respect to a business combination (see "Termination of
Merger Agreement," clause (e)(iii), above), or (C) the Company's pursuit of any
Alternative Acquisition or Equity Transaction, the withdrawal or adverse
modification of the favorable recommendations of the Company's Board of
Directors with respect to the Offer and the Merger, a third-party acquisition of
beneficial ownership of more than 50% of the outstanding Shares, or the failure
to adopt the Rights Amendment by April 20, 1998 or to maintain the Rights
Amendment in full force and effect thereafter (see "Termination of Merger
Agreement," clause (c), above). Upon the occurrence of a Purchase Event, Parent
may exercise the Stock Option, in whole or in part, during the period (the
"Option Exercise Period") commencing on the Purchase Event and terminating 180
days thereafter (the "Termination Date"), with such period to be adjusted if any
injunction, order or similar court restraint delays the exercise of the Stock
Option. The related closing will generally take place on a date specified by
Parent that is within 2 business days and 60 calendar days after the date that
Parent provides written notice of exercise of the Stock Option (the "Notice
Date"), subject to adjustment if the closing is delayed by any applicable law or
because prior notification to or approval of any governmental authority is
required.
Repurchase of Stock Option and Option Shares. If Parent notifies the
Company of its intention to exercise a portion of the Stock Option, but the
related closing has not occurred, then the Company may, by providing written
notice to Parent not less than two business days prior to the date scheduled for
such closing, elect to repurchase the Stock Option in its entirety from Parent
together with all Option Shares previously purchased by Parent as to which
Parent then has beneficial ownership (as used in Rule 13d-3 under the Exchange
Act). The repurchase will take place within three business days of such
election. The repurchase price will equal the sum of the following: (i) with
respect to the unexercised portion of the Stock Option, the difference between
(A) the "Market/Tender Offer Price" (defined below) for shares of the Company's
common stock and (B) the option exercise price of $10.00 (subject to adjustment
as provided above), multiplied by the number of Option Shares subject to the
unexercised portion of the Stock Option, but only if such Market/Tender Offer
Price is greater than such exercise price; and (ii) with respect to Option
Shares, the greater of the Market/Tender Offer Price and the purchase price paid
for any Option Shares acquired upon exercise of any portion of the Stock Option,
multiplied by the number of Option Shares so acquired. "Market/Tender Offer
Price" means the higher of (x) the highest price per share at which a tender or
exchange offer has been made and not withdrawn for shares of the Company's
common stock during the Option Exercise Period or (y) the highest closing price
per such share as reported by the NASDAQ National Market for any day within the
period beginning on the Notice Date and preceding the date the Company gives
notice of its election to repurchase.
Limitation on Total Profit. If Parent (or any of its affiliates) sells any
of the Option Shares or any rights therein, Parent may keep the proceeds of such
sale until the proceeds exceed by more than $14,250,000 the aggregate purchase
price paid for such Option Shares (the "Profit Limitation"). Any proceeds in
excess of the Profit Limitation (whether in cash or in kind, valued at fair
market) will be paid to the Company. The Profit Limitation applies to all sales
and dispositions by Parent and its affiliates, including a sale to the Company
pursuant to its repurchase rights.
Termination. The Stock Option Agreement will terminate, but only if a
Purchase Event has not occurred, on (i) the date on which Offeror purchases all
Shares tendered in the Offer and not withdrawn pursuant to the Offer, or (ii)
the termination of the Merger Agreement pursuant to its terms (unless terminated
by the occurrence of a Purchase Event).
Registration Rights; Listing. The Company has granted to the holders and
beneficial owners of the Option Shares certain registration rights that may be
exercised at any time after the closing of a sale of Option Shares. Registration
will be at the Company's expense except for underwriting commissions and the
fees and disbursements of counsel to such holders and beneficial owners. Upon
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receiving any request to exercise such registration rights, the Company will
send a copy thereof to any other person known to the Company to be entitled to
such registration rights. In no event will the Company be required to effect
more than one registration pursuant to such rights. Also, if the Option Shares
are then listed on any national securities exchange, the Company, upon the
request of Parent, will promptly file an application to list the Option Shares
on all such exchanges and will use its best efforts to obtain approval of such
listings as soon as practicable.
Representations and Warranties; Covenants. Under the Stock Option
Agreement, the Company made customary representations and warranties to Parent,
including with respect to the Company's authority to enter into and perform its
obligations under the Stock Option Agreement, the due execution and delivery by
the Company of the Stock Option Agreement, the Company's taking of all corporate
actions necessary to authorize and reserve for issuance the Option Shares, and
the valid issuance of such fully paid and nonassessable Option Shares, free and
clear of all encumbrances. The Company also agreed that no provision of the
Rights Agreement will be triggered solely by virtue of any ownership, exercise
or purchase under the Stock Option Agreement.
Parent has also made customary representations and warranties under the
Stock Option Agreement, including with respect to Parent's authority to enter
into and perform its obligations under the Stock Option Agreement, the due
execution and delivery by Parent of the Stock Option Agreement, and the Parent's
representation that it will not transfer or dispose of the Option Shares except
in compliance with the Securities Act.
The foregoing is a summary of certain provisions of the Merger Agreement
and the Stock Option Agreement, copies of which have been filed as exhibits to
the Schedule 14D-1 and which are available in the manner set forth in Section 8.
Such summary is qualified in its entirety by reference to the text of such
agreements.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, (a) issue, sell, pledge, dispose of or
encumber (or permit any of its subsidiaries to issue, sell, pledge, dispose of
or encumber) any shares of, or any options, warrants, conversion privileges or
rights of any kind to acquire any shares of any capital stock of the Company or
any of its subsidiaries (other than shares issuable upon exercise of the
outstanding (as of the date of the Merger Agreement) options or rights under the
Employee Stock Purchase Plans to acquire Shares in accordance with their terms
in effect on the date of the Merger Agreement); (b) split, combine or reclassify
any outstanding Shares, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect to the
Shares other than pursuant to the Rights Agreement; or (c) other than pursuant
to the Rights Agreement, redeem, purchase or acquire or offer to acquire (or
permit any of its subsidiaries to redeem, purchase or acquire or offer to
acquire) any Shares or other securities of the Company or any of its
subsidiaries other than as contemplated by the Merger Agreement and other than
for the repurchase by the Company, pursuant to existing agreements, of any
outstanding Shares upon termination of any employment, director or consulting
relationship with the Company. See Section 13, "Conduct of Company's Business
Pending Merger."
15. CERTAIN CONDITIONS TO OFFEROR'S OBLIGATIONS.
In the Merger Agreement, Offeror has agreed that if all of the conditions
to the Offer are not satisfied by the Expiration Date then, provided that all
such conditions are reasonably probable of being satisfied by the date which is
30 business days after the commencement of the Offer, Offeror shall extend the
Offer (up to such 30th business day) until such conditions are satisfied or
waived. Subject to such obligation to extend the Offer, Offeror shall not be
required to accept for payment, purchase or pay for any Shares tendered, or may
postpone the acceptance, purchase or payment for Shares, or may amend or
terminate (to the extent permitted by the Merger Agreement) the Offer,
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(1) if the Minimum Condition is not satisfied as of the expiration of the Offer;
(2) if any applicable waiting period under the Hart-Scott-Rodino Act in respect
of the Offer shall not have expired or have been terminated prior to the
expiration of the Offer or (3) if, upon the Expiration Date and before
acceptance of such Shares for payment, any of the following conditions exists or
is continuing (each of paragraphs (a) through (f) providing a separate and
independent condition to Offeror's obligations pursuant to the Offer):
(a) there is any statute, rule, injunction or other order by any court
or governmental agency or other agency or commission, domestic or foreign
of competent jurisdiction (other than the routine application of waiting,
review and investigation periods under the Hart-Scott-Rodino Act and
similar foreign antitrust laws and published rules, and routine application
of federal securities laws and published rules), (i) making the purchase of
some or all of the Shares pursuant to the Offer or the Merger illegal, or
resulting in a material delay in the ability of Offeror or the Merger Sub
to purchase some or all of the Shares, (ii) invalidating or rendering
unenforceable any material provision of the Merger Agreement, (iii)
imposing material limitations on the ability of Offeror or the Merger Sub
effectively to acquire or hold or to exercise full rights of ownership of
the Shares acquired by it, including voting rights, (iv) imposing material
limitations on the ability of any of Parent, Offeror, or the Company to
continue to own or operate effectively all or any material portion of its
respective business as heretofore conducted or to continue to own or
operate effectively all or any material portion of its respective assets as
heretofore owned or operated, (v) imposing material limitations on the
ability of Offeror to continue effectively all or any material portion of
the Company's business as heretofore conducted or to own or operate
effectively all or any material portion of the Company's assets as
heretofore operated, or (vi) to the effect that the Offer or the Merger is
violative of any applicable law which would reasonably be expected to
result in any of the consequences described in clauses (i) through (v)
above;
(b) there is any law, statute, rule or regulation, domestic or
foreign, that results or would reasonably be expected to result in any of
the consequences referred to in paragraph (a) above, or any action, suit or
proceeding is commenced by a governmental or regulatory authority or body
seeking to restrain, enjoin or otherwise prohibit the Offer, the Merger, or
the completion of the transactions contemplated by the Merger Agreement;
(c) there is (i) any general suspension of, or limitation on prices
for, trading in securities on any national securities exchange or in the
over the counter market in the United States or on the London Stock
Exchange, (ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the United Kingdom,
(iii) any limitation by any governmental authority which would reasonably
be expected to materially adversely affect, the extension of credit by
banks or other lending institutions in the United States or the United
Kingdom, (iv) from the date of the Merger Agreement through the close of
business on the business day immediately prior to the Expiration Date, a
decline of at least 25% in the Standard & Poor's 500 Index, or (v) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof;
(d) except as set forth in reports heretofore filed by the Company
with the Commission or the disclosure schedule provided by the Company, any
change occurs or is threatened since the date of the Merger Agreement which
individually or in the aggregate has had or is continuing to have or would
reasonably be expected to have a Material Adverse Effect on the Company and
its subsidiaries, taken as a whole;
(e) any of the representations and warranties of the Company in the
Merger Agreement are not true and correct (i) in all material respects on
the date of the Merger Agreement or (ii) in all respects as if made on the
Expiration Date, except in the case of clause (ii) where the aggregate of
all inaccuracies would not have a Material Adverse Effect on the Company,
and except for those representations and warranties that address matters
only as of a particular date
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(which representations and warranties will be true and correct except as
would not have a Material Adverse Effect on the Company as of such
particular date) (for purposes of determining whether inaccurate
representations and warranties would have a Material Adverse Effect on the
Company, "Material Adverse Effect" and "materiality" qualifications and
limitations in the representations and warranties will not be given
effect); or (iii) the Company shall have breached in any material respect
or shall not have performed in all material respects each covenant and
complied with each agreement to be performed and complied with by it under
the Merger Agreement; or
(f) the Merger Agreement is terminated pursuant to its terms
which, in the good faith judgment of Offeror, in any such case, and regardless
of the circumstances giving rise to any such condition (except in the case any
such condition is not satisfied as the direct result of a breach by Parent or
Offeror of obligations under the Merger Agreement), make it inadvisable to
proceed with acceptance for payment or purchase of or payment for the Shares.
The foregoing conditions are for the sole benefit of Offeror and Parent and
may be asserted by Offeror and Parent regardless of the circumstances (except in
the case any such condition is not satisfied as the direct result of a breach by
Parent or Offeror of obligations under the Merger Agreement) giving rise to such
conditions, or may be waived (except for the Minimum Condition) by Offeror or
Merger Sub in whole at any time or in part from time to time in their sole
discretion. The failure by Offeror or Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right and may be asserted at any time and from
time to time. Any determination by Offeror concerning the conditions described
in this Section shall be final and binding upon all parties.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section, Offeror is not aware of any approval
or other action by any governmental or administrative agency which would be
required for the acquisition or ownership of Shares by Offeror as contemplated
herein. Should any such approval or other action be required, it will be sought,
but Offeror has no current intention to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such matter, subject, however,
to Offeror's right to decline to purchase Shares if any of the conditions
specified in Section 15 shall have occurred. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be obtained
without substantial conditions, or that adverse consequences might not result to
the Company's business or that certain parts of the Company's business might not
have to be disposed of if any such approvals were not obtained or other action
taken.
Antitrust. The Hart-Scott-Rodino Act provides that the acquisition of
Shares by Offeror may not be consummated unless certain information has been
furnished to the Division (the "Division") and the FTC and certain waiting
period requirements have been satisfied. The rules promulgated by the FTC under
the Hart-Scott-Rodino-Act require the filing of a Notification and Report Form
(the "Form") with the Division and the FTC and that the acquisition of Shares
under the Offer may not be consummated until 15 days after receipt of the Form
by the Division and the FTC. Within such 15 day period the Division or the FTC
may request additional information or documentary material from Offeror. In the
event of such request the acquisition of Shares under the Offer may not be
consummated until 10 days after receipt of such additional information or
documentary material by the Division or the FTC. Offeror expects to file its
Form with the Division and the FTC on April 22, 1998. The Company advised the
Offeror that the Company expects to file its Form with the Division and the FTC
on April 24, 1998.
Federal Reserve Board Regulations. Federal Reserve Board Regulations G, T,
U and X (the "Margin Regulations") promulgated by the Federal Reserve Board
place restrictions on the amount of credit that may be extended for the purpose
of purchasing margin stock (including the Shares) if such credit is secured
directly or indirectly by margin stock. Because, among other reasons, Parent's
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Revolving Credit Agreement is unsecured, Parent and Offeror believe the
financing for the acquisition of the Shares will comply with the Margin
Regulations.
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. On April 15, 1998,
prior to the execution of the Merger Agreement, the Board of Directors of the
Company, by unanimous vote of all directors present at a meeting held on such
date, (i) approved and adopted the Merger Agreement, the Option Agreement and
the transactions contemplated thereby, (ii) determined that the Merger
Agreement, the Option Agreement and the transactions contemplated thereby,
including each of the Offer and the Merger, is fair to and in the best interests
of, the stockholders of the Company and (iii) recommended that the stockholders
of the Company accept the Offer and approve and adopt the Merger Agreement, the
Option Agreement and the transactions contemplated thereby. Accordingly, Section
203 is inapplicable to the Offer, the Merger or the Option Agreement.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. Offeror does not know whether any of these laws will, by their
terms, apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, Offeror will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, Offeror might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Offeror might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer and the Merger. In such case, Offeror may not be
obligated to accept for payment any Shares tendered. See Section 15.
17. FEES AND EXPENSES.
Neither Offeror nor Parent will pay any fees or commissions to any broker
or dealer or other person (other than the Dealer Manager) for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by Offeror for customary mailing and
handling expenses incurred by them in forwarding material to their customers.
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Morgan Stanley is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services to Parent in connection with
the proposed acquisition of the Company. Parent has agreed to pay Morgan Stanley
(i) an advisory fee in the range of $100,000 to $200,000, if no acquisition of
the Company is consummated, (ii) a fee of $500,000, upon Parent's reaching any
agreement to acquire the Company or commencement of a tender offer for shares of
the Company, and (iii) a transaction fee of $1,500,000 (against which any of the
aforementioned fees paid will be credited), if an acquisition of the Company is
concluded. The transaction fee will become payable in the event Offeror acquires
more than a majority of the outstanding Shares. In addition, Parent has agreed
to reimburse Morgan Stanley for all reasonable out-of-pocket expenses incurred
by Morgan Stanley, including the reasonable fees and disbursements of its legal
counsel, and to indemnify Morgan Stanley and certain related persons against
certain liabilities and expenses, including, without limitation, certain
liabilities under the federal securities laws.
