<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 13E-3 ((S)240.13E-3) THEREUNDER))
----------------
PYRAMID TECHNOLOGY CORPORATION
(NAME OF THE ISSUER)
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PYRAMID TECHNOLOGY CORPORATION
SIEMENS NIXDORF MID-RANGE ACQUISITION CORP.
SIEMENS NIXDORF INFORMATIONSSYSTEME AG
SIEMENS AKTIENGESELLSCHAFT
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
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747236107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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E. ROBERT LUPONE, ESQ. RICHARD H. LUSSIER
SIEMENS CORPORATION CHIEF EXECUTIVE OFFICER
1301 AVENUE OF THE AMERICAS PYRAMID TECHNOLOGY CORPORATION
NEW YORK, NEW YORK 10019-6022 3860 N. FIRST STREET
(212) 258-4000 SAN JOSE, CALIFORNIA 95134
(408) 428-9000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON(S) AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
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COPIES TO:
PETER D. LYONS, ESQ. LARRY W. SONSINI, ESQ.
SHEARMAN & STERLING DOUGLAS H. COLLOM, ESQ.
599 LEXINGTON AVENUE AARON J. ALTER, ESQ.
NEW YORK, NEW YORK 10022 WILSON, SONSINI, GOODRICH & ROSATI
(212) 848-4000 650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
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This statement is filed in connection with (check the appropriate box):
a. [_] The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1], Regulation
14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c) [(S)240.13e-
3(c)] under the Securities Exchange Act of 1934.
b. [_] The filing of a registration statement under the Securities Act of
1933.
c. [X] A tender offer.
d. [_] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [_]
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CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
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<S> <C>
$261,772,336.00* $52,354.46**
</TABLE>
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* Note: The Transaction Value is calculated by multiplying $16.00, the per
share tender offer price, by 16,360,771, the sum of the number of shares of
Common Stock outstanding not already owned by Siemens Informationssysteme AG
and the 3,449,923 shares of Common Stock subject to options outstanding.
** 1/50 of 1% of Transaction Value.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: $52,354.46 Filing Party: Siemens Nixdorf Mid-
RangeAcquisition Corp.,
Form or Registration No: Schedule Siemens Nixdorf
14D-1/Schedule 13D Informationssysteme AG,
(Amendment No. 5) Siemens Aktiengesellschaft
Date Filed: January 27, 1995
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<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (this "Schedule 13E-
3") is being filed by (i) Siemens Nixdorf Mid-Range Acquisition Corp., a
Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of
Siemens Nixdorf Informationssysteme AG ("SNI AG"), a corporation organized
under the laws of the Federal Republic of Germany and a direct wholly owned
subsidiary of Siemens Aktiengesellschaft ("Siemens AG"), a corporation
organized under the laws of the Federal Republic of Germany, (ii) SNI AG, (iii)
Siemens AG, and (iv) Pyramid Technology Corporation, a Delaware corporation
(the "Company"), pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended, and Rule 13e-3 thereunder, in connection with the tender
offer by Purchaser for all the outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated January 27, 1995 (the
"Offer to Purchase"), the related Letter of Transmittal, and the Supplement to
the Offer to Purchase dated February 13, 1995, a copy of which is filed as
Exhibit (d)(2) to this Schedule 13E-3 (the "Supplement") (together, the Offer
to Purchase, the Supplement and the Letter of Transmittal constitute the
"Offer"). Forms of the Offer to Purchase and the Letter of Transmittal were
filed as Exhibits (a)(1) and (a)(2) to the Tender Offer Statement on Schedule
14D-1 and Amendment No. 5 to the Schedule 13D filed by Purchaser, SNI AG and
Siemens AG on January 27, 1995 (the "Statement").
The following Cross Reference Sheet, prepared pursuant to General Instruction
F to Schedule 13E-3, shows the location in the Statement of certain information
required to be included in this Schedule 13E-3. The information set forth in
the Statement, including all exhibits thereto, is hereby expressly incorporated
herein by reference as set forth in the Cross Reference Sheet and in the
responses in this Schedule 13E-3, and such responses are qualified in their
entirety by reference to the information contained in the Offer to Purchase and
the Supplement.
The information contained in this Schedule 13E-3 concerning the Company,
including, without limitation, information concerning the background of the
transaction and the deliberations of the Company's Board of Directors in
connection with the transaction, the opinion of the Company's financial advisor
and the Company's historical financial statements, was supplied by the Company.
Purchaser, SNI AG and Siemens AG take no responsibility for the accuracy of
such information. The information contained in this Schedule 13E-3 concerning
Purchaser, SNI AG and Siemens AG was supplied by Purchaser, SNI AG and Siemens
AG. The Company takes no responsibility for the accuracy of such information.
2
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN WHERE LOCATED IN
SCHEDULE 13E-3 SCHEDULE 14D-1
- -------------- ----------------
<S> <C>
Item 1(a).................................................... Item 1(a)
Item 1(b).................................................... Item 1(b)
Item 1(c).................................................... Item 1(c)
Item 1(d).................................................... *
Item 1(e).................................................... @
Item 1(f).................................................... @
Item 2(a).................................................... Item 2(a)
Item 2(b).................................................... Item 2(b)
Item 2(c).................................................... Item 2(c)
Item 2(d).................................................... Item 2(d)
Item 2(e).................................................... Item 2(e)
Item 2(f).................................................... Item 2(f)
Item 2(g).................................................... Item 2(g)
Item 3(a).................................................... Item 3(a)
and Item 3(b)
Item 3(b).................................................... *
Item 4(a).................................................... +
Item 4(b).................................................... @
Item 5(a).................................................... Item 5(a)
Item 5(b).................................................... Item 5(b)
Item 5(c).................................................... Item 5(c);*
Item 5(d).................................................... @
Item 5(e).................................................... Item 5(e);*
Item 5(f).................................................... Item 5(f)
Item 5(g).................................................... Item 5(g)
Item 6(a).................................................... Item 4(a)
Item 6(b).................................................... *
Item 6(c).................................................... @
Item 6(d).................................................... @
Item 7(a).................................................... Item 5;*
Item 7(b).................................................... *
Item 7(c).................................................... *
Item 7(d).................................................... *
Item 8(a).................................................... *
Item 8(b).................................................... *
Item 8(c).................................................... *
Item 8(d).................................................... *
Item 8(e).................................................... *
Item 8(f).................................................... @
Item 9....................................................... *
Item 10(a)................................................... Item 6(a)
Item 10(b)................................................... Item 6(b)
Item 11...................................................... Item 7
Item 12(a)................................................... *
Item 12(b)................................................... *
Item 13(a)................................................... +;*
Item 13(b)................................................... @
Item 13(c)................................................... @
Item 14(a)................................................... *
Item 14(b)................................................... @
Item 15(a)................................................... @
Item 15(b)................................................... @
Item 16...................................................... @
Item 17...................................................... Item 11
</TABLE>
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@ Not applicable.
* The information required by this Item of Schedule 13E-3 is set forth in the
Supplement.
+ The information required by this Item of Schedule 13E-3 is not required to be
included in the Schedule 14D-1.
3
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer is Pyramid Technology Corporation, a Delaware
corporation (the "Company"), which has its principal executive offices at 3860
N. First Street, San Jose, California 95134.
(b) The class of equity securities that is the subject of this transaction is
the Common Stock, par value $.01 per share, of the Company. The information set
forth in the Introduction and Section 1 ("Terms of the Offer; Expiration Date")
of the Offer to Purchase is incorporated herein by reference. The information
set forth in the Supplement under "INTRODUCTION" is incorporated herein by
reference.
(c) The information concerning the principal market in which the shares are
traded and certain high and low sales prices for the shares in such principal
market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer
to Purchase is incorporated herein by reference.
(d) The information set forth in the Supplement under "CERTAIN LEGAL MATTERS
AND REGULATORY APPROVALS" is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in Section 8 of the Offer to Purchase is
incorporated herein by reference. As it pertains to the Company, Item 1(f) is
not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(g) This Schedule 13E-3 is being filed by Purchaser, SNI AG, Siemens AG
and the Company. The information concerning the name, state or other place of
organization, principal business and address of the principal office of each of
Purchaser, SNI AG and Siemens AG, and the information concerning the name,
business address, present principal occupation or employment and the name,
principal business and address of any corporation or other organization in
which such employment or occupation is conducted, material occupations,
positions, offices or employments during the last five years and citizenship of
each of the executive officers and directors of Purchaser, SNI AG and Siemens
AG are set forth in the Introduction, Section 8 ("Certain Information
Concerning Purchaser, SNI AG and Siemens AG") and Schedule I of the Offer to
Purchase and are incorporated herein by reference. During the last five years,
none of Purchaser, SNI AG or Siemens AG, and, to the best knowledge of
Purchaser, SNI AG and Siemens AG, none of the persons listed in Schedule I of
the Offer to Purchase has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
In addition, the names, business addresses, present principal occupations or
employments, and material occupations, positions, offices or employments and
principal businesses and addresses thereof for the last five years and the
citizenship of the directors and executive officers of the Company are set
forth in Annex A to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9, filed on January 27, 1995 (the "Schedule 14D-9"), and are
incorporated herein by reference. During the past five years, neither the
Company nor, to the best knowledge of the Company, any director or executive
officer of the Company (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining further violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information
Concerning Purchaser, SNI AG and Siemens AG"),
4
<PAGE>
Section 10 ("Background of the Offer; Contacts with the Company; the Merger
Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After
the Offer and the Merger") of the Offer to Purchase is incorporated herein by
reference. The information set forth in the Supplement under "INTRODUCTION" is
incorporated herein by reference.