Offeror has retained D.F. King & Co., Inc. as Information Agent and Bankers
Trust Company as Depositary in connection with the Offer. The Information Agent
and the Depositary will receive reasonable and customary compensation for their
services hereunder and reimbursement for their reasonable out-of-pocket
expenses. The Depositary will also be indemnified by Offeror against certain
liabilities in connection with the Offer.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities or blue sky
laws of such jurisdiction. In any jurisdiction where the securities or blue sky
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of Offeror by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal, and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by Offeror.
Offeror has filed with the Commission a statement on Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be examined and
copies may be obtained at the same places and in the same manner as set forth
with respect to the Company in Section 8 (except that they will not be available
at the regional offices of the Commission).
S ACQUISITION CORP.
April 21, 1998
33
<PAGE> 36
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND OFFEROR
The names and ages of the directors and executive officers of Parent and
Offeror, and their present principal occupations, are set forth below. Unless
otherwise indicated, each individual is a citizen of the United Kingdom and his
business address is Saxon House, 2-4 Victoria Street, Windsor, Berkshire SL4
1EN, United Kingdom.
SIEBE PLC
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT WITH SIEBE PLC; MATERIAL POSITIONS
NAME AND AGE HELD DURING THE PAST FIVE YEARS
------------ ---------------------------------------------
<S> <C>
Sir Philip Beck (63)(a) Chairman since March 1, 1998, and a member of the Board of
Directors for more than the past five years. Formerly
Chairman and Chief Executive Officer of John Mowlem and
Company plc.
Sir Colin Marshall (64)(b) Deputy Chairman, and a member of the Board of Directors
since January 1, 1998. Chairman of British Airways plc since
1993; Deputy Chairman and Chief Executive Officer prior to
1993. Also Chairman of Inchcape since 1996; Deputy Chairman
of British Telecommunications plc since 1995 and Board
Director of the New York Stock Exchange Inc. since 1994.
Allen M. Yurko (46)(c) Member of the Board of Directors, Managing Director and
Chief Executive Officer since January 1, 1994; Managing
Director and Chief Operating Officer from October 1, 1992 to
December 31, 1993.
Dr. George W. Sarney (58)(d) Member of the Board of Directors since January 1994;
President and Chief Operating Officer, Siebe Control
Systems, since September 1993; Director, President and Chief
Operating Officer, Siebe Temperature and Appliance Controls
from June to September 1993. Director, Bowthorpe plc, since
1996; Senior Vice President, Energy and Environmental Group,
Raytheon Company, prior to 1993.
Roger Mann (58) Member of the Board of Directors and Group Finance Director
for more than the past five years.
Colin P. Bonsey (51) Member of the Board of Directors and Director of Planning
for more than the past five years.
James C. Bays (48)(e) Vice President, General Counsel and Chief Legal Officer
since March 1996. Vice President, Law and Assistant General
Counsel, GenCorp Inc., from April 1993 to March 1996.
R.P.A. Coles (55) Director of Legal Affairs and Company Secretary for more
than the past five years.
Sir Richard Lloyd, Bt. (69)(f) Member of the Board of Directors for more than the past five
years.
Lord Trefgarne PC (57)(g) Member of the Board of Directors since 1991. Chairman of the
Engineering Training Authority since 1994; President of the
Mechanical and Metals Trades Confederation since 1990;
former Minister of State.
</TABLE>
I-1
<PAGE> 37
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT WITH SIEBE PLC; MATERIAL POSITIONS
NAME AND AGE HELD DURING THE PAST FIVE YEARS
------------ ---------------------------------------------
<S> <C>
Mr. Peter A. M. Curry (67)(h) Member of the Board of Directors since June 1996. Executive
Chairman of Unitech plc prior to May 1996.
Mr. Timothy K. Thornton (63)(i) Member of the Board of Directors since 1995. Director of
Kleinwort Benson Securities Limited prior to 1995.
Mr. James Mueller (51)(j) Member of the Board of Directors since April 1996; President
and Chief Operating Officer of Siebe Temperature and
Appliance Controls since 1993; President of Ranco Inc., an
indirect wholly owned subsidiary of Parent, briefly in early
1993.
</TABLE>
OFFEROR
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT WITH OFFEROR; MATERIAL POSITIONS
NAME AND AGE HELD DURING THE PAST FIVE YEARS
------------ -------------------------------------------
<S> <C>
Allen M. Yurko Chairman and Member of the Board of Directors (see notation
above for age and employment history).
Dr. George W. Sarney Member of the Board of Directors and President (see notation
above for age and employment history).
James C. Bays Member of the Board of Directors and Vice President (see
notation above for age and employment history).
Thomas G. Foley (56)(k) Vice President; Executive Vice President and Chief Financial
Officer, Siebe Control Systems and Executive Vice President
and Chief Financial Officer, The Foxboro Company, since
September 1990.
Gregory M. Miller (49)(l) Vice President and Treasurer; Vice President of
International Finance, Parent, since January 1998; Vice
President, Finance and Administration, Siebe Inc. (a holding
company for Siebe plc's U.S. investments) since September
1990.
R.P.A. Coles Secretary (See notation above for age and employment
history).
</TABLE>
- ---------------
(a) Sir Philip Beck's business address is Pylle Manor, Pylle, Shepton Mallet,
Somerset, BA4 6TD, United Kingdom.
(b) Sir Colin Marshall's business address is British Airways, Berkeley Square
House, Berkeley Square, London, W1X 6BA, United Kingdom.
(c) Mr. Yurko is a citizen of the United States.
(d) Dr. Sarney is a citizen of the United States and his business address is 33
Commercial Street, Bristol Park, Foxboro, Massachusetts 02035.
(e) Mr. Bays is a citizen of the United States.
(f) Sir Richard Lloyd's business address is Sundridge Place, Sundridge,
Sevenoaks, Kent TN14 6DD, United Kingdom.
(g) Lord Trefgarne's business address is The Old Barn, Kettlewell Close,
Horsell Nr. Woking, Surrey GU 21 4HZ, United Kingdom.
(h) Mr. Curry's business address is The Old Vicarage, Valley End, Chobham,
Surrey, GU24 8TB, United Kingdom.
(i) Mr. Thornton's business address is Juthware Hall, Halstock, Nr. Yeovil,
Somerset, BA22 9SG, United Kingdom.
I-2
<PAGE> 38
(j) Mr. Mueller is a citizen of the United States and his business address is
8161 US Route 42N, Plain City, Ohio 43064.
(k) Mr. Foley is a citizen of the United States and his business address is 33
Commercial Street, Foxboro, Massachusetts 02035.
(l) Mr. Miller is a citizen of the United States and his business address is
33 Commercial Street, Foxboro, Massachusetts 02035
I-3
<PAGE> 39
ANNEX II
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP
Below are the major differences between UK GAAP and US GAAP as they relate
to Parent:
Goodwill and Other Intangibles
Under U.K. GAAP, Parent writes off goodwill, being the excess of cost over
the fair value attributable to the net assets acquired, to consolidated equity
in the year of acquisition. Under U.S. GAAP, goodwill is capitalized and
amortized through the statement of income over a period representing the
estimated useful life, not exceeding 40 years. In calculating any gain or loss
resulting from a disposition of assets, goodwill previously written off, subject
to certain adjustments, is restored to original cost under U.K. GAAP.
In accordance with U.K. GAAP, development prototype expenditure and
associated software costs on development of defined commercial projects are
capitalized and amortized through the profit and loss account over a period of
three to ten years. Under U.S. GAAP, such expenditure is generally expensed as
it is incurred.
Deferred Taxation
Under U.K. GAAP, provision is made for deferred taxation under the
liability method unless there is reasonable certainty that such deferred
taxation will not become payable in the foreseeable future. Under U.S. GAAP,
deferred taxation is accounted for on all temporary differences which will
result in taxable or tax deductible amounts in future years subject to a
valuation allowance to reduce the deferred tax asset if it is more likely than
not that the related tax benefit will not be realized.
Dividends
Under U.K. GAAP, dividends are provided for in the year to which they
relate. These dividends are deducted from current year earnings and therefore
reserves. U.S. GAAP recognizes proposed dividends as a reduction of retained
earnings in the accounting period in which they are formally declared.
Pensions
Contributions to the pension funds are assessed in accordance with advice
from actuaries and charged to the income statement so as to spread the pension
cost over the expected service lives of the employees with the pension plan.
Pension accounting under U.S. GAAP is more prescriptive than that under U.K.
GAAP, where a more flexible and judgmental approach is taken. Accordingly, there
may be differences in the actuarial assumptions and methods of valuation of the
plan assets compared with those that would be made under U.S. GAAP.
Acquisition Accounting
Prior to the adoption of Financial Reporting Standard No. 7 -- "Fair Values
in Acquisition Accounting" ("FRS7"), Parent provided for certain costs as part
of the purchase accounting adjustments on an acquisition which under U.S. GAAP
should have been included in the statement of income when those costs were
incurred. Examples of such items include certain costs in respect of salaries of
individuals made redundant, the closure of certain of the Parent's existing
operations and the rectification of inadequate operating systems.
With effect from April 2, 1994, Parent adopted FRS7, FRS7 sets out rules
for accounting for acquisitions in consolidated financial statements. The fair
value balance sheet of the acquired
II-1
<PAGE> 40
company cannot include provisions for integration and reorganization costs set
up by the acquiring company. In compliance with FRS7, comparative figures have
not been restated. Under U.S. GAAP, certain integration and reorganization
costs, meeting specific criteria, may be considered liabilities assumed and
included in the allocation of the acquisition cost.
Restructuring and Integration Costs
Under U.K. GAAP, when a decision has been taken to restructure part of
Parent's business, provisions are made for the impairment of asset values
together with severance and other costs. U.S. GAAP requires a number of specific
criteria to be met before such costs can be recognized as an expense. Among
these criteria is the requirement that all significant actions arising from a
restructuring and integration plan and their completion dates must be identified
by the balance sheet date and employees must have been informed of their
severance benefits. These criteria also apply to the recognition of integration
costs considered liabilities assumed on acquisition.
Earnings per Ordinary Share
Under U.K. GAAP, earnings per ordinary share is computed using the weighted
average number of ordinary shares in issue during the year. U.S. GAAP also
includes in the computation for earnings per ordinary share the dilutive effect
of all outstanding share options and common share equivalents under the treasury
stock method. Under U.K. GAAP, the weighted average number of ordinary shares
for prior years is restated to reflect the bonus element of rights issued. Under
U.S. GAAP, no restatement is made.
Cash Flows
Under U.K. GAAP, Parent complies with the Revised Financial Reporting
Standard No. 1 -- "Cash flow statements' ("FRS1"). Its objective and principles
are similar to those set out in the Statements of Financial Accounting Standards
No. 95 -- "Statement of Cash Flows" ("SFAS No. 95").
The principal difference between U.K. GAAP and U.S. GAAP is in respect of
classification. Under U.K. GAAP, Parent presents its cash flows for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditures and financial investments, acquisitions and disposals, equity
dividends paid, management of liquid resources, and financing. U.S. GAAP
requires only three categories of cash flow activities which are operating,
investing and financing activities.
Cash flows arising from taxation and returns on investments and servicing
of finance under U.K. GAAP would, with the exception of dividends paid, be
included as operating activities under U.S. GAAP; dividend payments would be
included as a financing activity under U.S. GAAP. In addition, capital
expenditures and financial investment, acquisition and disposals, and management
of liquid resources under U.K. GAAP would be presented as investing activities
under U.S. GAAP.
Furthermore, under U.K. GAAP, cash and cash equivalents include short term
borrowings which under U.S. GAAP would be presented as financing activities.
Investment Securities
Trade investments are carried at cost, reduced for any permanent diminution
in value. Under U.S. GAAP, investments in marketable equity securities and all
debt securities would be classified as "available for sale" securities and
recorded at fair value, with unrealized gains and losses, net of tax, presented
as a component of equity.
Share Option Scheme
Parent does not recognize any compensation for performance-based options
granted to directors
II-2
<PAGE> 41
and executives. U.S. GAAP requires compensation cost to be recorded over the
service period for the excess of the market value of the underlying shares over
the exercise price of the options.
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary is:
Bankers Trust Company
<TABLE>
<S> <C> <C>
By Mail By Hand By Overnight Mail or Courier
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Receipt and Delivery Window Reorganization Unit
Nashville, TN 37229-2737 123 Washington St., 1st Floor 648 Grassmere Park Road
New York, NY 10006 Nashville, TN 37211
</TABLE>
Facsimile Copy Number:
(615) 835-3701
(For Eligible Institutions Only)
For Confirmation Telephone:
(615) 835-3572
For Information Telephone:
(800) 735-7777
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below and will be furnished promptly at Offeror's
expense. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(800) 769-6414
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-7239
II-3
<PAGE> 1
EXHIBIT 99.7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 15, 1998 (the "Agreement"),
by and among Siebe plc, a United Kingdom public limited company (the "Parent"),
S Acquisition Corp., a Delaware corporation and an indirect wholly-owned
subsidiary of Parent (the "Purchaser"), S Sub Corp., a Delaware corporation and
a wholly-owned subsidiary of the Purchaser (the "Merger Sub"), and Simulation
Sciences Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Parent, the Purchaser, the Merger
Sub and the Company have each determined that it is in the best interests of
their respective stockholders for the Purchaser to acquire the Company on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, it is proposed that the Purchaser shall
make a cash tender offer to acquire all of the issued and outstanding shares of
common stock, par value $.001 per share, of the Company (the "Company Common
Stock"), together with the associated Rights (as hereinafter defined) for $10.00
per share of Company Common Stock (all issued and outstanding shares of Company
Common Stock, together, except where the context otherwise requires, with the
associated Rights, being hereinafter collectively referred to as the "Shares"),
net to the seller in cash, in accordance with the terms and subject to the
conditions provided for herein and in the offering documents relating to the
Offer (as defined below); and
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that each of the Offer and the Merger (as defined below) is fair to
and in the best interests of the Company and its stockholders and (ii) resolved
to approve and adopt this Agreement and the transactions contemplated hereby and
to recommend acceptance of the Offer and approval and adoption by the
stockholders of the Company of this Agreement and the Merger on the terms and
conditions set forth herein of the Merger Sub with and into the Company
following the Offer.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, the Purchaser, the Merger Sub and the Company hereby agree as follows:
<PAGE> 2
ARTICLE 1
THE OFFER
1.1 The Offer.
(a) Provided this Agreement shall not have been terminated in accordance
with Section 8.1, the Purchaser (or one or more other direct or indirect
wholly-owned subsidiaries of Parent) shall, not later than one business day
after execution of this Agreement, publicly announce the transactions
contemplated hereby, and not later than five business days after execution of
this Agreement, commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), an offer to purchase all
Shares at a price of $10.00 per Share (the "Per Share Price"), net to the seller
in cash (the "Offer," which term shall include any amendments to such Offer not
prohibited by this Agreement) and, subject to a minimum of not less than a
majority of the outstanding Shares (on a fully-diluted basis excluding Out of
the Money Options (as defined below)) being validly tendered and not withdrawn
prior to the expiration of the Offer (the "Minimum Condition") and the further
conditions set forth in this Agreement and Annex I of this Agreement, shall
accept for payment and pay for Shares purchased pursuant to the Offer. The
initial expiration date of the Offer shall be May 18, 1998. Parent shall provide
or cause to be provided to the Purchaser on a timely basis the funds necessary
to accept for payment and pay for any Shares that the Purchaser becomes
obligated to accept for payment, and pay for, pursuant to the Offer, and shall
cause the Purchaser and the Merger Sub to fulfill all of their respective other
obligations under this Agreement. The Offer shall be made by means of an offer
to purchase containing the Minimum Condition and the further conditions set
forth in this Agreement and Annex I. Simultaneously with the commencement of the
Offer, the Purchaser shall file with the Securities and Exchange Commission (the
"Commission") a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer (together with all amendments and supplements hereto, the "Schedule
14D-1"), which shall have been provided to the Company such that the Company
shall have a reasonable opportunity to promptly comment thereon. Parent, the
Purchaser and the Merger Sub agree to provide the Company and its counsel any
comments the Parent, the Purchaser or the Merger Sub or their counsel may
receive from the Commission or its staff with respect to the Schedule 14D-1
promptly after the receipt of such comments. For purposes of this Agreement,
"Out of the Money Options" shall mean any option, warrant or other contractual
right to purchase shares of the Common Stock of the Company which as of the date
hereof have an exercise price per Share of Common Stock equal to or greater than
the Per Share Price.
(b) The Purchaser expressly reserves the right to modify the terms and
conditions of the Offer from time to time, except that, without the prior
written approval of the Company, the Purchaser shall not amend the Offer (i) to
reduce the cash price per Share to be paid pursuant thereto, (ii) to reduce the
number of Shares to be purchased thereunder, (iii) to change the form of
consideration to be paid in the Offer, (iv) to increase the minimum number of
Shares which must be tendered as a condition to the
2
<PAGE> 3
Offer, (v) to waive the Minimum Condition if such waiver would result in less
than a majority of the outstanding Shares (on a fully-diluted basis excluding
Out of the Money Options) being accepted for payment or paid for pursuant to the
Offer, (vi) to impose additional conditions to the Offer, (vii) to extend the
period of the Offer, except that the Offer may be extended (subject to the
Company's right of termination in Section 8.1 herein), without the prior written
approval of the Company (A) as required to comply with any rule, regulation or
interpretation of the Securities and Exchange Commission (the "Commission"), (B)
if at the scheduled or extended expiration date of the Offer any of the
conditions set forth in Annex I have not been satisfied or waived, until such
time as all such conditions are satisfied or waived or (C) provided that there
shall not have been tendered at least 90% of the outstanding Shares, for one or
more times for a total number of days in the aggregate for any extension
pursuant to this clause (C) not to exceed 10 business days for any reason other
than those specified in the immediately preceding clauses (A) and (B), or (viii)
otherwise to amend the terms of the Offer (including the conditions set forth in
the Agreement and Annex I) in a manner that is materially adverse to
stockholders of the Company.
(c) Notwithstanding the foregoing, the Parent, the Purchaser and the
Merger Sub agree that if all of the conditions set forth on Annex I hereto are
not satisfied on any scheduled expiration date of the Offer then, provided that
all such conditions are and continue to be reasonably probable of being
satisfied by the date which is 30 business days after the commencement of the
Offer, the Purchaser shall extend the Offer from time to time until such
conditions are satisfied or waived, provided that the Purchaser shall not be
required to extend the Offer beyond the date which is 30 business days after the
commencement of the Offer.
1.2 Company Action.
(a) The Company hereby consents to the Offer and represents that its Board
of Directors has unanimously (i) approved the Offer and the Merger (as defined
in Section 2.1), has determined that this Agreement and the Offer are fair to
and in the best interest of the Company and its stockholders and has resolved to
recommend acceptance of the Offer to the Company's stockholders, and that the
stockholders tender their Shares in the Offer and, if applicable, vote to
approve and adopt this Agreement and the Merger, (ii) taken all action necessary
to render (x) Section 203 of the Delaware General Corporation Law, and (y) the
Company's Stockholders Rights Agreement, dated as of August 13, 1997, between
the Company and Harris Trust Company of California, as rights agent, (the
"Rights Agreement"), inapplicable to the Offer, the Merger, this Agreement, the
Stock Option Agreement (as defined herein) or any of the transactions
contemplated hereby or thereby and (iii) approved the Stock Option Agreement (as
defined in Section 6.12). The Company hereby consents to the inclusion in the
Offer Documents (as hereinafter defined) of the recommendation of the Board of
Directors described in the first sentence of this Section 1.2, except as such
consent may be withdrawn by the Board of Directors of the Company in the
exercise of its fiduciary duties after consultation with its counsel. The
Company represents that it has received
3
<PAGE> 4
the opinion of Dain Rauscher Wessels, a division of Dain Rauscher Incorporated
("DRW") to the effect that, as of the date of such opinion, the consideration
offered pursuant to the Offer and Merger is fair to stockholders of the Company
from a financial point of view.
(b) Simultaneously with, or as promptly as possible after, the
commencement of the Offer, subject to the terms hereof, the Company shall file
with the Commission and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9"), which shall reflect
the recommendation of the Board of Directors; provided that prior to the filing
of such Schedule 14D-9, the Company shall have provided the Purchaser's counsel
with a reasonable opportunity to review and make comments with respect to such
Schedule 14D-9. Such recommendation shall not be withdrawn or adversely modified
except by resolution of the Board of Directors adopted in the exercise of
applicable fiduciary duties after consultation with counsel.
(c) In the event that the Purchaser has not designated a majority of the
members of the Company's Board of Directors pursuant to the terms of Section 1.3
hereof and a stockholder vote is required, all information supplied by the
Company for inclusion in any proxy statement filed with the Commission and sent
or given to stockholders pursuant to Section 6.2 hereof shall, at the time such
proxy statement is first mailed to the Company's stockholders and at the time of
the related stockholders meeting, not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading at the time of filing with the
Commission, mailing to stockholders or any meeting of stockholders.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information which is supplied in writing by Parent, the
Purchaser or the Merger Sub specifically for inclusion and which is contained in
any of the foregoing documents. Each of the Company, the Parent and the
Purchaser agrees to correct promptly any information supplied by it for use in
the Schedule 14D-9 if and to the extent that the Schedule 14D-9 shall become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be
mailed to holders of the Shares. Any such Schedule 14D-9 and/or proxy statement,
or any amendment thereto, shall be provided to the Parent, the Purchaser and the
Merger Sub such that Parent, Purchaser and Merger Sub shall have an opportunity
to promptly comment thereon. The Company agrees to provide the Parent, the
Purchaser and the Merger Sub and their counsel any comments the Company or its
counsel may receive from the Commission or its staff with respect to any such
Schedule 14D-9 and/or proxy statement, or any amendment thereto, promptly after
receipt of such comments.
(d) The Company shall promptly furnish the Purchaser with mailing labels
containing the names and addresses of the record holders and, if available, of
non-objecting beneficial owners of Shares and lists of securities positions of
Shares held in stock depositories, each as of the most recent practicable date,
and shall from time to time
4
<PAGE> 5
furnish the Purchaser with such additional information, including updated
or additional lists of stockholders, mailing labels and lists of
securities positions, and other assistance as the Purchaser may reasonably
request in order to be able to communicate the Offer to the stockholders
of the Company. Subject to the requirements of law, and except for such
steps as are necessary to disseminate the Offer and any other documents
necessary to consummate the Merger, Parent, the Purchaser and the Merger
Sub and each of their affiliates shall treat all information in such
labels, lists and additional information as "Evaluation Material" in
accordance with the letter agreement dated April 7, 1998 between Parent
and the Company (the "Confidentiality Agreement").
1.3 Directors. Promptly upon the payment by the Purchaser or any of
Parent's direct or indirect subsidiaries pursuant to the Offer for such number
of Shares which represent at least a majority of the outstanding Shares and from
time to time thereafter, the Company shall increase the size of its Board of
Directors to seven (7) members and the Purchaser shall be entitled to designate
members of the Company's Board of Directors such that the Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, will have a number of
representatives on the Board of Directors, rounded up to the next whole number,
equal to the product obtained by multiplying seven (7) by the percentage of
Shares beneficially owned by Parent and any of its subsidiaries. The Company
shall, upon request by the Purchaser, promptly increase the size of the Board of
Directors to the extent permitted by its Certificate of Incorporation and/or use
its reasonable efforts to secure the resignations of such number of directors as
is necessary to enable the Purchaser's designees to be elected to the Board of
Directors and shall use its best efforts to cause the Purchaser's designees to
be so elected, provided, however, that in the event that Purchaser's designees
are elected to, and constitute a majority of, the Board of Directors of the
Company, until the Effective Time, such Board of Directors shall have at least
two directors who are directors of the Company on the date of this Agreement
(the "Continuing Directors") and, provided further that, in such event, if the
number of Continuing Directors shall be reduced below two for any reason
whatsoever, the remaining Continuing Director(s) shall designate a person to
fill such vacancy who shall be deemed to be a Continuing Director for purposes
of this Agreement, or, if no Continuing Director then remain, the other
directors of the Company on the date hereof shall designate three persons to
fill such vacancies, and such persons shall be deemed to be Continuing Directors
for purposes of this Agreement. The Company shall take, at its expense, all
action necessary to fulfill its obligations under this Section 1.3, including
the mailing to the Company's stockholders of the information required by Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, in form and
substance reasonably satisfactory to the Purchaser and its counsel. The
Purchaser shall supply to the Company and be solely responsible for any
information furnished in writing to the Company specifically with respect to the
Purchaser and its nominees, officers, directors and affiliates for use in
connection with and required by, such Section 14(f) and Rule 14f-1
Notwithstanding the foregoing, (i) the affirmative vote of a majority of
the Continuing Directors shall be required to terminate, amend, modify or waive
any provision of this Agreement on behalf of the Company, or to approve any
other action by the Company with respect to the Offer or the other transactions
contemplated hereby, or the Certificate of Incorporation or Bylaws of the
Company which adversely affects the interests of the
5
<PAGE> 6
stockholders of the Company (other than the Parent, the Purchaser or the Merger
Sub) with respect to such transactions and (ii) none of the Purchaser, the
Merger Sub or Parent shall, directly or indirectly, cause the Company to breach
its obligations hereunder.
6
<PAGE> 7
ARTICLE 2
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.3), in
accordance with this Agreement and the Delaware General Corporation Law, as
amended (the "Delaware Law"), the Merger Sub (or another direct or indirect
Delaware subsidiary of Parent) shall be merged with and into the Company (the
"Merger"), the separate existence of the Merger Sub (except as may be continued
by operation of law) shall cease, and the Company shall continue as the
surviving corporation under the corporate name it possesses immediately prior to
the Effective Time. The Company, in its capacity as the corporation surviving
the Merger, sometimes is referred to herein as the "Surviving Corporation."
Notwithstanding the foregoing, the Purchaser may revise the structure of the
Merger (including merging the Company into the Merger Sub or merging the Company
with or into another direct or indirect wholly-owned subsidiary of Parent)
provided that any such restructuring does not (i) cause a failure of a condition
to the Offer or the Merger, (ii) adversely affect the stockholders of the
Company and (iii) cause the Company to breach its representations and warranties
hereunder.
2.2 Effect of the Merger. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, both public and private, of the
Merger Sub and the Company (collectively, the "Constituent Corporations"); shall
be vested with all property, whether real, personal, or mixed, and all debts due
on whatever account, including subscriptions to shares, and all other choses in
action, and all and every other interest belonging to or due to each of the
Constituent Corporations; and shall be responsible and liable for all the
obligations and liabilities of each of the Constituent Corporations, all with
the effect set forth in the Delaware Law.
2.3 Consummation of the Merger. As soon as is practicable after the
satisfaction or waiver, if possible, of the conditions set forth in Article 7,
and in no event later than five business days after such satisfaction or waiver,
the parties hereto will cause an Agreement or Certificate of Merger to be filed
with the Secretary of State of the State of Delaware, in such form as required
by, and executed in accordance with, the relevant provisions of applicable law
using the procedures permitted in Section 253 (if possible) or Section 251 of
the Delaware Law. The Merger shall be effective at the time of the filing of the
Agreement or Certificate of Merger with the Secretary of State of the State of
Delaware or at such other time specified in the Certificate of Merger as the
Merger Sub and the Company shall agree (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
2.4 Certificate of Incorporation and By-Laws; Directors and Officers. The
Certificate of Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation immediately after the
Effective Time and shall thereafter continue to be its Certificate of
Incorporation and By-Laws until amended, subject to Section 6.10 below, as
provided therein and under the Delaware Law. The directors of the Merger Sub
holding office immediately prior
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to the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the Merger Sub, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time, other than Shares to be cancelled pursuant to Section
2.5(b) hereof, shall automatically be cancelled and extinguished and,
other than Shares with respect to which appraisal rights are properly
exercised ("Dissenting Shares"), be converted into and become a right to
receive in cash the highest price per share paid pursuant to the Offer
(the "Merger Consideration").
(b) Each Share issued and outstanding immediately prior to the
Effective Time and held in the treasury of the Company or owned by Parent,
the Purchaser or any subsidiary thereof shall automatically be cancelled
and retired and no payment shall be made with respect thereto.
(c) Each share of the Merger Sub's Common Stock, par value $.01 per
share, issued and outstanding immediately prior to the Effective Time
shall automatically be converted into and become one validly issued, fully
paid and nonassessable share of Common Stock, par value $.001 per share,
of the Surviving Corporation.
(d) The holders of such Dissenting Shares, if any, shall be entitled
to payment for such shares only to the extent permitted by and in
accordance with the provisions of Section 262 of the Delaware Law;
provided, however, that if, in accordance with such Section of the
Delaware Law, any holder of Dissenting Shares shall (i) subsequently
withdraw his demand for payment for such shares, or (ii) fail to maintain
a petition for appraisal as provided in such Section; or if neither any
holder of Dissenting Shares nor the Surviving Corporation has filed suit
as provided in Section 262 of the Delaware Law, such holder or holders (as
the case may be) shall forfeit such right to payment of such Shares, and
such Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration.
2.6 Company Stock Options. The Parent, the Purchaser, the Merger Sub and
the Company hereby acknowledge and agree that the Surviving Corporation shall
not assume or continue any outstanding stock options or warrants under any of
the Company's 1994 Stock Option Plan, 1996 Stock Option Plan or 1996 Director
Option Plan or any other agreement or arrangement (collectively, as amended, the
"Stock Plans"), or substitute any additional options or warrants for such
outstanding options or warrants. Following the purchase of Shares pursuant to
the Offer, the unvested portions of all outstanding stock options, warrants or
other rights to acquire shares issued under the Stock Plans shall automatically
accelerate in accordance with the terms of the Stock Plans(the "Accelerated
Options"). In lieu of exercising such Accelerated
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Options, each holder thereof shall, upon surrender for cancellation of the same
to the Company on or before the Effective Time, be entitled to receive from the
Company, subject to applicable withholding requirements, an amount in cash equal
to the excess of (a) the product of the number of Shares covered by such
Accelerated Options multiplied by the Merger Consideration, over (b) the product
of the number of Shares covered by such Accelerated Options multiplied by the
per-Share exercise, purchase or conversion price payable upon exercise, purchase
or conversion of the same. Any outstanding stock options or warrants that shall
not have been exercised or surrendered for payment in accordance with the
preceding sentence shall terminate at the Effective Time in accordance with the
terms of the Stock Plans.
2.7 Employee Stock Purchase Plans. The Company shall terminate its 1996
Employee Stock Purchase Plan for U.S. Employees and its 1996 Employee Stock
Purchase Plan for non-U.S. employees (together, the "Employee Stock Purchase
Plans") by having its Board of Directors amend each of the Employee Stock
Purchase Plans as necessary to provide that: (a) any shares of the Company's
Common Stock shall be purchased under the Employee Stock Purchase Plans on a new
"Exercise Date" (as such term is defined in the Employee Stock Purchase Plans)
set by the Board of Directors, which Exercise Date shall be on the last trading
day immediately prior to the consummation of the Offer, or such earlier time as
the Board shall specify, and (b) immediately following such purchase of shares
of the Company's Common Stock, each of the Employee Stock Purchase Plans shall
terminate.