(b) The information set forth in the Supplement under "SPECIAL FACTORS--1.
Recommendation of the Board; Position of the Company Regarding the Fairness of
the Offer and the Merger" is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Offer to Purchase on the cover page
thereof and under "INTRODUCTION", "Section 1. Terms of the Offer; Expiration
Date", "Section 2. Acceptance for Payment and Payment for Shares", "Section 3.
Procedures for Accepting the Offer and Tendering Shares", "Section 4.
Withdrawal Rights", "Section 10. Background of the Offer; Contacts with the
Company; the Merger Agreement", "Section 15. Certain Legal Matters and
Regulatory Approvals", "Section 12. Dividends and Distributions", "Section 14.
Certain Conditions of the Offer" and "Section 17. Miscellaneous" is
incorporated herein by reference.
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement")
and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer
and the Merger") of the Offer to Purchase is incorporated herein by reference.
The information set forth in Item 3 of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, filed on January 27,
1995 (the "Schedule 14D-9"), under "Additional Agreements, Arrangements and
Understandings" and in the Information Statement, filed as Exhibit 20.1 to the
Schedule 14D-9, under "BOARD OF DIRECTORS--Buyer Designees" and "CERTAIN
RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS" is incorporated herein by
reference. The information set forth in the Supplement under "SPECIAL FACTORS--
6. Plans for the Company After the Offer and the Merger; Reasons of SNI AG for
the Offer and the Merger" and "SPECIAL FACTORS--8. Interests of Certain Persons
in the Offer and the Merger" is incorporated herein by reference.
(f)-(g) The information set forth in Section 13 ("Effect of the Offer on the
Market for Shares, Exchange Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 9 ("Financing of the Offer and the
Merger") of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in the Supplement under "FEES AND EXPENSES" is
incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth in the Introduction, Section 10 ("Background of
the Offer; Contacts with the Company; the Merger Agreement"), Section 11
("Purpose of the Offer; Plans for the Company After the Offer and the Merger")
and Section 13 ("Effect of the Offer on the Market for Shares, Exchange Listing
and Exchange Act Registration") of the Offer to Purchase is incorporated herein
by reference. The information set forth in the Supplement under "SPECIAL
FACTORS--5. Purpose and Structure of the Offer and the Merger; Reasons of SNI
AG for the Offer and the Merger" is incorporated herein by reference.
(b)-(d) The information set forth in the Supplement under "SPECIAL FACTORS--
1. Recommendation of the Board; Position of the Company Regarding the Fairness
of the Offer and the Merger", "SPECIAL FACTORS--5. Purpose and Structure of the
Offer and the Merger; Reasons of SNI
5
<PAGE>
AG for the Offer and the Merger" and "SPECIAL FACTORS--6. Plans for the Company
After the Offer and the Merger; Certain Effects of the Offer and the Merger"
and in Section 5 "Certain Federal Income Tax Consequences" of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(e) The information set forth in the Supplement under "SPECIAL FACTORS--
1. Recommendation of the Board; Position of the Company Regarding the Fairness
of the Offer and the Merger" and "SPECIAL FACTORS--3. Position of SNI AG
Regarding the Fairness of the Offer and the Merger" is incorporated herein by
reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the Supplement under "SPECIAL FACTORS--
2. Opinion of Smith Barney as Financial Advisor to the Company" and "SPECIAL
FACTORS--4. Analysis of Goldman Sachs as Financial Advisors to SNI AG" is
incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth in Section 8 ("Certain Information
Concerning Purchaser, SNI AG and Siemens AG") of the Offer to Purchase is
incorporated herein by reference. The information set forth in Annex A to the
Schedule 14D-9 is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser, SNI AG and Siemens AG"), Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement")
and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer
and the Merger") of the Offer to Purchase is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE OFFER AND THE MERGER.
(a) The information set forth in the Supplement under "SPECIAL FACTORS--1.
Recommendation of the Board; Position of the Company Regarding the Fairness of
the Offer and the Merger" and "SPECIAL FACTORS--8. Interests of Certain Persons
in the Offer and the Merger" is incorporated herein by reference.
(b) The information set forth in the Supplement under "SPECIAL FACTORS--1.
Recommendation of the Board; Position of the Company Regarding the Fairness of
the Offer and the Merger" is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE OFFER AND THE MERGER.
(a) The information set forth in Section 11 ("Purpose of the Offer; Plans for
the Company After the Offer and the Merger") of the Offer to Purchase, in the
Supplement under "SPECIAL FACTORS--7. Rights of Stockholders in the Merger",
and in Annex A to the Supplement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
6
<PAGE>
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in Annex B to the Supplement is incorporated
herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
Additional information concerning the Offer is set forth in the Offer to
Purchase, the Supplement and the Letter of Transmittal which are attached
hereto as Exhibits (d)(1), (d)(2) and (d)(3), respectively.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b)(1) Opinion of Smith Barney Inc., dated January 20, 1995.*
(b)(2) Presentation of Smith Barney Inc.
(b)(3) Goldman, Sachs & Co. Report.
(c)(1) Agreement and Plan of Merger, dated as of January 20, 1995, among
SNI AG, Purchaser and the Company.**
(c)(2) Common Stock and Warrant Purchase Agreement, dated as of August
21, 1994, between the Company and Siemens Nixdorf Information Systems, Inc.
(c)(3) Warrant to Purchase 1,330,000 Shares of Common Stock, dated as of
September 12, 1994.*
(d)(1) Offer to Purchase dated January 27, 1995.**
(d)(2) Supplement to the Offer to Purchase dated February 13, 1995.
(d)(3) Letter of Transmittal.**
(d)(4) Notice of Guaranteed Delivery.**
(d)(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.**
(d)(6) Letter to Clients from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.**
(d)(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.**
(d)(8) Summary Advertisement dated January 27, 1995.**
(d)(9) Text of Press Release dated January 23, 1995 issued by SNI AG and
the Company.**
(d)(10) Text of Press Release dated January 27, 1995 issued by SNI AG and
the Company.**
(d)(11) Audited Consolidated Financial Statements (and Related Notes) for
the Company for the Fiscal Years ended September 30, 1993 and September 30,
1994 and Unaudited Consolidated Financial Statements (and Related Notes)
for the Company for the First Quarter of the Fiscal Year ending September
30, 1995 (attached as Annex B to the Supplement).
(e) Summary of Stockholder Appraisal Rights and Text of Section 262 of
the Delaware General Corporation Law (attached as Annex A to the
Supplement).
(f) Not applicable.
- --------
* Incorporated by reference from the Statement on Schedule 14D-9 filed by the
Company on January 27, 1995.
** Incorporated by reference from the Statement.
7
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT
THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT.
February 13, 1995
Siemens Nixdorf Mid-Range Acquisition
Corp.
/s/ Gerhard Schulmeyer
By:_____________________________________
Name: Gerhard Schulmeyer
Title: President
Siemens Nixdorf Informationssysteme AG
/s/ Gerhard Schulmeyer
By:_____________________________________
Name: Gerhard Schulmeyer
Title: President
Siemens Aktiengesellschaft
/s/ Adrienne Whitehead
By:_____________________________________
Name: Adrienne Whitehead
Title: Attorney-in-Fact
8
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT
THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT.
February 13, 1995
Pyramid Technology Corporation
/s/ John S. Chen
By: _____________________________________
Name: John S. Chen
Title: President and Chief Operating
Officer
9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<S> <C> <C>
(a) --Not applicable.
(b)(1) --Opinion of Smith Barney Inc., dated January 20,
1995.*
(b)(2) --Presentation of Smith Barney Inc.
(b)(3) --Goldman, Sachs & Co. Report.
(c)(1) --Agreement and Plan of Merger, dated as of January 20,
1995, among SNI AG, Purchaser and the Company.**
(c)(2) --Common Stock and Warrant Purchase Agreement,
dated as of August 21, 1994, between the Company
and Siemens Nixdorf Information Systems, Inc.
(c)(3) --Warrant to Purchase 1,330,000 Shares of Common
Stock, dated as of September 12, 1994.*
(d)(1) --Offer to Purchase dated January 27, 1995.**
(d)(2) --Supplement to the Offer to Purchase dated
February 13, 1995.
(d)(3) --Letter of Transmittal.**
(d)(4) --Notice of Guaranteed Delivery.**
(d)(5) --Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.**
(d)(6) --Letter to Clients from Brokers, Dealers,
Commercial Banks, Trust Companies and Other
Nominees.**
(d)(7) --Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.**
(d)(8) --Summary Advertisement dated January 27, 1995.**
(d)(9) --Text of Press Release dated January 23, 1995
issued by SNI AG and the Company.**
(d)(10) --Text of Press Release dated January 27, 1995
issued by SNI AG and the Company.**
(d)(11) --Audited Consolidated Financial Statements (and
Related Notes) for the Company for the Fiscal
Years ended September 30, 1993 and September 30,
1994 and Unaudited Consolidated Financial
Statements (and Related Notes) for the Company for
the First Quarter of the Fiscal Year ending
September 30, 1995 (attached as Annex B to the
Supplement).