2.8 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, the Purchaser shall designate a
bank or trust company reasonably satisfactory to the Company to act as
agent for the holders of Shares (the "Exchange Agent") to receive the
Merger Consideration, and at or immediately following the Effective Time,
Parent shall take all steps necessary to cause the Purchaser to have
sufficient funds to be able to provide the Exchange Agent with the funds
necessary to make the payments contemplated by this Article II.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each person who was, at the Effective Time, a holder of record of
Shares entitled to receive the Merger Consideration pursuant to Section
2.5(a) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates previously
representing Shares to be exchanged pursuant to the Merger (the
"Certificates") shall pass, only upon proper delivery of such Certificates
to the Exchange Agent) and instructions for use thereof in effecting the
surrender of the Certificates. Upon surrender to the Exchange Agent of the
Certificates, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such
other documents as may be requested, the Exchange Agent shall promptly
deliver to the persons entitled thereto the Merger Consideration payable
in respect of the Shares represented by the Certificates, and the
Certificates shall forthwith be cancelled. Until so surrendered and
exchanged, each such Certificate (other than Certificates representing
Shares held in the treasury of the Company, by the Purchaser or any
subsidiary of the Purchaser and Dissenting Shares) evidencing Shares
shall, after the
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Effective Time, be deemed to evidence only the right to receive the Merger
Consideration.
(c) If delivery of the Merger Consideration in respect of cancelled
Shares is to be made to a person other than the person in whose name a
surrendered Certificate or instrument is registered, it shall be a
condition to such delivery or payment that the Certificate or instrument
so surrendered shall be properly endorsed or shall be otherwise in proper
form for transfer and that the person requesting such delivery or payment
shall have paid any transfer and other taxes required by reason of such
delivery or payment in a name other than that of the registered holder of
the Certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation or the Exchange Agent that such
tax either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers of
Shares thereafter on the records of the Company. From and after the
Effective Time, holders of Certificates evidencing ownership of Shares
outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares except as otherwise provided herein
or by law. No interest shall be paid or accrue on any portion of the
Merger Consideration.
(e) Notwithstanding anything to the contrary in this Section 2.7,
none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to a holder of Shares for any amount properly paid to a
public official pursuant to any applicable property, escheat or similar
law.
2.9 Taking of Necessary Action; Further Action. Subject to the terms and
conditions hereof, Parent, the Purchaser, the Merger Sub and the Company,
respectively, shall use all reasonable efforts to take all such action as may be
necessary or appropriate in order to effectuate the Offer and the Merger as
promptly as possible and to carry out the transactions provided for herein or
contemplated hereby. If at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, immunities, powers and franchises of
either of the Constituent Corporations, the officers and directors of the
Surviving Corporation are fully authorized in the name of either of the
Constituent Corporations or otherwise to take, and shall take, all such action.
2.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing Shares shall have been lost, stolen or destroyed, the paying agent
shall pay to such holder the Merger Consideration required pursuant to Section
2.5, in exchange for such lost, stolen or destroyed certificates, upon (i) the
making of an affidavit of that fact by the holder thereof with such assurances
as the paying agent (upon prior consultation with Parent) in its discretion and
as a condition precedent to the payment of the Merger Consideration as the
paying agent, may reasonably require of the holder of such lost, stolen or
destroyed certificates, and (ii) upon written agreement by such holder to
indemnify the Company, Parent, Merger Sub and the
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<PAGE> 11
Surviving Corporation for any and all losses or damages suffered by such
entities as a result of payment of the Merger Consideration (upon prior
consultation with Parent) in its discretion and as a condition precedent to the
payment of the Merger Consideration as the paying agent, may reasonably require
of the holder of such lost, stolen or destroyed certificates.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARENT,
THE PURCHASER AND THE MERGER SUB
The Parent, the Purchaser and the Merger Sub hereby agree and represent
and warrant to the Company as follows:
3.1 Organization and Qualification. Each of the Parent, the Purchaser and
the Merger Sub has been duly incorporated and is validly existing as a
corporation and in good standing under the laws of the United Kingdom in the
case of Parent and the laws of Delaware in the case of the Purchaser and Merger
Sub and has the requisite corporate power to carry on its respective business as
now conducted. Each of the Parent, the Purchaser and the Merger Sub is duly
qualified as a foreign corporation in good standing in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the business, assets,
revenues, operations or financial condition of the Parent and its subsidiaries,
taken as a whole. As of the date of this Agreement, the Parent, the Purchaser
and the Merger Sub have no obligations or liabilities, and none of such parties
are parties to any pending or, to the knowledge of such parties, threatened,
litigation, which in any case if paid or adversely determined would have a
material effect on their ability to consummate the transactions contemplated by
this Agreement. The Purchaser is an indirect wholly-owned subsidiary of the
Parent and the Merger Sub is a wholly-owned subsidiary of the Purchaser. The
Certificate or Articles of Incorporation and By-Laws of the Purchaser and the
Merger Sub contain no provisions which would have a material adverse effect on
the ability of either of such entities to consummate the transactions
contemplated by this Agreement.
3.2 Authority Relative to this Agreement. Each of the Parent, the
Purchaser and the Merger Sub has the requisite corporate power and authority to
enter into this Agreement and the Option Agreement, as applicable, and to carry
out its respective obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Option Agreement, as applicable, by the
Parent, the Purchaser and the Merger Sub, as applicable, and the consummation by
the Parent, the Purchaser and the Merger Sub, as applicable, of the transactions
contemplated hereby and thereby have been duly authorized by the respective
Boards of Directors of the Parent, the Purchaser and the Merger Sub, as
applicable, by the Parent as the sole stockholder of the Purchaser, and by the
Purchaser as the sole stockholder of the Merger Sub, and no other corporate
proceedings on the part of the Parent, the Purchaser or the Merger Sub are
necessary to authorize this Agreement or the Option Agreement, as applicable,
and the
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transactions contemplated hereby and thereby. This Agreement and the Option
Agreement, as applicable, have been duly executed and delivered by the Parent,
the Purchaser and the Merger Sub and constitute a valid and binding obligation
of each such company, enforceable in accordance with its terms. None of the
Parent, the Purchaser or the Merger Sub is subject to or obligated under any
provision of (a) its Certificate or Articles of Incorporation or By-Laws, or (b)
any contract, indenture, instrument, or other agreement, or (c) any license,
franchise or permit, or (d) any law, regulation, order, judgment or decree,
which would be breached, violated or defaulted or in respect of which a right of
termination or acceleration or any encumbrance on any of its assets would be
created by its execution, delivery and performance of this Agreement or the
Stock Option Agreement, as applicable, and the consummation by it of the
transactions contemplated hereby and thereby, other than any such breaches,
violations, defaults, rights of termination or acceleration, or encumbrances,
which will not, individually or in the aggregate, have a material adverse effect
on the ability of the Purchaser or the Merger Sub to consummate the Offer or the
Merger. Other than in connection with or in compliance with the provisions of
the Delaware Law, the Exchange Act, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "Hart-Scott-Rodino Act"), no authorization, consent
or approval of, or filing with, any public body, court or authority of competent
jurisdiction (each a "Government Entity") is necessary on the part of the
Parent, the Purchaser or the Merger Sub for the consummation by the Parent, the
Purchaser and the Merger Sub of the transactions contemplated by this Agreement
or the Stock Option Agreement, as applicable, other than filings with such
foreign jurisdictions in which subsidiaries of the Company are organized which
may require filings to be made in connection with the transfer of control of
such subsidiaries, and Parent, the Purchaser and the Merger Sub each agrees to
make any and all such filings on or prior to the Effective Time if any of such
parties are required to make such filings under applicable law.
3.3 Offer Documents. The Offer to Purchase and related Letter of
Transmittal and Schedule 14D-1 (and any amendments or supplements to the
foregoing) (which together constitute the "Offer Documents") shall in all
material respects conform with the requirements of the Exchange Act and the
rules and regulations thereunder (except that the foregoing representation shall
not apply with respect to the accuracy of information relating to the Company
which has been excerpted or derived from public sources or furnished in writing
by the Company specifically for inclusion in the Offer Documents). As of their
respective dates, and on the date they are first published, sent or given to
holders of Shares, the Offer Documents, taken as a whole, shall not contain any
misstatement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading. Each of the
Parent, Purchaser and the Company agrees to correct promptly any information
provided by it for use in the Schedule 14D-1 and the other Offer Documents if
and to the extent that any of them shall become false or misleading in any
material respect, and Parent and the Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable law.
The information supplied by Parent for inclusion in the proxy statement to be
sent to the stockholders of the Company in connection with the meeting of the
Company's stockholders to consider the Merger, or the information statement to
be sent to such stockholders, as appropriate, shall not, on the date the proxy
statement or information statement is first mailed to stockholders, at the time
of such
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stockholders' meeting, if any, or at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or shall omit to
state any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for such stockholders'
meeting which has become false or misleading.
3.4 Financing. At the expiration of the Offer and the Effective Time,
Parent and the Purchaser will have available all funds necessary for the
acquisition of all Shares pursuant to the Offer and to perform their respective
obligations under this Agreement, including without limitation, payment in full
for all shares of Common Stock validly tendered into the Offer or outstanding at
the Effective Time and all obligations to make payment with respect to the
Options pursuant to Section 2.6.
3.5 No Violation of the Margin Rules. None of the transactions
contemplated by this Agreement will violate or result in the violation of
Section 7 of the Exchange Act or any regulation promulgated pursuant thereto,
including, without limitation, Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
3.6 Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has engaged in
no other business activities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent, the Purchaser
and the Merger Sub, except as set forth in the Disclosure Schedule which was
dated and delivered to the Parent, the Purchaser and the Merger Sub on or prior
to the date hereof, as follows:
4.1 Organization and Qualification. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
Delaware. The Company is duly qualified as a foreign corporation in good
standing in each jurisdiction in which the character of its properties owned or
leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the business, revenues, assets, operations or financial conditions of
the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect
on the Company" (it being understood that (i) any adverse effect that is caused
by conditions affecting the economy or security markets generally shall not be
taken into account in determining whether there has been a Material Adverse
Effect on the Company, (ii) any adverse effect that is caused by conditions
affecting the primary industry in which the Company currently competes shall not
be taken into account in determining whether there has been a Material Adverse
Effect on the Company (provided that such affect does not adversely effect the
Company in a disproportionate manner) and (iii) any adverse effect resulting
from litigation brought or threatened against the Company or any
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<PAGE> 14
member of its Board of Directors in respect of the Offer, the Merger, or any of
the transactions contemplated hereby shall not be taken into account in
determining whether there has been a Material Adverse Effect on the Company)).
The Company has full corporate power and authority to own its properties and
conduct its business as presently owned and conducted. The copies of the
Certificate of Incorporation and By-Laws of the Company previously delivered or
made available to the Purchaser are true, correct and complete as of the date
hereof.
4.2 Subsidiaries. Each subsidiary of the Company, all of which are listed
in either Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "Form 10-K Report") or the Disclosure
Schedule, has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation, is duly
qualified as a foreign corporation in good standing in each jurisdiction in the
United States in which the character of its properties owned or leased or the
nature of its activities make such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Company, and has full power and authority to own its properties and conduct its
business as presently owned and conducted. Except as set forth on Schedule 4.2,
the Company owns, directly or indirectly, all of the outstanding shares of
capital stock of each such subsidiary free and clear of all liens, claims.
charges or encumbrances; there are no irrevocable proxies with respect to such
shares; and all such shares are validly issued, fully paid and nonassessable.
Except for the capital stock of such subsidiaries or otherwise as disclosed in
the Form 10-K Report, the Company does not own, directly or indirectly, any
investment (other than for ordinary cash management purposes) in (a) any general
partnership or joint venture or (b) any equity or debt investment having either
a fair market or face value or cost in excess of $100,000. Except as disclosed
in the Disclosure Schedule, neither the Company nor any of its subsidiaries is
obligated to make any payments in the form of earn-outs, deferred purchase price
or other consideration in respect of the purchase price payable in connection
with the acquisition of any subsidiary or business.
4.3 Capitalization. The authorized capital stock of the Company consists
of 30,000,000 Shares and 5,000,000 shares of preferred stock, $.001 par value
("Preferred Stock"), of which 100,000 shares have been designated Series A
Participating Preferred Stock (the "Series A Preferred Stock"). As of the date
hereof, 14,146,608 Shares (plus any Shares issued upon exercise of stock options
outstanding on March 31, 1998), and no shares of Preferred Stock, are issued and
outstanding. All issued and outstanding Shares are duly authorized and issued,
and are fully paid and nonassessable. As of the date hereof, (a) 2,086,249
Shares (less the number of Shares issued upon the exercise of stock options
outstanding on March 31, 1998) are reserved for issuance pursuant to outstanding
stock options, (b) 1,320,001 shares are reserved for future grants pursuant to
the Stock Plans, and (c) 100,000 shares of Series A Preferred Stock are reserved
for issuance pursuant to preferred stock purchase rights (the "Rights") issued
under the Rights Agreement. Section 4.3 of the Disclosure Schedule sets forth a
complete and correct list of the Company's outstanding stock options, including
for each the name of the option holder, the date of grant, the expiration date,
the plan under which the option (or any portion thereof) was granted, and the
dates and the number of Shares as to which any portion of the option becomes
exercisable. Except as otherwise described in the Disclosure Schedule and for
Stock issuable upon exercise of outstanding options on the date hereof or upon
issuance of Stock
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pursuant to the Employee Stock Purchase Plans, there are no options, warrants,
conversion privileges or other rights, agreements, arrangements or commitments
obligating the Company or any of its subsidiaries to issue or sell any shares
of, or make any payments based on the value or appreciation of any, capital
stock of the Company or any of its subsidiaries or securities or obligations of
any kind convertible into or exchangeable for any shares of capital stock of the
Company, any of its subsidiaries or any other person. The holders of outstanding
Shares are not entitled to any contractual or statutory preemptive or other
similar rights. Upon consummation of the Merger in accordance with the terms of
this Agreement, the Purchaser will own the entire equity interest in the
Company, and there will be no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments obligating the Surviving
Corporation or any of its subsidiaries to issue or sell any shares of capital
stock of the Surviving Corporation or of any of its subsidiaries.
4.4 Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to enter into this Agreement and the Option
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Option Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and unanimously authorized by the Board of Directors of the
Company and, except for the approval of its stockholders (if required) as set
forth in Section 6.1, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or the Option Agreement and the
transactions contemplated hereby and thereby. This Agreement and Option
Agreement have been duly executed and delivered by the Company and the Agreement
constitutes valid and binding obligations of the Company, enforceable in
accordance with their terms. Except as set forth on the Disclosure Schedule 4.4,
neither the Company nor any of its subsidiaries is subject to or obligated under
any provision of (a) its Certificate or Articles of Incorporation or By-Laws,
(b) except as set forth in the Disclosure Schedule, any contract, (c) any
license, franchise or permit, or (d) any law, regulation, order, judgment or
decree, which would be breached or violated or in respect of which a right of
termination or acceleration or any encumbrance on any of its or any of its
subsidiaries' assets would be created by the Company's execution, delivery and
performance of this Agreement or the Option Agreement and the consummation by
the Company of the transactions contemplated hereby, other than any such
breaches, violations, rights or encumbrances which will not, individually or in
the aggregate, have a Material Adverse Effect on the Company. Other than in
connection with or in compliance with the provisions of the Delaware Law, the
Exchange Act and the Hart-Scott-Rodino Act, no authorization, consent or
approval of, or filing with, any public body, court or authority is necessary
for the consummation by the Company of the transactions contemplated by this
Agreement or the Option Agreement other than (i) filings with such foreign
jurisdictions in which subsidiaries of the Company are organized which may
require filings to be made in connection with the transfer of control of such
subsidiaries, and (ii) such authorizations, consents, approvals or filings with
respect to which the failure to obtain would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the ability of the
parties to consummate the transactions contemplated hereby. The Company agrees
to make any and all such filings on or prior to the Effective Time if the
Company is required to make such filings under applicable law.