(e) --Summary of Stockholder Appraisal Rights and Text
of Section 262 of the Delaware General Corporation
Law (attached as Annex A to the Supplement).
(f) --Not applicable.
</TABLE>
- --------
* Incorporated by reference from the Statement on Schedule 14D-9 filed by the
Company on January 27, 1995.
** Incorporated by reference from the Statement.
<PAGE>
EXHIBIT 99(b)(2)
CONFIDENTIAL
Project Jupiter
Presentation to the Board of Directors
January 20, 1995
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Tab
---
Transaction Overview ............................................... 1
Summary Valuation .................................................. 2
Form of Smith Barney Fairness Opinion .............................. 3
APPENDIX
- --------------------------------------------------------------------------------
Summary Historical and Projected Financial Statements .............. 1
Comparable Company Analysis ........................................ 2
Comparable Transaction Anaysis ..................................... 3
. Selected Comparable Transactions
. All Technology Transactions
Discounted Cash Flow Analysis ...................................... 4
Premium Analysis ................................................... 5
Stock Price Performance ............................................ 6
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION OVERVIEW
PURCHASER: Siemens Nixdorf Informations Systeme AG
FORM OF TRANSACTION: Cash tender offer
OFFER: $16.00 per share, cash
CONDITIONS TO OFFER: Offer is subject to a minimum condition that the number
of shares tendered, plus Siemens' existing common
shares, shall equal a majority of the fully diluted
shares outstanding (including shares issuable upon the
exercise of Siemens' warrant).
Regulatory clearance on Hart-Scott-Rodino, Exon Florio
and other regulatory bodies
No material adverse change.
TERMINATION FEE: Elements of the transaction call for a termination fee
of $7 million (approximately 3.2% of the aggregate
purchase price) plus reimbursement of expenses up to $3
million, as well as customary conditions to close.
EXPECTED TIMING: Siemens must commence a cash tender offer within five
business days from the date of announcement.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
SUMMARY VALUATION ANALYSIS
RANGE
-----
VALUATION METHODOLOGY LOW HIGH
- --------------------- ------ ------
Public Market Comparables/1/ $ 4.70 to $10.68
Public Market Value with 53.7% $ 7.22 to $16.47
Acquisition Premium/2/
Private Market Value/3/ $14.25 to $26.66
Discounted Cash Flow Analysis $11.59 to $19.79
Deal Price/4/ $16.00
/1/ Figures equal 7.7x Sunshine's 1995 EPS. 7.7x and 17.5x represent the low
and high price/earnings multiple for Sunshine's selected comparable companies
(Auspex, NetFrame, Sequent, Stratus and Tricord).
/2/ Figures equal private market value multiplied by median transaction
premiums paid in technology M&A transactions since 1988. (See Appendix, Tab 3)
/3/ Figures derived by using revenue multiples paid in selected comparable
transactions. Revenue multiple range used is 0.8x to 1.7x assuming 16 million
fully diluted shares.
/4/ Deal price falls within range of each valuation methodology.
Smith Barney
------------
<PAGE>
FORM OF SMITH BARNEY FAIRNESS OPINION
-------------------------------------
January __, 1995
The Board of Directors
Pyramid Technology Corporation
3860 North First Street
San Jose, CA 95134-1702
Members of the Board:
In connection with the proposed acquisition of Pyramid Technology
Corporation ("Pyramid" or the "Company") by Siemens Nixdorf Informations Systeme
AG ("Siemens" or "Parent"), you have requested our opinion as to the fairness,
from a financial point of view, of the consideration of $16.00 net per share in
cash to be received by the holders of the common stock of Pyramid (other than
Siemens) pursuant to an Agreement and Plan of Merger, dated January __, 1995 by
and among Pyramid, Siemens, and HN Acquisition Corp. ("Purchaser") (HN
Acquisition Corp. is a wholly-owned subsidiary of Siemens) (the "Merger
Agreement"). As more fully described in the Merger Agreement, and subject to the
terms and conditions specified therein, HN Acquisition Corp. shall commence a
tender offer to purchase all of the outstanding shares of common stock, par
value $.01 per share, of the Company (the "Company Common Stock") (shares of
Company Common Stock being hereinafter collectively referred to as "Shares"),
other than Shares owned by Siemens, for $16.00 per share (the "Offer") and if
the Offer is consummated, a subsequent cash merger between Pyramid and HN
Acquisition Corp., pursuant to which each share of the Company Common Stock
which has not been purchased pursuant to the Offer, other than any Shares owned
by Parent, Purchaser or any of its affiliates or Shares issuable upon the
exercise of the Parent Warrant (as defined in the Merger Agreement), shall be
canceled and extinguished and be converted into and become a right to receive in
cash the highest price per share paid pursuant to the Offer (the "Merger").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Pyramid concerning the business, operations and prospects of
Pyramid. We examined certain publicly available business and financial
information relating to Pyramid and Siemens as well as certain financial
forecasts and other data for Pyramid which were provided to us by senior
management of Pyramid. We reviewed the financial terms of the Merger as set
forth in the Merger Agreement in relation to, among other things: the Company's
historical and projected earnings and the capitalization and financial condition
of Pyramid. We also considered, to the extent publicly available, the financial
terms of certain other similar transactions which we deemed comparable to the
Merger and analyzed certain financial and other publicly available information
relating to the businesses of other companies whose operations we considered
comparable to Pyramid. In addition, we conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as we deemed necessary to arrive at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with us.
With respect to financial forecasts and other information provided to or
otherwise discussed with us, we assumed that such forecasts and
Smith Barney
------------
<PAGE>
other information were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of Pyramid as to
the expected future financial performance of Pyramid. We have assumed the
correctness of, and relied upon the representations of Siemens and Pyramid,
pursuant to the Merger Agreement, and have not attempted to independently verify
any such information. We have not made or been provided with an independent
valuation or appraisal of the assets or liabilities (contingent or otherwise) of
Pyramid, nor have we made any physical inspection of the properties or assets of
Pyramid. Our opinion is necessarily based upon financial, stock market and other
conditions and circumstances existing and disclosed to us as of the date hereof.
Smith Barney has been engaged to render financial advisory services to
Pyramid in connection with the Offer and Merger and will receive a fee for our
services, a significant portion of which is contingent upon consummation of the
Merger. We will also receive a fee upon the delivery of this opinion. We have
in the past provided financial advisory and investment banking services to
Pyramid and have received fees for the rendering of such services. In addition,
we and our affiliates (including The Travelers Inc. and its affiliates) may
maintain business relationships with Pyramid, Siemens and their affiliates.
Our advisory services, and the opinion expressed herein, are provided
solely for the use of Pyramid's Board of Directors in its evaluation of the
proposed Offer and Merger and are not on behalf of, and are not intended to
confer rights or remedies upon, Siemens or its affiliates, any stockholder of
Pyramid or Siemens, or any person other than Pyramid's Board of Directors. Our
opinion may not be published or otherwise used or referred to, nor shall any
public reference to Smith Barney be made, without our prior written consent;
provided however, that we consent to the inclusion of this opinion in any Proxy
Statement, 14D-9 or otherwise in connection with the proposed transaction.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the consideration to be received
by stockholders of Pyramid (other than Siemens), pursuant to the Offer and the
Merger, is fair from a financial point of view.
Very Truly Yours,
SMITH BARNEY INC.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL AND PROJECTED INCOME STATEMENTS
(Dollars in thousands)
Historical Years Ended
September 30, Projected Years Ending September 30,
-------------------------------- ------------------------------------------------------------------
1992 1993 1994 1995E 1996E 1997E 1998 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
- --------
Product $138,916 $174,364 $152,590 $210,000 $260,914 $334,648 - - -
Service 53,310 59,334 65,925 70,000 75,841 89,648 - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues 192,226 233,698 218,515 280,000 336,755 424,296 $509,155 $585,528 $673,358
Cost of sales:
- -------------
Product 78,743 86,828 87,708 106,260 133,239 175,324 - - -
Service 44,786 45,293 50,875 52,500 56,881 67,236 - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total cost of sales 123,529 132,121 138,583 158,760 190,120 242,560 292,764 339,607 393,914
Gross profit 68,697 101,577 79,932 121,240 146,635 181,736 216,391 245,922 279,443
Operating expenses:
- ------------------
Research & development 28,371 27,831 25,488 26,633 31,655 38,187 43,278 49,770 57,235
Sales - - - 60,485 68,096 77,846 94,194 108,323 124,571
Marketing - - - 14,005 16,501 19,518 23,421 26,934 30,974
General & administrative - - - 11,450 12,797 14,426 18,330 21,079 24,241
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total SG&A 64,741 64,411 73,744 85,940 97,394 111,790 135,944 156,336 179,787
Restructuring 41,180 - - 0 0 0 0 0 0
Legal settlement 900 - - 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses 135,192 92,242 99,232 112,573 129,049 149,977 179,223 206,106 237,022
Operating income (66,495) 9,335 (19,300) 8,667 17,586 31,759 37,168 39,816 42,422
Other income/(expense) (141) 258 (178) 1,940 1,600 1,600 2,546 2,928 3,367
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before taxes (66,636) 9,593 (19,478) 10,607 19,186 33,359 39,714 42,744 45,788
Provision for income taxes (6,929) 959 2,935 641 3,837 6,672 9,929 10,686 11,447
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) ($59,707) $8,634 ($22,413) $9,966 $15,349 $26,687 $29,786 $32,058 $34,341
========== ========== ========== ========== ========== ========== ========== ========== ==========
Earnings per share ($4.99) $O.67 ($1.66) $0.61 $0.85 $1.35 $1.44 $1.48 $1.51
Weighted average shares out-
standing (1) 11,962 12,890 13,467 16,275 18,100 19,700 20,685 21,719 22,805
CASH FLOW DATA
- --------------
Capital expenditures $16,848 $13,722 $11,970 $12,600 $13,470 $15,699 $18,839 $21,665 $24,914
Capitalized software develop-
ment costs 6,051 8,695 9,223 8,960 8,419 8,910 9,165 8,783 9,858
Depreciation & amortization 31,118 29,961 28,455 17,248 17,511 19,687 22,403 24,358 27,818
Change in net working capital (17,184) 15,393 (7,458) 1,347 9,622 18,715 20,873 13,835 16,661
</TABLE>
(1) Weighted average shares outstanding for 1995 through 1997 are from
management projections; thereafter, shares are assumed to grow at 5%
annually.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME STATEMENT ASSUMPTIONS
(As a % of sales)
Historical Years Ended
September 30, Projected Years Ending September 30,
------------------------------ ---------------------------------------------------------------
1992 1993 1994 1995E 1996E 1997E 1998 1999 2000
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year-to-Year Revenue growth:
- ----------------------------
Product -6.3% 25.5% -12.5% 37.6% 24.2% 28.3% - - -
Service 69.5% 11.3% 11.1% 6.2% 8.3% 18.2% - - -
Total revenues 7.0% 21.6% -6.5% 28.1% 20.3% 26.0% 20.0% 15.0% 15.0%
Cost of sales:
- --------------
Product 56.7% 49.8% 57.5% 50.6% 51.1% 52.4% - - -
Service 84.0% 76.3% 77.2% 75.0% 75.0% 75.0% - - -
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total cost of sales 64.3% 56.5% 63.4% 56.7% 56.5% 57.2% 57.5% 58.0% 58.5%
Gross profit 35.7% 43.5% 36.6% 43.3% 43.5% 42.8% 42.5% 42.0% 41.5%
Operating expenses:
- -------------------
Research & development 14.8% 11.9% 11.7% 9.5% 9.4% 9.0% 8.5% 8.5% 8.5%
Sales 0.0% 0.0% 0.0% 21.6% 20.2% 18.3% 18.5% 18.5% 18.5%
Marketing 0.0% 0.0% 0.0% 5.0% 4.9% 4.6% 4.6% 4.6% 4.6%
General & administrative 0.0% 0.0% 0.0% 4.1% 3.8% 3.4% 3.6% 3.6% 3.6%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total SG&A 33.7% 27.6% 33.7% 30.7% 28.9% 26.3% 26.7% 26.7% 26.7%
Restructuring 21.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Legal settlement 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses 70.3% 39.5% 45.4% 40.2% 38.3% 35.3% 35.2% 35.2% 35.2%
Operating income -34.6% 4.0% -8.8% 3.1% 5.2% 7.5% 7.3% 6.8% 6.3%
Other income/(expense) -0.1% 0.1% -0.1% 0.7% 0.5% 0.4% 0.5% 0.5% 0.5%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before taxes -34.7% 4.1% -8.9% 3.8% 5.7% 7.9% 7.8% 7.3% 6.8%
Provision for income taxes 10.4% 10.0% -15.1% 6.0% 20.0% 20.0% 25.0% 25.0% 25.0%
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) -31.1% 3.7% -10.3% 3.6% 4.6% 6.3% 5.9% 5.5% 5.1%
======== ======== ======== ======== ======== ======== ======== ======== ========
Cash Flow Data
- --------------
Capital expenditures 8.8% 5.9% 5.5% 4.5% 4.0% 3.7% 3.7% 3.7% 3.7%
Capitalized software development
costs 3.1% 3.7% 4.2% 3.2% 2.5% 2.1% 1.8% 1.5% 1.5%
Depreciation & amortization (1) 135.9% 133.7% 134.3% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%
Change in net working capital -8.9% 6.6% -3.4% 0.5% 2.9% 4.4% 4.1% 2.4% 2.5%
</TABLE>
(1) As a percentage of capital expenditures and capitalized software development
costs.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL AND PROJECTED NET WORKING CAPITAL
(Dollars in thousands)
Historical Years Ended
September 30, Projected Years Ending September 30,
----------------------------- --------------------------------------------------------------
1992 1993 1994 1995E 1996E 1997E 1998 1999 2000
--------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Current Assets:
Accounts receivable $36,663 $51,392 $49,310 $62,222 $74,834 $94,288 $113,146 $130,117 $149,635
Days receivable (1) 68.7 79.2 81.2 80.0 80.0 80.0 80.0 80.0 80.0
Inventories 30,569 35,712 25,840 35,280 42,249 53,902 65,059 75,468 87,537
Inventory turns (2) 4.0 3.7 5.4 4.5 4.5 4.5 4.5 4.5 4.5
Other current assets 9,010 11,873 15,270 10,000 12,155 14,775 17,311 19,322 22,355
% of sales 4.7% 5.1% 7.0% 3.6% 3.6% 3.5% 3.4% 3.3% 3.3%
--------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Total net current assets 76,242 98,977 90,420 107,502 129,238 162,965 195,516 224,908 259,527
Net Current Liabilities:
Accounts payable 18,196 20,312 16,398 22,932 29,046 37,058 44,728 51,884 60,181
Days payable (3) 53.0 55.3 42.6 52.0 55.0 55.0 55.0 55.0 55.0
Accrued liabilities (4) 21,758 26,984 29,799 39,000 45,000 52,000 56,007 64,408 74,069
% of sales 11.3% 11.5% 13.6% 13.9% 13.4% 12.3% 11.0% 11.0% 11.0%
--------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Total net current
liabilities 39,954 47,296 46,197 61,932 74,046 89,058 100,735 116,292 134,251
--------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Net working capital $36,288 $51,681 $44,223 $45,570 $55,192 $73,907 $94,781 $108,616 $125,276
========= ========= ========= ========= ========= ========= ========== ========== ==========
</TABLE>
(1) Accounts receivable / (Sales/360).
(2) Cost of sales / Inventory.
(3) Accounts payable / (Cost of sales/360).