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4.5 Commission Filings. The Company has heretofore delivered or made
available to the Purchaser copies of the Company's (a) Form 10-K Report and (b)
all proxy statements relating to the Company's meetings of stockholders (whether
annual or special) during 1997 and 1998, in each case as filed with the
Commission. The Company has heretofore made available to the Purchaser all other
reports, registration statements and other documents filed by the Company with
the Commission under the Exchange Act and the Securities Act. All such documents
described in the first two sentences of this section are collectively referred
to herein as the "Commission Filings." Except as set forth on the Disclosure
Schedule, the Company has not filed any Form 8-K Reports with the Commission
since January 1, 1998. The Company has timely filed all reports, registration
statements and other documents required to be filed with the Commission under
the rules and regulations of the Commission, and all Commission Filings complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be. As of their respective dates, the Commission
Filings (including in all cases any exhibits or schedules thereto or documents
incorporated therein by reference) did not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent corrected or
superseded by subsequent filings.
4.6 Financial Statements and Related Data. The audited consolidated
financial statements of the Company included in the Form 10-K Report have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto, and fairly presented the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended.
4.7 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, or reflected in any financial statement or note thereto referred to
in Section 4.6 or reflected in the Disclosure Schedule, or reflected in any
Commission Filing filed prior to date hereof, since December 31, 1997 until the
date hereof, there has not been (a) any Material Adverse Effect on the Company;
(b) any damage, destruction or loss, whether covered by insurance or not, having
a Material Adverse Effect on the Company; (c) any entry by the Company or any
subsidiary into any commitment or transaction material to the Company and its
subsidiaries taken as a whole, which is not in the ordinary course of business;
(d) any change by the Company in accounting principles or methods except insofar
as may be required by a change in generally accepted accounting principles; (e)
any declaration, payment or setting aside for payment of any dividends or
purchase or redemption of any securities of the Company or (f) any entering into
or modification of any employment or severance contract with any executive
officer of the Company or any of its subsidiaries or any increase in
compensation payable by the Company or any of its subsidiaries to any of their
executive officers or any material increase under any bonus, pension or benefit
plan.
4.8 Litigation. As of the date hereof, except as set forth on Schedule
4.8, no action, suit, claim, proceeding, or to the Company's knowledge as of the
date hereof, investigation,
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compliance review, or other legal or administrative proceeding is pending or to
the Company's knowledge as of the date hereof, is threatened at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators (a "Claim") which is against
(i) the Company, (ii) or any of its subsidiaries or (iii) against any of the
officers or directors of the Company or any of its subsidiaries with respect to
the Company or its subsidiaries or the business or property of the Company or
its subsidiaries.
4.9 Liabilities. Except as disclosed in the Form 10-K Report neither the
Company nor any of its subsidiaries has any obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to the Company, whether due or to become due) of a nature that would be required
under GAAP to be disclosed on a balance sheet of the Company other than (i)
obligations and liabilities incurred since December 31, 1997 in the ordinary
course of business consistent with past practice, which in the aggregate have
not had nor are reasonably expected to have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole, and (ii) obligations and
liabilities to be incurred from and after the date of this Agreement relating to
the transactions contemplated hereby.
4.10 Environmental Matters. The Company and its subsidiaries have obtained
all material permits, licenses and other authorizations which are required under
applicable federal, state, local and foreign laws relating to public health and
safety, worker health and safety, pollution or protection of the environment,
including those relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes, except where its failure to obtain
the same would not have a Material Adverse Effect on the Company. The Company
and its subsidiaries have complied and are in compliance with all terms and
conditions of any and all required permits, licenses, and authorizations, and
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
federal, state, local or foreign law or any regulation, code, plan, order,
decree or judgment relating to public health and safety, worker health and
safety, and pollution or protection of the environment, or any notice or demand
letter issued, entered, promulgated or approved thereunder by any Governmental
Entity, except where the failure to comply would not have a Material Adverse
Effect on the Company. To the knowledge of the Company as of the date hereof, no
facts, events or conditions relating to the Company's or any of its
subsidiaries' past or present operations, facilities or properties interfere in
any material respect with or prevent continued compliance by the Company in all
material respects with, or give rise to any material present or potential legal,
common law or statutory liability of the Company under, any applicable law or
regulation related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or related to the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste.
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4.11 Employee Benefit Plans.
(a) Section 4.11(a) of the Disclosure Schedule hereto sets forth a
list of all material "employee benefit plans," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other material employee benefit or compensation
arrangements, including, without limitation, any such material
arrangements providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation,
bonus pay, incentive pay, stock options (including those held by
directors, employees, and consultants), hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, that
are maintained by the Company, any subsidiary of the Company or any
Company ERISA Affiliate (as defined in this Section 4.11) or with respect
to which the Company, any subsidiary of the Company or any Company ERISA
Affiliate has or may have any material liability (the "Company Employee
Benefit Plans").
(b) None of the Company Employee Benefit Plans is a "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA (a "Multiemployer Plan"),
and neither the Company nor any subsidiary of the Company or Company ERISA
Affiliate presently maintains or has maintained such a plan.
(c) Except as provided in Part 6 of Title I of ERISA, the Company
and the subsidiary of the Company do not maintain or contribute to any
plan or arrangement which provides or has any liability to provide life
insurance or medical or other employee welfare benefits to any employee or
former employee upon his retirement or termination of employment, and the
Company and the subsidiaries of the Company have never represented,
promised to or contracted with any employee or former employee that such
benefits would be provided.
(d) Except for the Options set forth in Section 4.3 of the
Disclosure Schedule and the rights of participants under the Company's
Employee Stock Purchase Plans, the execution of, and performance of the
transactions contemplated in, this Agreement will not, either alone or
upon the occurrence of subsequent events, result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any individual. The only severance agreements or severance
policies applicable to the Company or the subsidiary of the Company in the
event of a change of control of the Company are the agreements and
policies specifically referred to in Section 4.11(d) of the Disclosure
Schedule. No payment or benefit which will or may be made by the Company,
Parent or any of their subsidiaries or affiliates with respect to any
employee of the Company or any subsidiary of the Company will be
characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended.
(e) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto,
has been determined
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to be exempt from federal income taxation under Section 501 of the Code by
the IRS, and, to the Company's knowledge, nothing has occurred with
respect to the operation or organization of any such Company Employee
Benefit Plan that would cause the loss of such qualification or exemption
or the imposition of any material liability, penalty or tax under ERISA or
the Code. No Company Employee Benefit Plan is a "defined benefit plan"
within the meaning of Section 3(35) of ERISA, and neither the Company nor
any subsidiary of the Company or any Company ERISA Affiliate maintains or
has ever maintained such a plan.
(f) (i) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans to any funds or trusts
established thereunder or in connection therewith have been made by the
due date thereof, (ii) the Company and the subsidiary of the Company have
complied in all material respects with any notice, reporting and
documentation requirements of ERISA and the Code, (iii) as of the date
hereof there are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Company's knowledge, threatened, in
connection with the Company Employee Benefit Plans, and (iv) the Company
Employee Benefit Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code
(including rules and regulations thereunder) and other applicable federal
and state laws and regulations.
(g) Section 4.11(g) of the Disclosure Schedule sets forth a complete
list of all amounts outstanding relating to bonuses payable to employees
and any obligation to pay bonuses to employees relating to the Company's
performance, the employee's performance or the transactions contemplated
hereby.
(h) All compensation attributable to outstanding options to acquire
Shares constitute "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
(i) The Company has provided, or concurrently herewith shall
provide, all notices to holders of options required under any Stock Plan
or otherwise in connection with the Offer and the other transactions
contemplated hereby.
For purposes of this Agreement, "Company ERISA Affiliate" means any
business or entity which is a member of the same "controlled group of
corporations," under "common control" or a member of an "affiliated service
group" with the Company within the meanings of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with the Company under Section 414(o) of
the Code, or is under "common control" with the Company, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under
any of the foregoing Sections.
4.12 Labor Matters. As the date hereof, there are no controversies pending
or, to the knowledge of the Company, threatened, between the Company or any of
its subsidiaries and any
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group of their respective employees; (ii) neither the Company nor, to the
knowledge of the Company, any of its subsidiaries, is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or its subsidiaries nor does the Company know of any
activities or proceedings of any labor union to organize any such employees;
(iii) neither the Company nor any of its subsidiaries has materially breached or
otherwise materially failed to comply with any provision of any such agreement
or contract and there are no material grievances outstanding against any such
parties under any such agreement or contract; (iv) there are no unfair labor
practice complaints pending against the Company or any of its subsidiaries
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any of its subsidiaries; and (v)
the Company has no knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of the Company
or any of its subsidiaries. No consent of any union which is a party to any
collective bargaining agreement with the Company is required to consummate the
transactions contemplated by this Agreement.
4.13 Offer Documents. Neither the Schedule 14D-9 nor any of the
information supplied by the Company for inclusion in the Offer Documents shall,
at the respective times the Schedule 14D-9, the Offer Documents or any such
amendments or supplements are filed with the SEC or are first published, sent or
given to stockholders, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4.14 Trademarks, Patents and Copyrights.
(a) The Company and its subsidiaries own, or are licensed to use,
all trademarks, trade names, service marks, copyrights and patents,
together with any applications for the registrations of such trademarks,
trade names, services marks, copyrights and patents, and all processes,
formulae, methods, schematics, technology, know-how, software programs or
applications and tangible or intangible proprietary information or
materials that are necessary to conduct the business of the Company and
its subsidiaries as currently conducted, the absence of which rights would
reasonably be expected to have a Material Adverse Effect on the Company
(the foregoing collectively referred to as the "Company IP Rights").
(b) Schedule 4.14(b) of the Disclosure Schedule sets forth a
complete list of all patents, registered copyrights, registered
trademarks, trade names and service marks and any applications for all of
the foregoing, included in Company IP Rights, and specifies, where
applicable, the jurisdictions in which each such Company IP Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners.
(c) Schedule 4.14(c) of the Disclosure Schedule sets forth a list of
all material licenses, sublicenses and other agreements to which the
Company or any of its
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subsidiaries is a party and pursuant to which the Company or any other
person is licensed or otherwise has rights under any Company IP Right,
including agreements pursuant to which any party is granted any rights to
access source code or to use source code to create derivative works of any
products of the Company, but excluding object code licenses granted by the
Company to end-users in the ordinary course of business that permit use of
software products without a right to distribute or sublicense the same or
otherwise that are on customary end-user terms, and excluding standard
licenses granted to the Company by software vendors covering software
which is broadly distributed by such licensors. The Company and its
subsidiaries are not subject to any agreement which restricts in any
material respect the use, transfer, or licensing by the Company and its
subsidiaries of the Company IP Rights and the products of the Company.
(d) The execution and delivery of this Agreement by the Company, and
the consummation of the transactions contemplated hereby, will neither
cause the Company to be in violation of or default under any such license,
sublicense or other agreement set forth or required to be set forth on
Schedule 4.14(c), nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, except in each case or in the aggregate where such violation,
default, termination or modification would not have a Material Adverse
Effect on the Company. Except as set forth in Schedule 4.14 of the
Disclosure Schedule, the Company (i) is the sole and exclusive owner of,
with all right, title and interest in and to (free and clear of any liens
or encumbrances), Company IP Rights, or (ii) is a licensee under or
otherwise possesses legally enforceable rights under the Company IP Rights
under valid and binding agreements listed in Schedule 4.14(c) of the
Disclosure Schedule or excluded therefrom as permitted by this Section
4.14.
(e) No claims against the Company, or to the Company's knowledge,
its licensors or licensees with respect to Company IP Rights, have been
asserted or are, to the Company's knowledge, threatened by any person, nor
to the Company's knowledge, are there any valid grounds for any claims,
(i) to the effect that the manufacture, sale, use, offer for sale,
importation, reproduction, distribution or preparation of derivative works
of any of the products of the Company infringes on any copyright, patent,
trademark, service mark, trade secret or other proprietary rights, (ii)
against the manufacture, sale, use, offer for sale, importation,
reproduction, distribution or preparation of derivative works by the
Company of any computer software programs and applications and tangible or
intangible proprietary information or material used in the Company's
business as currently conducted or as currently proposed to be conducted,
or (iii) challenging the ownership by the Company, or the validity or
effectiveness of any, of the Company IP Rights, except in the case of
clauses (i), (ii) and (iii) with respect to claims brought after the date
hereof as would not have a Material Adverse Effect on the Company. To the
Company's knowledge, there is no material unauthorized use, infringement
or misappropriation under any Company IP Rights by any third party,
including any employee or former employee of the Company. To the knowledge
of the Company, no Company IP Right or product of the Company is subject
to any outstanding decree, order, judgment, or stipulation restricting in
any manner the licensing thereof by or to the Company.
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(f) It is the Company's policy to have each employee, consultant or
contractor of the Company execute a proprietary information and
confidentiality agreement substantially in the form of the Company's
standard forms of such agreement, and substantially all of the Company's
employees, consultants and contractors have executed such an agreement.
4.15 Taxes. Each of the Company and its subsidiaries has filed all federal
and state tax returns and reports, and all material local and foreign tax
returns and reports, that it was required to file. All such tax returns and
reports were correct and complete in all material respects. All taxes owed by
any of the Company and its subsidiaries have been paid except for taxes in an
immaterial amount or as to which the Company is contesting in good faith (with
the basis for such contested Taxes set forth on Schedule 4.15). Each of the
Company and its subsidiaries has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid to any employee,
independent contractor, creditor, stockholder, or other third party. Neither the
Internal Revenue Service (the "IRS") nor any other taxing authority or agency is
now asserting or, to the best of the Company's knowledge, threatening to assert
against the Company or any of its subsidiaries any deficiency or claim for
material additional taxes or interest thereon or penalties in connection
therewith. Neither the Company nor any of its subsidiaries has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any federal, state, local or foreign income tax.
The accruals and reserves for taxes reflected in the balance sheet of the
Company as of December 31, 1997 are adequate to cover all taxes accruable
through such date (including interest and penalties, if any, thereon) in
accordance with generally accepted accounting principles. Neither the Company
nor any of its subsidiaries has made an election under Section 341(f) of the
Code. The Company is not, and has not been during the period specified in
Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c) of the Code.
4.16 Brokers, Advisors. No broker, finder or investment banker
(other than DRW)
(a) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company.
The Company has heretofore furnished to the Purchaser and the Merger Sub a
complete and correct copy of all agreements between the Company and DRW
pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereunder.
(b) As long as the transactions contemplated hereunder are
consummated without any related litigation, and excluding any fees and
expenses related to antitrust matters other than fees and expenses
associated with the Company's initial filing under the Hart-Scott-Rodino
Act, the aggregate fees and expenses payable by the Company and its
subsidiaries in respect of this Agreement and the transactions
contemplated hereby to any of its advisors (including investment bankers,
counsel, accountants and other consultants) will not exceed $3,000,000.00.
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4.17 Product Liabilities. Except as set forth in the Disclosure Schedule,
as of the date hereof there are no product warranty, product liability or
similar claims pending, or to the knowledge of the Company, as of the date
hereof, threatened, against the Company or any of its subsidiaries.
4.18 Related Party Transactions. Except as set forth in the Disclosure
Schedule, or the SEC Reports for the year ended December 31, 1997, no current or
former director, officer or, to the knowledge of the Company as of the date
hereof, key employee of the Company or any of its subsidiaries nor any
"Associate" (as defined in Rule 405 promulgated under the Securities Act) of any
such person, is presently, directly or indirectly through his affiliation with
any other person or entity, a party to any transaction with the Company or any
of its subsidiaries providing for the furnishing of services (except as an
employee) by or to, or rental of real or personal property from or to, or
otherwise requiring cash payments by or to any such person. In addition, except
as set forth in the Disclosure Schedule or SEC Reports, during such periods
there was no relationship or transaction involving the Company or any of its
subsidiaries which is described in Item 404 of Regulation S-K promulgated under
the Securities Act.