(4) Excludes restructuring accruals.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
CALENDAR 1995 P/E MULTIPLES*
<TABLE>
<S> <C>
Sunshine as of 1/6/95 20.9x
Sunshine at $16 Offer 26.6
Auspex 15.3
NetFrame 7.7
Sequent 14.8
Stratus 12.2
Tricord 17.5
</TABLE>
*Based on stock price as of 1/18/95
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
DISCOUNT TO LTM HIGH*
<TABLE>
<S> <C>
Sunshine as of 1/6/95 -24.6%
Sunshine at $16 Offer -1.5%
Auspex -18.8%
NetFrame -63.8%
Sequent -10.6%
Stratus -0.6%
Tricord -76.7%
</TABLE>
*Based on stock price as of 1/18/95
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE COMPANY ANALYSIS
(Dollars in thousands, except per share amounts)
SHARE PRICE AS
A
MULTIPLE OF: MARKET
---------------- VALUE
ESTIMATED MULTIPLE
EPS(2) OF
FISCAL FINANCIAL LTM DISOUNT ADJUSTED ---------- TANGIBLE
COMPANY/ YEAR STATEMENTS PRICE(3) ------------ TO LTM MARKET MARKET LTM CAL CAL BOOK
TICKER END DATE (1/18/95) LOW HIGH HIGH VALUE VALUE(1) EPS 94 95 VALUE
- ---------------- ------ ---------- --------- ----- ------ ------- ---------- ---------- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amdahl/AHM...... Dec Sep $11.50 $5.25 $12.00 -4.2% $1,371,191 $874,632 50.3x 19.5x 14.0x 1.7x
Auspex/ASPX..... Jun Sep 8.13 3.88 10.00 -18.8% 194,456 155,879 24.1 20.1 15.3 2.8
Convex/CNX...... Dec Sep 7.75 4.38 8.88 -12.7% 203,290 237,565 NM NM 24.2 3.4
Data
General/DGN.... Sep Sep 10.75 6.63 12.00 -10.4% 384,571 353,661 NM NM 32.6 1.4
Digital Equip-
ment Corp./DEC. Jun Sep 36.75 18.25 38.75 -5.2% 5,204,145 5,342,725 NM NM 47.1 1.7
Hewlett-
Packard/HWP.... Oct Oct 106.38 71.88 107.25 -0.8% 27,657,500 28,195,500 17.3 16.8 14.4 2.8
NetFrame/NETF... Dec Sep 6.25 5.00 17.25 -63.8% 85,788 54,841 10.7 8.8 7.7 1.3
Parallan/PLLN... Dec Sep 4.38 3.63 14.00 -68.8% 33,058 NM NM NM NM 1.0
Sequent/SQNT.... Dec Sep 19.00 11.13 21.25 -10.6% 611,268 649,423 21.1 18.4 14.8 2.3
Silicon
Graphics/SGI... Jun Sep 32.75 18.75 33.13 -1.1% 5,151,215 4,914,960 32.4 30.2 23.1 6.2
Stratus
Computer/SRA... Dec Sep 39.63 22.75 39.88 -0.6% 981,432 750,219 18.1 14.0 12.2 2.2
Sun Microsytems/
SUNW........... Jun Sep 34.63 18.25 37.63 -8.0% 3,312,470 2,680,724 15.3 14.7 12.0 2.3
Tandem/TDM...... Sep Sep 19.25 10.50 19.75 -2.5% 2,183,893 2,214,796 14.7 13.9 11.6 2.7
Tricord/TRCD.... Dec Sep 5.94 3.88 25.50 -76.7% 78,868 60,673 13.0 34.9 17.5 1.2
HIGH: -0.6% 27,657,500 28,195,500 50.3x 34.9x 47.1x 6.2x
LOW: -76.7% 33,058 54,841 10.7 8.8 7.7 1.0
MEAN: -20.3% 3,389,510 3,575,815 21.7x 19.1x 19.0x 2.3x
MEDIUM: -9.2% 796,350 750,219 17.7 17.6 14.8 2.2
SUNSHINE
(1/6/95)....... SEP DEC $12.25 $5.38 $16.25 -24.6% $190,904 $139,376 NM NM 20.9x 1.6x
SUNSHINE AT CUR-
RENT OFFER..... SEP SEP $16.00 $5.38 $16.25 -1.5% $260,193 $208,665 NM NM 26.6x 2.2x
<CAPTION>
ADJUSTABLE MARKET
VALUE AS A
MULTIPLE OF:
------------------ CASH AS
LTM OF % OF
COMPANY/ LTM OPERATING LTM
TICKER REVENUES INCOME REVENUE
- ----------------- -------- --------- -------
<S> <C> <C> <C>
Amdahl/AHM...... 0.55x NMx 37.6%
Auspex/ASPX..... 1.80 19.4 44.9%
Convex/CNX...... 1.63 NM 24.7%
Data
General/DGN.... 0.32 NM 17.0%
Digital Equip-
ment Corp./DEC. 0.39 NM 6.5%
Hewlett-
Packard/HWP.... 1.13 11.1 9.9%
NetFrame/NETF... 0.62 13.6 34.7%
Parallan/PLLN... NM NM NM
Sequent/SQNT.... 1.52 20.4 6.4%
Silicon
Graphics/SGI... 3.06 22.6 29.7%
Stratus
Computer/SRA... 1.31 9.8 42.6%
Sun Microsytems/
SUNW........... 0.54 8.5 15.7%
Tandem/TDM...... 1.05 14.1 5.9%
Tricord/TRCD.... 0.70 12.5 21.0%
HIGH: 3.06x 22.6x 44.9%
LOW: 0.32 8.5 5.9%
MEAN: 1.12x 14.7x 22.8%
MEDIUM: 1.05 13.6 21.0%
SUNSHINE
(1/6/95)....... 0.63x NM 24.5%
SUNSHINE AT CUR-
RENT OFFER..... 0.95x NM 24.5%
</TABLE>
- ----
(1) Adjusted market value equals market value plus debt and preferred stock
less cash and cash equivalents.
(2) Earnings estimates from IBES.
(3) Sunshine stock price reflects closing on 1/6/95.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
LATEST 12 MONTHS
-------------------------------------------------------------------------------------------------
MARGINS NET RETURN CHANGE IN
-------------------- ON AVG. -----------------------------
OPERATING NET OPERATING NET COMMON OPERATING NET
COMPANY/TICKER REVENUE INCOME (1) INCOME (2) INCOME (1) INCOME (2) EQUITY REVENUE INCOME (1) INCOME (2)
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amdahl/AMH...... $1,582,850 ($23,078) $28,301 NM 1.8% 3.5% -38.4% NM NM
Auspex/ASPX..... 86,781 8,047 7,962 9.3% 9.2% 11.8% 52.9% -2.7% 13.7%
Convex/CNX...... 145,849 (44,667) (48,824) NM NM -56.4% -45.4% NM NM
Data
General/DGN.... 1,120,505 (44,778) (52,700) NM NM -15.4% 4.0% NM NM
Digital Equip-
ment Corp./DEC. 13,558,314 (873,816) (1,010,408) NM NM -25.4% -3.7% NM NM
Hewlett-
Packard/HWP.... 24,991,000 2,549,000 1,599,000 10.2% 6.4% 17.3% 23.0% 35.7% 35.9%
NetFrame/NETF... 89,102 4,022 8,009 4.5% 9.0% 12.7% 29.4% 262.0% -3.3%
Parralan/PLLN... 8,509 (2,512) (1,545) NM NM -4.3% -66.1% NM NM
Sequent/SQNT.... 428,216 31,787 27,926 7.4% 6.5% 10.8% 1.9% 21.0% 54.6%
Silicon
Graphics/SGI... 1,607,353 217,657 156,770 13.5% 9.8% 19.2% 38.4% 59.0% 56.2%
Stratus
Computer/SRA... 573,675 76,489 54,043 13.3% 9.4% 11.9% -8.1% -0.9% -17.8%
Sun
Microsystems/SUNW 5,002,850 315,545 217,105 6.3% 4.3% 13.6% 13.4% 27.7% 21.3%
Tandem/TDM...... 2,108,035 156,594 148,380 7.4% 7.0% 17.7% 3.8% NM NM
Tricord/TRCD.... 87,127 4,870 5,608 5.6% 6.4% 8.7% 23.3% -19.7% -0.3%
HIGH: 13.5% 9.8% 19.2% 52.9% 262.0% 56.2%
LOW: 4.5% 1.8% -56.4% -66.1% -19.7% -17.8%
MEAN: 8.6% 7.0% 1.8% 2.0% 47.8% 20.0%
MEDIAN: 7.4% 6.8% 11.3% 3.9% 24.4% 17.5%
SUNSHINE
(1/6/95)........ $220,616 ($18,965) ($21,748) NM NM -15.7% -5.6% NM NM
<CAPTION>
LATEST 3 FISCAL YEARS GROWTH
-----------------------------
OPERATING NET
COMPANY/TICKER REVENUE INCOME (1) INCOME (2)
- ------------------- ------- ---------- ----------
<S> <C> <C> <C>
Amdahl/AMH...... -0.6% NM NM
Auspex/ASPX..... 27.2% 24.9% 30.2%
Convex/CNX...... -1.3% NM NM
Data
General/DGN.... 0.2% NM NM
Digital Equip-
ment Corp./DEC. -1.7% NM NM
Hewlett-
Packard/HWP.... 23.4% 34.7% 34.7%
NetFrame/NETF... 77.1% NM NM
Parralan/PLLN... 164.6% NM NM
Sequent/SQNT.... 28.8% NM NM
Silicon
Graphics/SGI... 30.8% 178.8% 180.3%
Stratus
Computer/SRA... 7.0% -0.3% -10.1%
Sun
Microsystems/SUNW 14.3% 3.1% 6.1%
Tandem/TDM...... 1.7% 2.0% 51.3%
Tricord/TRCD.... 143.4% NM NM
HIGH: 164.6% 178.8% 180.3%
LOW: -1.7% -0.3% -10.1%
MEAN: 36.8% 40.5% 48.8%
MEDIAN: 18.9% 14.0% 32.5%
SUNSHINE
(1/6/95)........ 6.6% NM NM
</TABLE>
- ----
(1) Operating income figures exclude non-recurring items.
(2) Net income from continuing operations, excluding extraordinary items,
accounting charges and other non-recurring items.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE COMPUTER HARDWARE DEALS
(Dollars in thousands)
Aggregate LTM EBITDA
Date Transaction Multiple of Margin of
Effective Target/Acquiror Value LTM Revenues of Target
---------------- --------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
06/29/92 MIPS Computer Systems / Silicon Graphics $168,598 1.1 6.8%
02/28/92 Teradata Corporation / AT & T 496,987 1.7 21.5%
09/19/91 NCR Corporation / AT & T 7,843,961 1.2 15.2%
01/30/90 Prime Computer / JH Whitney & Company 1,828,337 1.1 16.2%
05/19/89 Apollo Computer Inc. / Hewlett Packard 569,190 0.8 7.3%
08/11/88 Convergent, Inc. / Unisys Corp. 357,475 0.9 7.5%
Mean 1.1x 12.4%
Sunshine -- 4.2%
-----------------------------------------------
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of:
Premium Over Market(3) --------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/14/94 Pending Powersoft/ 807,931 771,002 34.0% 74.9% 61.6 13.8 50.4
Sybase
11/14/94 12/30/94 Triconex Corp./ 94,075 86,502 11.8% 19.3% 17.9 3.6 13.2
Siebe PLC
10/13/94 Pending Intuit Inc./ 1,535,816 1,448,271 75.8% 89.1% 228.4 17.0 37.3
Microsoft
09/21/94 11/28/94 Anthem Electronics/ 435,163 395,510 51.6% 72.3% 20.3 2.1 20.0
Arrow Electronics
09/09/94 10/10/94 Xyplex Inc./ 180,122 145,334 77.8% 119.6% 21.0 2.9 15.7
Raytheon Co.