4.19 Rights Agreement. The Board of the Directors of the Company has
approved an amendment to the Rights Agreement, and within 3 business days
hereof, the Company will amend the Rights Agreement, so that the Rights
Agreement will not be applicable to Parent, Purchaser or Merger Sub solely by
virtue of this Agreement, the Option Agreement, the Offer, the announcement of
the Offer, the purchase of Shares or Option Shares by Parent, the Purchaser or
the Merger Sub pursuant to the Offer or the Merger, or any other action
contemplated hereby.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, prior to the Effective Time, unless the Purchaser
shall otherwise agree in writing or as otherwise expressly contemplated or
permitted by this Agreement or as set forth in Schedule 6.1:
(a) The business of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall maintain
their facilities in, the ordinary course of business and consistent with
past practice.
(b) The Company shall not directly or indirectly, or permit any of
its subsidiaries, do any of the following: (i) issue, sell, pledge,
dispose of or encumber (or permit any of its subsidiaries to issue, sell,
pledge, dispose of or encumber) any shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of, any
capital stock of the Company or any of its subsidiaries (other than shares
issuable upon exercise of the outstanding (as of the date hereof) options
or rights under the Employee Stock Purchase Plans to acquire Shares in
accordance with their terms in effect on the date hereof); (ii) amend or
propose to amend the Certificate or Articles of
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Incorporation or By-Laws of it or any of its subsidiaries; (iii) split,
combine or reclassify any outstanding Shares, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or
otherwise with respect to the Shares other than pursuant to the Rights
Plan; (iv) other than pursuant to the Rights Plan redeem, purchase or
acquire or offer to acquire (or permit any of its subsidiaries to redeem,
purchase or acquire or offer to acquire) any Shares or other securities of
the Company or any of its subsidiaries other than as contemplated by
Section 2.5 hereof and other than for the repurchase by the Company,
pursuant to existing agreements, of any outstanding Shares upon
termination of an employment, director or consulting relationship with the
Company; or (v) enter into or materially modify any agreement, commitment
or arrangement with respect to any of the foregoing.
(c) Neither the Company nor any of its subsidiaries shall (i) sell,
pledge, lease, dispose of or encumber any material assets other than in
the ordinary course of business consistent with past practice; (ii)
acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
enterprise or material assets thereof; (iii) incur any indebtedness for
borrowed money or issue any debt securities for borrowings except in the
ordinary course of business and consistent with past practice; (iv)
guarantee, endorse or otherwise became liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person (other than a subsidiary of the Company or the Company) except in
the ordinary course of business consistent with past practice and in
amounts immaterial to the Company; or (v) enter into or materially modify
any contract, agreement, commitment or arrangement with respect to any of
the foregoing.
(d) Neither the Company nor any of its subsidiaries shall (i) enter
into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors; or (ii) in the case of
employees who are not officers or directors, take any action other than in
the ordinary course of business consistent with past practice (none of
which actions shall be unreasonable or unusual) with respect to the grant
of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits in effect on the date of this
Agreement.
(e) Except as may be required by applicable law, neither the Company
nor any of its subsidiaries shall adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust
fund or arrangement for the benefit or welfare of any employee.
(f) Except as is necessary after consultation with counsel to comply
with the fiduciary duties of the Board of Directors of the Company, the
Company will not (i) call any meeting (other than any meeting contemplated
by Section 6.1) of its stockholders or (ii) waive or modify any provision
of, or terminate any, confidentiality or standstill agreement entered into
by the Company with any person.
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(g) The Company shall use its reasonable efforts to cause its
current insurance (or reinsurance) policies not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under
the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect.
(h) The Company (i) shall use its reasonable efforts, and cause each
of its subsidiaries to use reasonable efforts, to preserve intact their
respective business organizations and goodwill, keep available the
services of its officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors, customers and
others having business relationships with it or its subsidiaries; (ii) as
requested by the Purchaser and the Merger Sub shall confer on a regular
and frequent basis with representatives of the Purchaser and the Merger
Sub to report operational matters and the general status of ongoing
operations; (iii) shall not take any action, and shall not permit any of
its subsidiaries to take any action, which would cause, or which
reasonably may be expected to cause, a failure to satisfy the condition
set forth in paragraph (e)(x) of Annex I; and (iv) shall notify the
Purchaser and the Merger Sub of any emergency or other change in the
normal course of its or any of its subsidiaries' business or in the
operation of its or any of its subsidiaries' properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would, individually
or in the aggregate, have a Material Adverse Effect on the Company or
would reasonably be expected to impair any party's ability to consummate
the transactions contemplated by this Agreement; and
(i) Neither the Company nor any of its subsidiaries shall adopt a
plan of liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or reorganization;
(j) Neither the Company nor any of its subsidiaries shall make any
material tax election or settle or compromise any material federal, state,
local, or foreign tax liability, except in the ordinary course of business
and consistent with past practice;
(k) Except as contemplated by Sections 2.6, 2.7 and 6.3, the Company
shall not modify or accelerate the exercisability of any stock options,
rights or warrants presently outstanding, and shall not amend, change or
waive (or exempt any person from the effect of) the Rights Agreement,
except in the exercise of its fiduciary duties by the Board of Directors
after consultation with counsel.
(i) The Company shall postpone the holding of its Annual Meeting of
Stockholders (the "Company Annual Meeting") indefinitely pending
consummation of the Merger unless the Company is otherwise required to
hold the Company Annual Meeting by Delaware Law.
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ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Action of Stockholders. The Company shall take all action necessary in
accordance with the Delaware Law and its Certificate of Incorporation and
By-Laws to convene a meeting of its stockholders promptly following consummation
of the Offer to consider and vote upon the Merger, if a stockholder vote is
required. If a stockholders' meeting is convened, the Board of Directors shall
recommend that the stockholders of the Company vote to approve the Merger. Such
recommendation shall not be withdrawn or adversely modified except by resolution
of the Continuing Directors adopted in the exercise of applicable fiduciary
duties after consultation with counsel. In the event that proxies are to be
solicited from the Company's stockholders, the Company shall, if and to the
extent requested by the Purchaser, use its best efforts to solicit from
stockholders of the Company proxies in favor of such approval and shall take all
other reasonable action necessary or, in the opinion of the Purchaser, helpful
to secure a vote or consent of stockholders in favor of the Merger. At any such
meeting, the Parent shall vote or cause to be voted all of the Shares then owned
by the Parent, Purchaser or any subsidiary of the Parent in favor of the Merger
and the Company shall vote all Shares in favor of the Merger for which proxies
in the form distributed by the Company shall have been given and with respect to
which no contrary direction shall have been made. Following the purchase of
Shares, if any, pursuant to the Offer, Parent shall ensure that all Shares
purchased pursuant to the Offer continue to be held by Parent, Purchaser, and/or
a direct or indirect wholly-owned subsidiary of Parent until such time as the
Merger is consummated.
6.2 Proxy Statement. If a stockholder vote is required, the Company and
the Purchaser shall cooperate with each other and use all reasonable efforts to
prepare, and the Company and the Purchaser shall file with the Commission as
soon as reasonably practicable following consummation of the Offer and use their
best efforts to have cleared by the Commission, a proxy statement or information
statement, as appropriate, with respect to the approval of the Merger by the
Company's stockholders. The information provided and to be provided by the
Purchaser, the Merger Sub and the Company, respectively, for use in the proxy
statement or information statement shall be true and correct in all material
respects and shall not omit to state any material fact required to be stated
therein or necessary in order to make such information not misleading.
6.3 Employee Agreements and Severance Agreements. Parent shall cause the
Company (or any successor to the Company after the purchase of shares pursuant
to the Offer) to honor without modification all employment agreements and
severance agreements and policies in effect prior to the date hereof between the
Company and any employee of the Company, all of which, the Company hereby
represents and warrants, have been disclosed in writing to Parent prior to the
date hereof.
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6.4 Expenses. If (a) this Agreement is terminated by the Company pursuant
to Section 8.1(e)(iii) or Section 6.6(b), or (b) this Agreement is terminated by
the Purchaser pursuant to Section 8.1(c) or (c) this Agreement is terminated for
any reason other than a material breach of this Agreement by the Parent, the
Purchaser or the Merger Sub, and in case of this clause (c) reasonably
concurrently therewith or within four months thereafter (x) a definitive
agreement is entered into between the Company and any person other than the
Purchaser or any affiliate of the Purchaser for the acquisition or disposition
of a material amount of assets or securities of the Company, or for a merger,
consolidation or other reorganization of the Company at a price equivalent to a
price per Share in excess of $10.00 and the transactions contemplated thereby
are subsequently consummated at any time or (y) any person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act) other than the Purchaser
or any affiliate of the Purchaser shall have acquired beneficial ownership of
50% or more of the outstanding Shares at a price per Share in excess of $10.00,
or offered by way of a public tender offer to acquire beneficial ownership of
50% or more of the outstanding Shares at a price per Share in excess of $10.00
and the transactions contemplated thereby are consummated at any time, the
Company shall pay to Parent upon demand (by wire transfer of immediately
available federal funds to an account designated by Parent for such purpose) the
amount of $7,250,000 (the "Termination Fee") to compensate Parent, the Purchaser
and the Merger Sub for taking actions to consummate this Agreement, to reimburse
them for the time and expense relating thereto and for other direct and indirect
costs (including lost opportunity costs) in connection with the transactions
contemplated herein. The Company acknowledges that the provisions set forth in
this section are an integral part of this Agreement that have been negotiated in
order to induce Parent, the Purchaser and the Merger Sub to enter into this
Agreement; accordingly, if the Company fails to promptly pay the amounts
referred to above, the Company shall in addition pay Parent all reasonable
out-of-pocket costs and expenses (including reasonable attorneys' fees and
expenses) incurred in collecting such fees together with interest on the amount
of such fees from the date such payment was required to be made until such time
as payment is received by Parent at the rate of the lesser of (i) 10% per annum
or (ii) the maximum rate permitted by law. Payment of such amount by the Company
along with any interest, costs and expenses as may be required under this
Section 6.4 shall constitute a full and complete discharge of all obligations or
liabilities of the Company under this Paragraph.
In addition to any damages caused by conduct which constitutes a breach by
any of Parent, the Purchaser, the Merger Sub or the Company of any of their
obligations under this Agreement, the breaching party agrees, jointly and
severally, to pay to the nonbreaching party all reasonable out-of-pocket costs
and expenses (including reasonable attorneys' fees and expenses) incurred by the
nonbreaching party in connection with the enforcement by the nonbreaching party
of its rights hereunder, together with interest on the amount of such damages
from the date such damages are incurred until such time as payment is received
by the nonbreaching party at the rate of the lesser of (i) 10% per annum or (ii)
the maximum rate permitted by law.
6.5 Additional Agreements. Subject to the terms and conditions provided
herein, each of the parties agrees to use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including using best
27
<PAGE> 28
efforts to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings, including but not limited to filings
under the Hart-Scott-Rodino Act and submissions of information requested by
governmental authorities. The Company shall, and shall cause its officers,
directors, affiliates and agents to, immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any acquisition of or sale of any equity
interest in or substantial assets of the Company or any of its subsidiaries.
6.6 No Solicitation.
(a) Except as provided in Section 6.6(b) below, the Company agrees
that from the date hereof until the Effective Time or the termination of
this Agreement, the Company will not, directly or indirectly, through any
officer, director, affiliate or agent of the Company, or otherwise,
solicit, initiate, entertain, or encourage any proposals or offers from
any person other than Parent or its affiliates (a "third party") relating
to any possible acquisition of the Company or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) (an "Alternative Acquisition"), or engage in any
recapitalization or sale of any equity interest in or sale or assignment
of substantial assets of the Company or any of its subsidiaries (other
than pursuant to the exercise of options and Rights outstanding on the
date hereof or granted following the date hereof with Parent's written
permission) to a third party (an "Equity Transaction"); nor will the
Company participate in any negotiations regarding, or furnish to any third
party any information with respect to, or otherwise cooperate with,
facilitate or encourage any effort or attempt by any third party person to
do or seek, any Alternative Acquisition or Equity Transaction (it being
understood that the Company may make available copies of this Section 6.6
to third parties who are not solicited by Company or any officer,
director, affiliate or agent of the Company).
(b) Notwithstanding the foregoing, this Section 6.6 will not be
violated and the Company shall be permitted to negotiate and provide
information to any third party that provides a Bona Fide Offer, provided
that the Company shall have first notified the Parent in writing of its
receipt of such proposal and the material terms thereof. For purposes of
this Agreement, a "Bona Fide Offer" means any bona fide proposal made by a
third party with respect to an Alternative Acquisition on terms which the
Board of Directors of the Company determines in its good faith judgment
(after consultation with its outside financial advisors) to be more
favorable to the Company's stockholders than the Offer and the Merger and
for which financing, to the extent required, is then committed or which,
in the good faith judgment of the Board of Directors of the Company (after
consultation with its outside financial advisors) is highly probable of
being obtained by such third party. In addition, the Company may terminate
this Agreement and accept such Bona Fide Offer upon the payment to Parent
of the fee provided in Section 6.4.
(c) Notwithstanding the provisions of paragraph 13 of the
Confidentiality Agreement and clause (b) of Section 8.4 of this Agreement
(the "Standstill Provisions") if
28
<PAGE> 29
any third party commences an Alternative Acquisition involving a change of
control in the Company or its business then, provided this Agreement has
been terminated, Parent and its affiliates shall be entitled to propose or
present any offer or offers or take other action it deems appropriate in
response thereto and the Standstill Provisions shall not be applicable
thereto.
6.7 Notification of Certain Matters. Each party shall give prompt notice
to the others of (a) the occurrence or failure to occur of any event, which
occurrence or failure would be likely to cause any representation or warranty on
its part contained in this Agreement or the Option Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof through the
purchase of Shares pursuant to the Offer, and (b) any material failure of such
party, or any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
6.8 Access to Information. From the date hereof to the Effective Time, the
Company shall, and shall cause its subsidiaries, officers, directors, employees
and agents (including lenders, attorneys and accountants) to afford the Parent
and the Purchaser complete access at all reasonable times to its officers,
employees, agents, properties, books and records, and shall furnish Parent and
the Purchaser all financial, operating, personnel, compensation, tax and other
data and information as the Purchaser, through its officers, employees or
agents, may reasonably request. All of such information shall be treated as
"Evaluation Material" pursuant to the terms of the Confidentiality Agreement.
6.9 Stockholder Claims. The Company shall not settle or compromise any
claim brought by any present, former or purported holder of any securities of
the Company in connection with the Merger prior to the Effective Time without
the prior written consent of the Purchaser.
6.10 Indemnification.
(a) The By-Laws of the Company as the Surviving Corporation shall
contain the provisions with respect to indemnification set forth in
Article VI of the By-Laws of the Company. Such provisions in the By-Laws
of the Company and the Surviving Corporation shall not be amended,
repealed or otherwise modified for a period of three years from the date
Parent, the Purchaser or the Merger Sub acquires a majority of the Shares
in any manner that would adversely affect the rights thereunder of
individuals who at or prior to the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law. In addition, Parent shall use its reasonable efforts to
cause the Company, as the Surviving Corporation, to maintain in full force
and effect for a period of at least three years following the Effective
Time, directors and officers liability insurance with limits of at least
those currently in place containing terms and provisions comparable to the
terms and provisions of the current policy maintained by the Company for
the benefit of existing and former officers, directors, employees and
agents of the Company but the Surviving Corporation shall only be liable
for annual premiums of no more than 30% greater than that presently
incurred by the
29
<PAGE> 30
Company on the date hereof for such coverage. From and after the
consummation of the Offer, Parent will, and will cause the Company to,
fulfill and honor in all respects the obligations of the Company pursuant
to each indemnification agreement in effect at such time between the
Company and each person who is or was a director, officer, employee or
agent of the Company at or prior to such time.
(b) In the event Parent or the Company as the Surviving Corporation
or any of its successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in
each such case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Corporation, shall assume the
obligations set forth in this Section 6.10. Parent further agrees to
assume the obligations set forth in this Section 6.10 and the obligations
of the Surviving Corporation under the indemnification obligations of the
Company referenced in paragraph (a) of this Section 6.10 during any period
of time in which the Surviving Corporation fails to or is unable to
perform its obligations hereunder.