08/01/94 12/1/94 KnowledgeWare/ 69,507 79,217 -31.9% -13.3% NM 7.4 NM
Sterling Software
07/28/94 Pending Keptel Corp./ 88,120 83,405 44.0% 60.0% 20.2 4.2 12.8
Antec Corp.
07/05/94 10/20/94 SynOptics Communications/ 1,286,307 1,030,277 14.4% -12.3% 16.0 3.7 12.2
Wellfleet Communications
06/09/94 08/23/94 Sunward Technologies/ 120,000 125,003 43.6% 39.9% 31.8 5.4 20.2
Read-Rite Corporation
05/23/94 09/01/94 SuperMac Technology, Inc./ 79,503 $71,497 60.8% -7.3% NM 1.5 NM
Radius Inc.
05/19/94 09/20/94 ASK Group, Inc./ 314,503 329,615 55.9% 71.0% NM 58.0 233.8
Computer Associates
International, Inc.
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
11/14/94 Pending Powersoft/ 7.2 40.8 35.3 9.3 8.7
Sybase
11/14/94 12/30/94 Triconex Corp./ 1.8 15.8 11.8 2.3 1.9
Siebe PLC
10/13/94 Pending Intuit Inc./ 6.6 176.4 35.8 9.8 6.0
Microsoft
09/21/94 11/28/94 Anthem Electronics/ 0.6 10.9 9.0 1.6 1.5
Arrow Electronics
09/09/94 10/10/94 Xyplex Inc./ 1.7 12.4 9.8 1.9 1.9
Raytheon Co.
08/01/94 12/1/94 KnowledgeWare/ 0.6 NM NM 1.0 0.7
Sterling Software
07/28/94 Pending Keptel Corp./ 1.8 11.6 8.7 3.2 2.8
Antec Corp.
07/05/94 10/20/94 SynOptics Communications/ 1.4 6.8 5.8 1.9 1.9
Wellfleet Communications
06/09/94 08/23/94 Sunward Technologies/ 1.1 23.5 16.7 2.6 2.6
Read-Rite Corporation
05/23/94 09/01/94 SuperMac Technology, Inc./ 0.4 NM NM 1.4 0.8
Radius Inc.
05/19/94 09/20/94 ASK Group, Inc./ 0.8 NM 37.1 1.4 1.1
Computer Associates
International, Inc.
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of:
Premium Over Market(3) --------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/13/94 09/13/94 Serving Software, Inc./ 48,335 44,297 26.5% 30.9% 82.2 7.1 28.5
HBO & Co.
03/31/94 05/12/94 Software Toolworks Inc./ 460,169 458,324 51.3% 61.6% 183.0 10.5 106.4
Pearson PLC
03/15/94 08/31/94 Aldus Corporation/ 484,627 409,687 19.0% 32.5% 30.3 4.2 12.4
Adobe Systems Inc.
01/31/94 03/31/94 VMX, Inc./ 157,811 142,327 43.2% 32.5% 20.2 4.2 13.7
Octel Communications
Corporation
10/18/93 02/15/94 Artel Communications Corp./ 39,181 38,656 19.2% 12.6% NM 11.2 NM
Chipcom Corp.
10/12/93 11/30/93 MECA Software, Inc./ 32,146 29,787 29.3% 26.2% NM NM NM
H&R Block, Inc.
09/27/93 11/16/93 Bytex Corporation/ 49,003 43,068 64.9% 94.3% NM 1.6 NM
Network Systems Corporation
09/23/93 12/22/93 Telematics International/ 301,637 280,909 29.4% 110.8% 41.9 6.4 22.8
ECI Telecom Ltd.
09/20/93 12/06/93 Digital Communications 204,085 204,085 33.9% 35.1% NM 1.8 15.1
Associates/DCA Holdings
09/01/93 12/13/93 ChipSoft Inc./ 236,939 186,240 39.4% 31.2% 23.9 4.8 26.7
Intuit
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
05/13/94 09/13/94 Serving Software, Inc./ 3.2 43.3 22.4 3.8 3.4
HBO & Co.
03/31/94 05/12/94 Software Toolworks Inc./ 3.5 90.1 66.2 5.4 5.0
Pearson PLC
03/15/94 08/31/94 Aldus Corporation/ 1.8 19.3 9.7 2.5 2.1
Adobe Systems Inc.
01/31/94 03/31/94 VMX, Inc./ 1.5 16.4 11.5 2.9 2.6
Octel Communications
Corporation
10/18/93 02/15/94 Artel Communications Corp./ 4.6 NM NM 5.9 5.9
Chipcom Corp.
10/12/93 11/30/93 MECA Software, Inc./ 1.2 NM NM 4.7 4.6
H&R Block, Inc.
09/27/93 11/16/93 Bytex Corporation/ 1.1 NM NM 1.2 1.2
Network Systems Corporation
09/23/93 12/22/93 Telematics International/ 3.8 29.3 19.4 4.9 4.3
ECI Telecom Ltd.
09/20/93 12/06/93 Digital Communications 0.8 83.1 12.5 1.3 1.0
Associates/DCA Holdings
09/01/93 12/13/93 ChipSoft Inc./ 2.7 20.4 14.7 2.6 2.5
Intuit
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- -------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of:
Premium Over Market(3) -------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/17/93 02/04/94 Spinnaker Software Corp./ 26,308 33,620 36.2% 49.8% NM NM NM
Wordstar International
(Part of 3 way transaction
with Softkey Software)
06/30/93 04/11/94 CMS / Data Corp./ 26,643 25,079 460.0% 561.8% NM 7.3 NM
Quartex Corp.
06/15/93 09/30/93 CYBERTEK Corporation/ $58,808 $44,897 40.5% 52.9% 21.3 2.4 16.0
Policy Management
Systems Corp.
04/01/93 07/01/93 Systems Center Inc./ 170,049 193,758 61.7% 72.4% NM NM 18.8
Sterling Software Inc.
02/18/93 08/31/93 SubMicron Systems, Inc./ 38,248 40,985 NA NA 33.1 NM 26.2
Trinity Capital
Enterprise Corp.
10/22/92 12/29/92 Archive Corporation/ 163,985 101,178 -2.1% 16.7% 13.8 8.2 4.9
Conner Peripherals, Inc.
09/21/92 11/30/92 Avasem Corporation/ 21,125 23,632 NA NA 16.6 39.8 NM
Integrated Circuit Systems
09/11/92 12/22/92 LPL Technologies, Inc./ 187,676 298,923 NA NA 9.3 NM 7.7
Amphenol Corp.
04/06/92 08/24/92 Wicat Systems/ 99,755 85,075 54.9% 65.2% NM 4.5 23.6
Jostens
04/02/92 08/03/92 Goal Systems International/ 440,937 413,894 47.1% 70.7% 42.7 9.3 25.5
LEGENT Corporation
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ----- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
08/17/93 02/04/94 Spinnaker Software Corp./ 0.9 NM 23.6 2.0 1.0
Wordstar International
(Part of 3 way transaction
with Softkey Software)
06/30/93 04/11/94 CMS / Data Corp./ 1.6 NM 164.3 2.6 1.7
Quartex Corp.
06/15/93 09/30/93 CYBERTEK Corporation/ 1.5 13.9 10.6 1.0 1.0
Policy Management
Systems Corp.
04/01/93 07/01/93 Systems Center Inc./ 1.5 51.8 14.3 2.3 1.6
Sterling Software Inc.
02/18/93 08/31/93 SubMicron Systems, Inc./ 1.6 18.5 16.2 5.3 5.2
Trinity Capital
Enterprise Corp.
10/22/92 12/29/92 Archive Corporation/ 0.3 3.7 2.0 0.5 0.4
Conner Peripherals, Inc.
09/21/92 11/30/92 Avasem Corporation/ 1.8 NM NM 4.2 4.2
Integrated Circuit Systems
09/11/92 12/22/92 LPL Technologies, Inc./ 2.7 10.3 9.0 2.2 1.4
Amphenol Corp.
04/06/92 08/24/92 Wicat Systems/ 1.8 NM 21.1 2.3 2.1
Jostens
04/02/92 08/03/92 Goal Systems International/ 3.2 27.3 17.2 3.2 2.7
LEGENT Corporation
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of:
Premium Over Market(3) --------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/12/92 06/29/92 MIPS Computer Systems, Inc./ 225,890 168,598 -25.2% -18.9% NM 2.0 NM
Silicon Graphics, Inc.
03/10/92 04/10/92 Acumos Inc./ 63,400 60,960 NA NA 22.0 9.4 19.9
Cirrus Logic Inc.
12/02/91 02/28/92 Teradata Corp./ 464,703 496,987 52.2% 44.0% 48.9 4.1 10.9
AT&T
10/29/91 12/20/91 Dastek, Inc./ 44,187 57,953 NA NA NM 3.6 NM
Komag, Incorporated
10/02/91 12/31/91 Valid Logic Systems 252,707 253,023 76.4% 86.2% 42.5 11.0 14.4
Incorporated/Cadence
Design Systems, Inc.
09/03/91 10/25/91 Crystal Semiconductor 60,492 59,867 NA NA 29.8 12.3 18.2
Corporation/Cirrus
Logic, Inc.
08/16/91 09/27/91 On-Line Software 92,248 116,290 59.5% 63.6% 20.2 3.1 5.6
International/Computer
Associates
08/07/91 11/04/91 Avantek Inc./ 104,336 101,182 54.3% 58.1% NM 1.2 26.0
Hewlett-Packard Co.
08/05/91 11/26/91 XL/Datacomp Inc./ 162,110 403,254 66.3% 93.0% 53.9 1.7 20.0
Storage Technology
Corporation
07/10/91 10/11/91 Ashton Tate Corp./ 518,863 433,654 54.1% 113.9% NM 3.4 17.6
Borland International
06/27/91 06/27/91 Omnirel Corporation/ 11,000 13,443 NA NA NM NM 33.0
Zeus Components Inc.
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
03/12/92 06/29/92 MIPS Computer Systems, Inc./ 1.1 NM 16.8 1.1 1.1
Silicon Graphics, Inc.
03/10/92 04/10/92 Acumos Inc./ 1.9 14.3 12.4 4.7 4.7
Cirrus Logic Inc.
12/02/91 02/28/92 Teradata Corp./ 1.7 16.3 7.9 2.0 1.6
AT&T
10/29/91 12/20/91 Dastek, Inc./ 1.1 NM NM 1.5 1.5
Komag, Incorporated
10/02/91 12/31/91 Valid Logic Systems 1.7 NM 25.3 3.0 2.4
Incorporated/Cadence
Design Systems, Inc.
09/03/91 10/25/91 Crystal Semiconductor 2.6 23.7 16.5 4.5 4.5
Corporation/Cirrus
Logic, Inc.
08/16/91 09/27/91 On-Line Software 1.2 12.0 5.4 1.3 1.3
International/Computer
Associates
08/07/91 11/04/91 Avantek Inc./ 0.6 NM 15.9 0.9 0.9
Hewlett-Packard Co.
08/05/91 11/26/91 XL/Datacomp Inc./ 1.0 14.9 13.3 0.9 0.9
Storage Technology
Corporation
07/10/91 10/11/91 Ashton Tate Corp./ 1.7 NM 17.8 2.0 1.8
Borland International
06/27/91 06/27/91 Omnirel Corporation/ 2.1 57.3 22.3 3.6 3.6
Zeus Components Inc.
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Premium Purchase Price as a Multiple of:
Over Market(3) --------------------------------
Aggregate ------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- --------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/07/91 07/01/91 Vitalink Communications 158,918 58,141 33.3% 18.3% 17.7 1.5 13.0
Corporation/
Network Systems Corporation
02/19/91 12/31/91 Square D Company/ 2,165,300 2,353,056 73.1% 69.2% NM 4.2 28.7
Schneider SA (Parisienne
d'Enterprises et de
Participations)
12/18/90 03/19/91 Index Technology Corp./ 54,423 45,483 116.7% 72.6% 59.2 2.7 7.7
Sage Software, Inc.
12/02/90 09/19/91 NCR Corporation/ 7,892,961 7,843,961 128.9% 86.9% 22.7 4.1 11.6
American Telephone &
Telegraph Company
09/10/90 09/22/90 Ingres Corp./ 111,408 121,803 94.7% 45.1% NM 2.0 10.1
ASK Computer Systems
07/02/90 08/22/90 General Instrument 1,863,000 1,330,110 54.4% 72.3% 19.0 20.2 8.9
Corporation/Forstmann
Little & Co.
06/28/90 09/07/90 Altos Computer Systems/ 91,700 68,463 42.6% 23.4% NM 0.9 NM
Acer Group
06/25/90 09/30/90 The Foxboro Company/ 656,450 724,557 113.6% 120.6% NM 3.5 29.1
Siebe Inc. (Siebe PLC)
04/25/90 09/18/90 Norton Company/ 1,840,200 1,728,700 14.2% 68.0% NM 2.5 29.4
Cie de Saint-Gobain SA
04/16/90 05/21/90 Dataproducts Corporation/ 158,044 136,999 77.8% 66.7% NM 1.0 21.8
HND Corp. (Nissei
Sangyo-Hitachi)
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
05/07/91 07/01/91 Vitalink Communications 1.0 8.0 5.5 0.5 0.5
Corpororation/
Network Systems Corporation
02/19/91 12/31/91 Square D Company/ 1.4 54.9 21.9 1.8 1.8
Schneider SA (Parisienne
d'Enterprises et de
Participations)
12/18/90 03/19/91 Index Technology Corp./ 1.0 91.5 7.6 1.3 1.0
Sage Software, Inc.
12/02/90 09/19/91 NCR Corporation/ 1.2 12.9 8.3 1.8 1.8
American Telephone & Telegraph
Company
09/10/90 09/22/90 Ingres Corp./ 0.8 NM 14.9 0.9 0.8
ASK Computer Systems
07/02/90 08/22/90 General Instrument Corporation/ 1.0 9.8 5.7 1.7 1.2
Forstmann Little & Co.
06/28/90 09/07/90 Altos Computer Systems/ 0.5 NM NM 0.5 0.5
Acer Group
06/25/90 09/30/90 The Foxboro Company/ 1.3 65.2 21.9 1.6 1.6
Siebe Inc. (Siebe PLC)
04/25/90 09/18/90 Norton Company/ 1.1 31.6 16.1 1.3 1.2
Cie de Saint-Gobain SA
04/16/90 05/21/90 Dataproducts Corporation/ 0.4 NM 13.5 0.5 0.5
HND Corp. (Nissei
Sangyo-Hitachi)
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of:
Premium Over Market(3) --------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
04/10/90 07/12/90 Automated Sytems, Inc./ 23,242 22,313 171.4% 280.0% NM 3.2 49.0
Cadence Design Systems, Inc.
12/20/89 04/27/90 Cipher Data Products, Inc./ 115,587 115,925 NA 69.2% NM 1.3 40.2
Archive Corporation
12/05/89 03/18/90 Mindscape Inc./ 21,460 27,143 206.3% 226.7% NM 4.5 NM
Software Toolworks Inc.
11/09/89 03/26/90 Wyse Technology Inc./ 142,399 235,540 23.1% 42.9% NM 1.1 NM
Channel International
Corporation
10/02/89 12/15/89 Microbilt Corp./ 133,721 115,424 -6.2% -2.7% 23.9 3.7 14.0
First Financial Management
09/28/89 01/18/90 AVX Corporation/ 563,059 514,037 61.0% 70.7% 19.7x 3.1 9.8
Kyocera Corporation
08/15/89 10/30/89 Materials Research Corp./ 56,044 98,987 41.1% 34.0% 12.4 1.4 7.2
Sony USA Inc. (Sony Corp.)
08/08/89 01/31/90 GTECH Corporation/ 163,018 274,156 14.7% 18.8% 20.4 2.8 5.8
GTEK Acquisition Co.
07/17/89 08/22/89 Micro Mask Inc./ 24,286 29,979 56.9% 100.0% 12.2 2.9 4.2
Hoya Corp. USA
06/23/89 01/30/90 Prime Computer Inc./ 1,299,062 1,828,337 NA NA 26.5 5.0 6.6
JH Whitney & Co.
06/19/89 08/08/89 Andover Controls Corporation/ 42,850 44,151 14.2% 16.4% 12.9 2.8 11.8
BICC PLC
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
04/10/90 07/12/90 Automated Sytems, Inc./ 1.3 NM 54.3 2.1 2.1
Cadence Design Systems, Inc.
12/20/89 04/27/90 Cipher Data Products, Inc./ 0.6 NM NM 0.8 0.6
Archive Corporation
12/05/89 03/18/90 Mindscape Inc./ 0.8 NM NM 1.6 1.6
Software Toolworks Inc.
11/09/89 03/26/90 Wyse Technology Inc./ 0.5 NM NM 0.7 0.7
Channel International
Corporation
10/02/89 12/15/89 Microbilt Corp./ 3.5 13.4 9.2 2.8 2.7
First Financial Management
09/28/89 01/18/90 AVX Corporation/ 1.3 9.8 6.3 1.2 1.2
Kyocera Corporation
08/15/89 10/30/89 Materials Research Corp./ 0.7 10.8 7.9 1.0 1.0
Sony USA Inc. (Sony Corp.)
08/08/89 01/31/90 GTECH Corporation/ 1.7 12.5 6.0 1.3 1.3
GTEK Acquisition Co.
07/17/89 08/22/89 Micro Mask Inc./ 0.7 9.7 4.3 1.7 1.7
Hoya Corp. USA
06/23/89 01/30/90 Prime Computer Inc./ 1.1 16.9 6.8 1.3 1.1
JH Whitney & Co.
06/19/89 08/08/89 Andover Controls Corporation/ 1.8 9.8 8.3 2.0 2.0
BICC PLC
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
Purchase Price as a Multiple of:
Premium Over Market(3) -------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/12/89 10/31/89 Adams-Russell Inc./ 85,159 110,972 103.3% 106.7% 61.4 1.3 7.5
M/A-COM Inc.
04/12/89 05/19/89 Apollo Computer Inc./ 554,145 569,190 61.5% 69.4% NM 2.5 18.9
Hewlett Packard
04/07/89 05/23/89 Silicon Systems, Inc./ 209,690 223,318 72.0% 81.8% 18.3 3.4 8.2
TDK Corporation
03/23/89 06/20/89 Excelan, Inc./ 160,100 151,721 30.1% 47.8% 33.7 4.0 19.8
Novell, Inc.