(c) This Section 6.10 shall survive the Effective Time, is intended
to benefit the Company, the Surviving Corporation and each of the persons
referred to in paragraph (a) of this Section and shall be binding on all
successors and assigns of Parent and the Company.
6.11 Consents and Amendments. The Company shall use its commercially
reasonable efforts to obtain, without the payment of any fee or compensation,
consents to the Offer, the Merger, and the transactions contemplated by this
Agreement from the parties to the agreements listed on Section 6.11 of the
Disclosure Schedule. The Company shall use its best efforts to enter into an
agreement with Shell Oil Products Company, with Shell acting for itself and
Shell Oil Company (collectively "Shell"), whereby the Company and Shell amend
the Software License Agreement (the "Shell License Agreement") dated September
15, 1997 by and between the Company and Shell (the "Shell Amendment") on terms
reasonably satisfactory to Parent.
6.12 Option Agreement. The Company hereby covenants that it will not take
any action whatsoever challenging or seeking to invalidate the effectiveness or
validity of the Option Agreement.
30
<PAGE> 31
ARTICLE 7
CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Merger shall have been approved and adopted by the vote of
the stockholders of the Company to the extent required by the Delaware
Law;
(b) All waiting, review and investigation periods (and any extension
thereof) applicable to the consummation of the Merger under the
Hart-Scott-Rodino Act shall have expired or been terminated;
(c) There shall have been no law, statute, rule or order, domestic
or foreign, enacted or promulgated which would make consummation of the
Merger illegal;
(d) No injunction or other order entered by a United States (state
or federal) court of competent jurisdiction shall have been issued and
remain in effect which would prohibit consummation of the Merger;
(e) This Agreement shall not have been terminated pursuant to
Section 8.1 hereof; and
(f) The Purchaser shall have been required hereunder to purchase
Shares pursuant to the Offer.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of the
Company (provided, however, that if Shares are purchased pursuant to the Offer,
neither Parent nor the Purchaser may in any event terminate this Agreement):
(a) By mutual consent of the Boards of Directors of Parent and the
Company;
(b) By either the Purchaser or the Company if the Offer shall not
have been consummated on or before October 31, 1998, provided, however,
that a party shall not be entitled to terminate this Agreement pursuant to
this Section 8.1(b) if it is in material breach of its obligations under
this Agreement;
31
<PAGE> 32
(c) By the Purchaser if (i) the Company or any subsidiary of the
Company shall have authorized, recommended or proposed, or shall have
announced an intention to authorize, recommend or propose, or shall have
entered into an agreement or agreement in principle with respect to, any
Alternative Acquisition or Equity Transaction or the Company's board of
directors shall have withdrawn or adversely modified (including by
amendment to the Schedule 14D-9) its favorable recommendations with
respect to the Offer and the Merger, or any corporation, entity, "group"
or "person" (as defined in the Exchange Act) other than Parent, the
Purchaser or the Merger Sub, shall have acquired beneficial ownership of
more than 50% of the outstanding Shares, or (ii) the Rights Amendment
shall not have been adopted by April 20, 1998 and remained in full force
and effect thereafter;
(d) By the Purchaser prior to the purchase of Shares pursuant to the
Offer in the event of any failure of any of the conditions to the Offer
set forth in Annex I; provided that if any and all such conditions as to
which there is a failure are and continue to be reasonably probable of
being satisfied by the date which is 30 business days after commencement
of the Offer, the Purchaser shall not terminate this Agreement as a result
of such failures until the date which is 30 business days after
commencement of the Offer.
(e) By the Company if (i) the Offer shall not have been commenced
substantially in accordance with Section 1.1; or (ii) the Offer shall have
expired or been terminated without any Shares having been purchased
thereunder; or (iii) if a tender offer for Shares is commenced by a person
or entity, or the Company receives an offer with respect to a merger, sale
of assets or other business combination with a person, any of which the
Board of Directors determines, in the exercise of its fiduciary duties and
subject to compliance with Section 6.6(b), makes necessary or advisable
the termination of this Agreement; provided that the provisions of Section
6.4 shall survive termination of the Agreement pursuant to this clause
(iii); or (iv) there shall have occurred a material breach or failure to
perform in any material respect by Parent, the Purchaser or Merger Sub of
any representation, warranty, covenant or other agreement contained in
this Agreement which cannot be or has not been cured within thirty days
after the giving of written notice to such breaching party; or
(f) By the Purchaser or if any Governmental Entity shall have issued
an order, decree or ruling or taken other action permanently enjoining,
restraining or otherwise prohibiting acceptance or payment for, Shares
pursuant to the Offer or the Merger, which such order, decree, ruling or
other action shall have become final and nonappealable provided that the
provisions of Section 6.4 shall survive termination of the Agreement
pursuant to this clause (f);
8.2 Amendment. This Agreement may not be amended except by an instrument
in writing approved by the parties to this Agreement and signed on behalf of
each of the parties hereto; provided, however, that after approval of the Merger
by the stockholders of the Company
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<PAGE> 33
(if such approval is required), no amendment may be made which changes the
amount into which each Share will be converted or effects any change which would
materially and adversely affect the stockholders of the Company without the
further approval of the stockholders of the Company.
8.3 Waiver. Subject to applicable law and the provisions of this
Agreement, at any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, or (b) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements and conditions are intended for its
benefit. For the purposes of this Section 8, Parent, the Purchaser and the
Merger Sub shall be considered to be a single party.
8.4 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, (a) this Agreement shall become void and there shall
be no liability or further obligation on the part of the Parent, the Purchaser,
the Merger Sub or the Company or their respective stockholders, officers or
directors, except as set forth in Section 6.4, in the last sentence of Section
1.2(d) hereof and in the confidentiality obligations of Section 6.8 hereof and
(b) the Purchaser and the Merger Sub shall terminate the Offer, if still
pending, without purchasing any Shares thereunder and shall not, subject to the
proviso set forth in Section 13(c) of the Confidentiality Agreement, for a
period of two years following termination, commence a tender or exchange offer
for any capital stock of the Company without prior written consent of the
Company.
ARTICLE 9
GENERAL PROVISIONS
9.l Public Statements. Except as required by applicable law, including the
rules and regulations of NASDAQ, neither Parent, the Purchaser or the Merger
Sub, on the one hand, nor the Company, on the other hand, shall make any public
announcement or statement with respect to the Offer, the Merger, this Agreement
or the transactions contemplated hereby, without the approval of the Company or
the Purchaser, respectively. The parties hereto agree to consult with each
other, to the extent practicable, prior to issuing each public announcement or
statement with respect to the Offer, the Merger, this Agreement or the
transactions contemplated hereby.
9.2 Notices. All notices and other communications hereunder shall be in
writing and sent by hand delivery, facsimile transmission (with confirmation of
receipt), or nationally recognized overnight courier service (with proof of
delivery), to the parties at the addresses set forth below (or at such other
address for a party as shall be specified by like notice):
33
<PAGE> 34
(a) if to Parent, the Purchaser or the Merger Sub:
Siebe plc
Saxon House
2-4 Victoria Street
Windsor, Berkshire SL4 1EN
England
Attention: Allen Yurko
Telephone: 011-44-1753-839-266
Facsimile: 011-44-1753-831-176
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
350 South Grand Avenue, 32nd Floor
Los Angeles, CA 90071
Attention: David K. Robbins, Esq.
Telephone: (213) 473-2000
Facsimile: (213) 473-2222
(b) if to the Company:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attention: Charles R. Harris
Telephone: 714-579-0412
Facsimile: 714-579-0175
with copies to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Marty Korman, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
9.3 Interpretation. When a reference is made in this Agreement to
subsidiaries of the Purchaser or the Company, the word "subsidiaries" means any
"majority-owned subsidiary" (as defined in Rule 12b-2 under the Exchange Act) of
the Purchaser or the Company, as the case may be; provided, however, that the
Company shall in no event and at no time be considered a subsidiary of the
Purchaser for purposes of this Agreement. As used herein, the term "person"
means an individual, a partnership, a corporation, an association, a joint stock
company, a trust, a
34
<PAGE> 35
joint venture, an unincorporated organization or other entity. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References to
Sections and Articles refer to sections and articles of this Agreement unless
otherwise stated.
9.4 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
enforceable, the remainder of the terms, provisions, covenants, and restrictions
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated and the parties shall negotiate in good faith
to modify the Agreement to preserve each party's anticipated benefits under the
Agreement.
9.5 Miscellaneous. This Agreement (together with all other documents and
instruments referred to herein including the Confidentiality Agreement and the
Option Agreement), except as expressly provided in Section 6.6(c) hereof,: (a)
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof; (b) except as set forth herein, is not intended to confer
upon any other person any rights or remedies hereunder; (c) shall not be
assigned by operation of law or otherwise, except that the Purchaser and the
Merger Sub may assign all or any portion of their rights under this Agreement to
any direct or indirect wholly-owned subsidiary of Parent, and except that this
Agreement may be assigned by operation of law to any corporation with or into
which the Purchaser may be merged; but no such assignment shall relieve Parent,
the Purchaser and the Merger Sub of their obligations hereunder, and (d) shall
be governed in all respects, including validity, interpretation and effect, by
the internal laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof. This Agreement may be executed in two or
more counterparts which together shall constitute a single agreement.
9.6 Survival of Representations and Warranties. The representations and
warranties of the parties set forth herein shall be deemed to be continuing as
if made as of the date of any determination hereunder; provided, however, that
such representations and warranties shall terminate as of the time Parent, the
Purchaser or the Merger Sub acquires Shares pursuant to the Offer, or upon the
termination of this Agreement pursuant to Section 8.1.
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<PAGE> 36
IN WITNESS WHEREOF, Parent, the Purchaser, the Merger Sub and the Company
have caused this Agreement and Plan of Merger to be executed as of the date
first written above by their respective officers thereunder duly authorized.
SIEBE PLC
By: /s/ GEORGE W. SARNEY
--------------------------------
Name: George W. Sarney
Its: Director
S ACQUISITION CORP.
By: /s/ JAMES C. BAYS
--------------------------------
Name: James C. Bays
Its: President
S SUB CORP.
By: /s/ JAMES C. BAYS
--------------------------------
Name: James C. Bays
Its: President
SIMULATION SCIENCES INC.
By: /s/ ROBERT E. GRICE, JR.
--------------------------------
Name: Robert E. Grice, Jr.
Its: Executive Vice President
Chief Financial Officer
<PAGE> 37
<PAGE> 38
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Agreement and Plan of Merger
(the "Agreement") or the Offer but subject to Section 1.1(c) of the Agreement,
the Purchaser shall not be required to accept for payment, purchase or pay for
any Shares tendered, or may postpone the acceptance, purchase or payment for
Shares, or may amend (to the extent permitted by the Agreement) or terminate (to
the extent permitted by the Agreement) the Offer (1) if the Minimum Condition is
not satisfied as of the expiration of the Offer; (2) any applicable waiting
period under the Hart-Scott-Rodino Act in respect of the Offer shall not have
expired or been terminated prior to the expiration of the Offer; or (3) if, upon
the scheduled expiration date of the Offer and before acceptance of such Shares
for payment (or, in respect of paragraph (g), the latest date permitted in
accordance with Rule 14d-1(c) of the Securities Exchange Act of 1934, as
amended), any of the following conditions exists or is continuing (each of
paragraphs (a) through (g) providing a separate and independent condition to the
Purchaser's obligations pursuant to the Offer):
(a) there shall be any statute, rule, injunction or other order
promulgated, enacted, entered or enforced by any court or governmental
agency or other regulatory or administrative agency or commission,
domestic or foreign of competent jurisdiction (other than the routine
application to the Offer, the Merger or other subsequent business
combination of waiting, review and investigation periods under the
Hart-Scott-Rodino Act and similar foreign antitrust laws and published
rules, and routine application of federal securities laws and published
rules), (i) making the purchase of some or all of the Shares pursuant to
the Offer or the Merger illegal, or resulting in a material delay in the
ability of the Purchaser or the Merger Sub to purchase some or all of the
Shares, (ii) invalidating or rendering unenforceable any material
provision of the Agreement, (iii) imposing material limitations on the
ability of the Purchaser or the Merger Sub effectively to acquire or hold
or to exercise full rights of ownership of the Shares acquired by it,
including but not limited to, the right to vote the Shares purchased by it
on all matters properly presented to the stockholders of the Company, (iv)
imposing material limitations on the ability of any of Parent, the
Purchaser, or the Company to continue to own or operate effectively all or
any material portion of its respective business as heretofore conducted or
to continue to own or operate effectively all or any material portion of
its respective assets as heretofore owned or operated, (v) imposing
material limitations on the ability of the Purchaser to continue
effectively all or any material portion of the Company's business as
heretofore conducted or to own or operate effectively all or any material
portion of the Company's assets as heretofore operated, or (vi) to the
effect that the Offer or the Merger is violative of any applicable law
which would reasonably be expected to result in any of the consequences
described in clauses (i) through (v) above;
(b) there shall be any law, statute, rule or regulation, domestic or
foreign, enacted or promulgated that, directly or indirectly, results or
would reasonably be expected to result in any of the consequences referred
to in paragraph (a) above, or any
<PAGE> 39
action, suit or proceeding shall have been commenced by a governmental or
regulatory authority or body seeking to restrain, enjoin or otherwise
prohibit the Offer, the Merger, or the completion of the transactions
contemplated by the Agreement;
(c) there shall be (i) any general suspension of, or limitation on
prices for, trading in securities on any national securities exchange or
in the over the counter market in the United States or on the London Stock
Exchange, (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or the United
Kingdom, (iii) any limitation by any governmental authority which would
reasonably be expected to materially adversely affect, the extension of
credit by banks or other lending institutions in the United States or the
United Kingdom, (v) from the date of this Agreement through the close of
business on the business day immediately prior to the date of termination
or scheduled expiration of the Offer, a decline of at least 25% in the
Standard & Poor's 500 Index, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(d) except as set forth in the SEC Reports or the Disclosure
Schedule, any change shall since the date of the Agreement have occurred
or be threatened which individually or in the aggregate has had or is
continuing to have or would reasonably be expected to have a Material
Adverse Effect on the Company (as defined in the Agreement) and its
subsidiaries, taken as a whole;
(e) (x) any of the representations and warranties of the Company in
the Agreement shall not be true and correct (i) in all material respects
on the date of the Agreement or (ii) in all respects as if made on the
date of any scheduled expiration of the Offer, except in the case of
clause (ii), in the case of any one or the aggregate of all inaccuracies,
as would not have a Material Adverse Effect on the Company, and except for
those representations and warranties that address matters only as of a
particular date (which representations and warranties shall have been true
and correct except as would not have a Material Adverse Effect on the
Company as of such particular date), it being understood that, for
purposes of determining whether inaccurate representations and warranties
would have a Material Adverse Effect on the Company, "Material Adverse
Effect" and "materiality" qualifications and limitations in the
representations and warranties shall not be given effect; or (y) the
Company shall have breached in any material respect or shall not have
performed in all material respects each covenant and complied with each
agreement to be performed and complied with by it under the Agreement; or
(f) the Agreement shall have been terminated pursuant to its terms.
which, in the good faith judgment of the Purchaser, in any such case, and
regardless of the circumstances giving rise to any such condition (except in the
case any such condition is not satisfied as the direct result of a breach by
Parent or Purchaser of obligations under the Agreement), make it inadvisable to
proceed with acceptance for payment or purchase of or payment for the Shares.
<PAGE> 40
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by the Purchaser and Parent regardless of the
circumstances (except in the case any such condition is not satisfied as the
direct result of a breach by Parent or Purchaser of obligations under the
Agreement) giving rise to such conditions, or may be waived (except for the
Minimum Condition) by the Purchaser or the Merger Sub in whole at any time or in
part from time to time in their sole discretion. The failure by the Purchaser or
the Parent at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right and may be asserted at any time and from time to time.
<PAGE> 1
EXHIBIT 99.8
STOCK OPTION AGREEMENT
Stock Option Agreement (this "Agreement") dated as of April 15, 1998,
between Siebe plc, a United Kingdom public limited company ("Parent"), and
Simulation Sciences Inc., a Delaware corporation ("Company").
Recitals
A. Concurrently herewith, Parent, S Acquisition Corp., a Delaware
corporation and an indirect wholly-owned subsidiary of Parent ("Purchaser"), S
Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Purchaser
("Merger Sub"), and the Company are entering into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Purchaser has agreed to make
a tender offer (the "Offer") for all outstanding shares of Common Stock at
$10.00 per share (the "Offer Price"), net to the seller in cash, to be followed
by a merger of Merger Sub with and into the Company.
B. As a condition to the willingness of Parent to enter into the Merger
Agreement, Parent has required that the Company agree, and in order to induce
Parent to enter into the Merger Agreement, the Company has agreed, to grant to
Parent the option set forth herein to purchase authorized but unissued shares of
Company Common Stock;
In consideration of the mutual covenants and agreements contained herein
and other good and valuable consideration, the adequacy of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Definitions. Capitalized terms used but not defined herein shall have
the same meanings as in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, the Company hereby grants to Parent an option (the "Option") to purchase
authorized and unissued shares of Company Common Stock in an aggregate amount up
to 15% of the Company's issued and outstanding shares of Company Common Stock as
of the date hereof (the "Option Shares") (subject to Section 8), at a price per
share equal to $10.00 (the "Purchase Price") payable in cash as provided in
Section 4 hereof.
3. Exercise of Option. (a) Parent may exercise the Option, in whole or
in part, at any time or from time to time during the period (the "Option
Exercise Period") commencing from the time a Purchase Event (as defined below)
shall have occurred and terminating 5:00 p.m. New York time on the date which is
180 days following the occurrence of the Purchase Event (the "Termination
Date"), whereupon the Option, to the extent it shall not have been exercised,
shall terminate and be of no further force and effect. If the Option cannot be
exercised prior to the Termination Date as a result of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the Option
Exercise Period shall terminate on the later of (i) the Termination Date and
(ii) the 10th business day after such injunction, order or restraint shall have
<PAGE> 2
been dissolved or shall have become permanent and no longer subject to appeal,
as the case may be, but in no event later than 18 months after the occurrence of
a Purchase Event.
(b) This Agreement shall terminate, if but only if no Purchase Event
shall have occurred prior thereto, upon the occurrence of any of the following,
as applicable:
(i) the date on which Purchaser purchases all shares of Company
Common Stock tendered and not withdrawn pursuant to the Offer; or
(ii) upon the termination of the Merger Agreement pursuant to its
terms (subject to clause (c) of this Section 3).
(c) As used herein, a "Purchase Event" shall have occurred if the
Merger Agreement shall have been terminated by the Company or Parent
under Section 6.6(b), 8.1(e)(iii) or 8.1(c) as the case may be.
(d) As used herein, the terms "Beneficial Ownership," "Beneficial Owner"
and "Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3
under the Exchange Act. As used herein, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(e) Whenever Parent wishes to exercise the Option, it shall deliver to
the Company a written notice (a "Notice of Exercise") (the date of receipt of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it intends to purchase pursuant to such exercise, and (ii) a
place and date not earlier than two business days nor later than 60 calendar
days from the Notice Date for the closing of such purchase (a "Closing Date");
provided that if any closing of the purchase and sale pursuant to the Option (a
"Closing") cannot be consummated by reason of any applicable law (including,
without limitation, the Hart-Scott Rodino Antitrust Improvements Act of 1976
("HSR"), the period of time that otherwise would run from the Notice Date
pursuant to this sentence shall run instead from the date on which such
restriction on consummation has expired or been terminated; and provided further
that, without limiting the foregoing, if prior notification to or approval of
any governmental authority (including, without limitation, under HSR, is
required in connection with such purchase, Parent and, if applicable, the
Company shall promptly file the required notice or application for approval and
shall expeditiously process the same (and the Company shall cooperate with
Parent in the filing of any such notice or application and the obtaining of any
such approval), and the period of time that otherwise would run from the Notice
Date pursuant to this sentence shall run instead from the date on which, as the
case may be, (i) any required notification period has expired or been terminated
or (ii) such approval has been obtained, and in either event, any requisite
waiting period has passed.
(f) In the event (i) Parent receives official notice that an approval of
any governmental authority required for the purchase of Option Shares would not
be issued or granted or (ii) the Closing Date shall not have occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval (including expiration of any required
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<PAGE> 3
waiting period under HSR), Parent shall be entitled to exercise its right as set
forth in Section 7 or, to the extent legally permitted, to exercise the Option
in connection with the resale of Option Shares pursuant to a registration
statement as provided in Section 8. The provisions of this Section 3 and Section
6 shall apply with appropriate adjustments to any such exercise.
4. Payment and Delivery of Certificates. (a) At each Closing, Parent
shall pay to the Company the aggregate Purchase Price for the Option Shares
purchased at such Closing pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated not later than one
business day prior to the Closing Date for such Closing by the Company.
(b) At such Closing, simultaneously with the delivery of the aggregate
Purchase Price as provided in Section 4(a) hereof, the Company shall deliver to
Parent a certificate or certificates representing the number of Option Shares
then being purchased by Parent, registered in the name of Parent or as
designated in writing by Parent, which Option Shares shall be fully paid and
nonassessable and free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever.
(c) If at the time of issuance of any Option Shares pursuant to any
exercise of the Option, the Company shall have issued any share purchase rights
or similar securities ("Rights") to holders of any class of Company Common
Stock, then, subject to the terms and conditions of any plan governing such
Rights, each such Option Share shall also represent rights with terms
substantially the same as and at least as favorable to Parent as those issued to
other holders of Company Common Stock.
(d) Certificates for Option Shares delivered at any Closing hereunder
shall be endorsed with a restrictive legend, which shall read substantially as
follows:
"The shares represented by this certificate are subject to certain
provisions of an agreement between the registered holder hereof and
Simulation Sciences Inc., a copy of which is on file at the principal
office of Simulation Sciences Inc., and to resale restrictions arising
under the Securities Act of 1933, as amended, and any applicable state
securities laws. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by Simulation Sciences Inc. of a
written request therefor."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend in connection with a transfer
or sale if (i) the Company has been furnished with an opinion of counsel,
reasonably satisfactory to counsel for the Company, that such transfer or sale
will not violate the Securities Act or applicable securities laws of any state
or (ii) such transfer or sale shall have been registered and qualified pursuant
to the Securities Act and any applicable state securities laws.
5. Representations and Warranties; Covenants. (a) The Company hereby
represents and warrants to Parent that (i) the Company has full corporate right,
power and authority to execute and deliver this Agreement and to perform all of
its obligations hereunder; (ii) such
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<PAGE> 4
execution, delivery and performance have been duly authorized by the Board of
Directors of the Company, and no other corporate proceedings are necessary
therefor; (iii) this Agreement has been duly and validly executed and delivered
by the Company; and (iv) the Company has taken all necessary corporate action to
authorize and reserve and permit it to issue, and at all times from the date
hereof through the date of the exercise in full or the expiration or termination
of the Option, shall have reserved for issuance upon exercise of the Option, a
number of shares of Company Common Stock equal to 15% of the Company's issued
and outstanding Common Stock as of the date hereof (subject to adjustment as
provided herein), all of which, upon issuance in accordance with the terms of
this Agreement, shall be duly authorized, validly issued, fully paid and
nonassessable and shall be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights of
any stockholder of the Company.
(b) Parent hereby represents and warrants to the Company that (i) Parent
has full corporate right, power and authority to execute and deliver this
Agreement and to perform all of its obligations hereunder; (ii) such execution,
delivery and performance have been duly authorized by all requisite corporate
action by Parent, and no other corporate proceedings are necessary therefor;
(iii) this Agreement has been duly and validly executed and delivered by Parent
and represents a valid and legally binding obligation of Parent, enforceable
against Parent in accordance with its terms; and (iv) any Company Common Stock
acquired by Parent upon exercise of the Option will not be transferred or
otherwise disposed of except in compliance with the Securities Act.
(c) the Company hereby covenants that any rights agreement, plan or
other instrument which may be adopted or entered into governing any Rights
(collectively, the "Rights Agreement") shall provide that neither the ownership
or exercise of the Option or any portion thereof nor the purchase or ownership
of any of the Option Shares, in and of itself, shall trigger any of the
provisions of the Rights Agreement.
6. Adjustment upon Changes in Capitalization. In the event of any change
in Company Common Stock by reason of stock dividends, split-ups,
recapitalizations or the like, the type and number of shares subject to the
Option and the Purchase Price shall be adjusted appropriately. In the event that
the Company enters into a merger with another company in which the shares of
Company Common Stock are converted into the right to receive cash, securities or
other property, then the Company will make appropriate provision so that the
Option will be adjusted so that it becomes an option to acquire the cash,
securities or other property that the holder thereof would have received in such
merger if it had exercised the Option immediately prior to such merger.
7. Repurchase. (a) If, during the Option Exercise Period, a notice of
exercise has been given but the related Closing has not occurred, at the option
of the Company exercised by written notice delivered to Parent not less than two
Business Days prior to date scheduled for such Closing during the period from
the Notice Date to the Closing Date (the "Repurchase Period"), the Company shall
repurchase the Option in its entirety from Parent together with all
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<PAGE> 5
(but not less than all) Option Shares previously purchased by Parent pursuant
thereto with respect to which Parent then has Beneficial Ownership, at a price
equal to the sum of:
(i) In the case of Options as to which Option Shares have not
been issued, the difference between (A) the "Market/Tender Offer Price"
for shares of Company Common Stock (defined as the higher of (x) the
highest price per share at which a tender or exchange offer has been
made and not withdrawn for shares of Company Common Stock during the
Option Exercise Period or (y) the highest closing price per share of
Company Common Stock as reported by the NASDAQ National Market for any
day within that portion of the Repurchase Period which precedes the date
the Company gives notice of the required repurchase under this Section
7) and (B) the Purchase Price (subject to adjustment as provided in
Section 6), multiplied by the number of Option Shares with respect to
which the Option has not been exercised or has been exercised but the
related Closing has not occurred, but only if such Market/Tender Offer
Price is greater than such exercise price; and
(ii) In the case of Option Shares, the greater of the
Market/Tender Offer Price and the Purchase Price paid for any Option
Shares acquired upon exercise of the Option, multiplied by the number of
Option Shares so acquired.
(b) In the event the Company exercises its rights under this Section 7,
the Company shall, within three business days thereafter, pay the required
amount to Parent by wire transfer of immediately available funds to an account
designated by Parent, and Parent shall surrender to the Company the Option and
the certificates evidencing any Option Shares acquired thereunder with respect
to which Parent then has Beneficial Ownership
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm mutually selected by Parent and the Company.
8. Limitation on Total Profit. If at any time from the date hereof,
Parent or any of Parent's affiliates effects a sale, transfer or other
disposition of the Option Shares or any rights or options therein (a "Sale")
then Parent shall cause to be paid to the Company (in cash or in the form of the
other consideration, if any, received pursuant to the Sale), the amount by
which: (i) the Proceeds of such Sale, together with the proceeds of all previous
Sales, exceed by more than $14,250,000 (ii) the aggregate Purchase price paid,
if any, with respect to the Option Shares subject to such Sale or Sales. For
purposes of this Section, the "Proceeds" of a Sale shall mean the aggregate
amount of the proceeds (in cash or in kind) paid to Parent or any of its
affiliates pursuant to such Sale, including without limitation pursuant to
Section 7 hereof (with any non-cash proceeds being valued at the fair market
value thereof). This Option shall not be transferable by Parent, except to a
direct or indirect wholly-owned subsidiary of Parent who agrees to be bound by
the terms hereof applicable to Parent.
9. Registration Rights; Listing. (a) At any time after a Closing, the
Company shall, if requested by any holder or Beneficial Owner of Option Shares
(each a "Holder"), as
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<PAGE> 6
expeditiously as possible file a registration statement on a form for general
use under the Securities Act if necessary in order to permit the sale or other
disposition of Option Shares in accordance the intended method of sale or other
disposition requested by any such Holder. Each such Holder shall provide all
information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. The Company shall use its
reasonable efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sales or other dispositions. The
registration effected under this Section 9(a) shall be at the Company's expense
except for underwriting commissions and the fees and disbursements of such
Holders' counsel attributable to the registration of such Option Shares. In no
event shall the Company be required to effect more than one registration
hereunder. The filing or effectiveness of any registration statement required
hereunder may be delayed (and use of a prospectus thereunder may be suspended)
for such period of time (not to exceed 90 days) as may reasonably be required to
comply with applicable law, facilitate any public distribution by the Company of
Company Common Stock, if a special audit of the Company would otherwise be
required in connection therewith during which the Company is in possession of
material information concerning it, its business affairs or a material
transaction in each case the public disclosure of which could have a material
adverse effect on the Company or significantly disrupt such material
transaction. If requested by any such Holder in connection with such
registration, the Company shall become a party to any underwriting agreement
relating to the sale of such shares on terms and including obligations and
indemnities which are customary for parties similarly situated. Upon receiving
any request for registration under this Section 9(a) from any Holder, the
Company agrees to send a copy thereof to any other person known to the Company
to be entitled to registration rights under this Section 9(a), in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
(b) If Company Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on any national securities exchange, the
Company, upon the request of Parent, will promptly file an application to list
the Option Shares or other securities to be acquired upon exercise of the Option
on all such exchanges and will use its best efforts to obtain approval of such
listings as soon as practicable.
10. Survival. The representations, warranties, covenants and agreements
of the parties hereto shall survive any Closing.
11. Severability. Any term, provision, covenant or restriction contained
in this Agreement held by a court or other governmental authority of competent
jurisdiction to be invalid, void or unenforceable shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
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<PAGE> 7
12. Expenses. Each of the parties hereto shall pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
13. Entire Agreement. This Agreement, the Merger Agreement (including
the documents and the instruments referred to therein), the Confidentiality
Agreement constitute the entire agreement between the parties and supersede all
prior agreements and understandings, agreements or representations by or between
the parties, written and oral, with respect to the subject matter hereof and
thereof.
14. Successors; No Third Party Beneficiaries. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
15. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 9.2 of the Merger Agreement (which is incorporated
herein by reference).
16. Counterparts. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed to be an original instrument, but both
such counterparts together shall constitute but one agreement.
17. Further Assurances. In the event of any exercise of the Option by
Parent, the Company and Parent shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
18. Specific Performance. The parties hereto agree that if for any
reason Parent or the Company shall have failed to perform its obligations under
this Agreement, then either party hereto seeking to enforce this Agreement
against such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This provision
is without prejudice to any other rights that either party hereto may have
against the other party hereto for any failure to perform its obligations under
this Agreement.
19. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without giving effect to the conflict of laws principles
thereof. Each party hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America located in the State of Delaware, for any Action (and
agrees not to commence any Action except in any such court), and further agrees
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that service of process, summons, notice or document by U.S. registered mail to
its respective address set forth in Section 9.2 of the Merger Agreement shall be
effective service of process for any Action brought against it in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Action in the courts of the State of Delaware or of
the United States of America located in the State of Delaware, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any Action brought in any such court has been brought in
an inconvenient forum.
20. Section 16(b). Periods of time that otherwise would run pursuant to
this Agreement shall also be extended to the extent necessary in order to avoid
liability under Section 16(b) of the Exchange Act.
21. Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
SIEBE PLC
By: /s/ GEORGE W. SARNEY
----------------------------------------
Name: George W. Sarney
Title: Director
SIMULATION SCIENCES INC.
By: /s/ ROBERT E. GRICE, JR.
----------------------------------------
Name: Robert E. Grice, Jr.
Title: Executive Vice President
Chief Financial Officer