03/01/89 04/13/89 Irwin Magnetic Systems 71,961 76,466 62.5% 65.1% 49.2 2.7 23.7
Cipher Data Products
01/24/89 04/10/89 Radionics/ 84,840 75,156 63.3% 70.2% 22.7 3.0 16.8
Expamet
12/22/88 05/05/89 ISC Systems Corp./ 174,249 165,972 104.2% 88.5% 37.8 2.0 13.1
Olivetti USA
12/09/88 03/28/89 Morino Associates Inc. 181,434 159,639 5.5% 20.4% 21.3 5.9 20.5
Duquesne Systems
12/05/88 02/10/89 Computer Consoles Inc. 227,644 218,053 55.2% 48.4% 22.1 5.6 9.6
STC PLC
12/01/88 02/24/89 Teknowledge, Inc./ 30,788 2,221 8.3% 0.0% NM 0.9 NM
American Cimflex Inc.
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
06/12/89 10/31/89 Adams-Russell Inc./ 0.8 17.1 6.7 0.9 0.9
M/A-COM Inc.
04/12/89 05/19/89 Apollo Computer Inc./ 0.8 134.1 10.9 1.2 1.2
Hewlett Packard
04/07/89 05/23/89 Silicon Systems, Inc./ 1.7 12.0 7.6 1.5 1.5
TDK Corporation
03/23/89 06/20/89 Excelan, Inc./ 2.1 23.8 15.6 2.7 2.7
Novell, Inc.
03/01/89 04/13/89 Irwin Magnetic Systems 1.3 101.8 33.8 2.1 2.1
Cipher Data Products
01/24/89 04/10/89 Radionics/ 1.9 13.3 10.4 2.2 2.2
Expamet
12/22/88 05/05/89 ISC Systems Corp./ 1.0 20.2 9.6 1.2 1.2
Olivetti USA
12/09/88 03/28/89 Morino Associates Inc. 3.4 14.1 12.7 3.4 3.2
Duquesne Systems
12/05/88 02/10/89 Computer Consoles Inc. 1.3 10.7 6.4 1.4 1.4
STC PLC
12/01/88 02/24/89 Teknowledge, Inc./ 0.2 NM NM NM NM
American Cimflex Inc.
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
Purchase Price as a Multiple of:
Premium Over Market(3) -------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
10/03/88 02/10/89 Computer Entry Systems/ 43,259 52,525 83.8% 74.4% 11.9 1.7 5.3
BancTec, Inc.
09/30/88 05/31/89 Cadnetix Corp./ 216,370 213,341 65.2% 58.3% 44.9 3.2 25.7
Daisy Systems Corp.
09/20/88 02/06/89 System Integrators/ 115,380 84,409 25.0% 31.1% 20.8 2.0 12.2
SI Acquisitions Corp.
08/30/88 11/01/88 Gould Inc,/ 1,060,298 1,354,498 53.7% 40.9% 44.7 2.1 10.0
Nippon Mining
Co. Ltd.
08/11/88 12/22/88 Convergent, Inc./ 362,871 357,475 124.0% 111.3% NM 2.0 10.5
Unisys Corp.
08/09/88 09/28/88 Micom Systems, Inc./ 315,146 296,629 6.7% 0.8% 26.1 1.8 14.8
MS1 Acquisition Corp.
08/08/88 11/21/89 C3, Inc./ 141,718 103,846 25.8% 31.8% 21.9 1.5 12.1
Knoll Capital
Management
08/01/88 09/27/88 Concurrent Computer Corp./ 236,308 195,743 12.7% 14.3% 16.4 1.3 8.4
Massachusetts
Computer Corp.
06/27/88 03/01/89 Veeco Instruments Inc./ 330,455 298,007 85.9% 78.1% NM 3.5 31.8
Unitech PLC
06/07/88 11/08/88 HHB Systems Inc./ 51,450 46,374 19.4% 10.4% NM 2.7 24.6
Cadnetix Corporation
03/24/88 06/17/88 Scantron Corp./ 78,048 83,285 72.2% 68.1% 19.6 3.1 13.7
John H. Harland Co.
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C>
10/03/88 02/10/89 Computer Entry Systems/ 0.6 7.1 4.3 1.1 1.1
BancTec, Inc.
09/30/88 05/31/89 Cadnetix Corp./ 2.5 34.9 22.0 1.8 1.8
Daisy Systems Corp.
09/20/88 02/06/89 System Integrators/ 1.3 15.1 9.4 1.1 1.1
SI Acquisitions Corp.
08/30/88 11/01/88 Gould Inc,/ 1.4 37.7 13.5 1.2 1.1
Nippon Mining
Co. Ltd.
08/11/88 12/22/88 Convergent, Inc./ 0.9 NM 13.8 1.3 1.2
Unisys Corp.
08/09/88 09/28/88 Micom Systems, Inc./ 1.3 21.3 12.8 1.3 1.3
MS1 Acquisition Corp.
08/08/88 11/21/89 C3, Inc./ 1.3 14.7 9.3 0.9 0.9
Knoll Capital
Management
08/01/88 09/27/88 Concurrent Computer Corp./ 0.7 11.8 6.5 0.7 0.7
Massachusetts
Computer Corp.
06/27/88 03/01/89 Veeco Instruments Inc./ 1.1 10.1 8.2 1.5 1.4
Unitech PLC
06/07/88 11/08/88 HHB Systems Inc./ 2.4 42.7 19.3 1.7 1.6
Cadnetix Corporation
03/24/88 06/17/88 Scantron Corp./ 2.6 16.2 11.5 1.9 1.9
John H. Harland Co.
</TABLE>
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS OF SELECTED TECHNOLOGY TRANSACTIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of:
Premium Over Market(3) -------------------------------
Aggregate ---------------------- LTM Tangible Gross
Date Date Target/ Purchase Transaction 1 Month 2 Months Net Book Value Cash
Announced Effective Acquiror Price(1) Value(2) Prior Prior Income of Equity(4) Flow(5)
- --------- --------- -------------------------- ----------- ----------- --------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
02/15/88 06/16/88 Ungermann Bass, Inc./ 282,367 263,821 72.4% 75.4% 42.7 4.0 15.5
Tandem Computers
<CAPTION>
Transaction Value as a Multiple of:
------------------------------------------------
Net Tangible
Date Date Target/ LTM LTM LTM Book Value
Announced Effective Acquiror Revenues EBIT EBITDA of Assets Assets
- --------- --------- -------------------------- -------- ---- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
02/15/88 06/16/88 Ungermann Bass, Inc./ 1.8 21.4 11.0 1.7 1.6
Tandem Computers
</TABLE>
High 460.0% 561.8%
Low -31.9% -18.9%
Mean 57.6% 65.0%
Median 53.7% 61.6%
Notes:
NM - Not meaningful.
(1) Aggregate purchase price equals total shares outstanding multiplied by
purchase price per share less the exercise price of the options plus the
value of the remaining preferred stock. If the consideration includes
stock, the stock is valued using the closing price on the day before the
announcement date.
(2) Transaction value equals aggregate purchase price plus short-term and long-
term debt less excess cash.
(3) Premium to the market price of stock one month and two months prior to the
announcement of the deal.
(4) Common and preferred shareholders' equity less intangibles.
(5) Defined as net income plus depreciation and amortization plus deferred
taxes.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW ANALYSIS:
(Dollars in thousands, except per share data)
FREE CASH FLOW CALCULATION Fiscal Years Ending September 30,
- -------------------------- ---------------------------------------------------
1995E 1996E 1997E 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net income $ 9,966 $15,349 $26,687 $29,786 $32,058
Plus: Depreciation & amortization 17,248 17,511 19,687 22,403 24,358
Less: Capital expenditures & capitalized software development costs 21,560 21,889 24,609 28,004 30,447
Less: Increase (decrease) in net working capital 1,347 9,622 18,715 20,873 13,835
------- ------- ------- ------- -------
Free cash flow $ 4,307 $ 1,349 $ 3,050 $ 3,312 $12,133
======= ======= ======= ======= =======
<CAPTION>
PRESENT VALUE OF FREE CASH FLOW PRESENT VALUE OF TERMINAL VALUE
- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of 1999 Net income $ 32,058 $ 32,058 $ 32,058 $ 32,058 $ 32,058
Discount Rate Free Cash Flow Terminal value multiple 15.0 x 16.0 x 17.0 x 18.0 x 19.0 x
- ------------- ---------------- -------- -------- -------- -------- --------
1999 Terminal value $480,865 $512,923 $544,981 $577,038 $609,096
15.0% $13,760
17.5% 12,761
20.0% 11,867 Terminal Value Multiple
22.5% 11,064 Discount ------------------------------------------------------------
Rate 15.0 x 16.0 x 17.0 x 18.0 x 19.0 x
-------- -------- -------- -------- -------- --------
15.0% $239,075 $255,013 $270,952 $286,890 $302,828
17.5% 214,701 229,014 243,328 257,641 271,955
20.0% 193,249 206,132 219,015 231,899 244,782
22.5% 174,318 185,940 197,561 209,182 220,803
<CAPTION>
IMPLIED VALUE OF EQUITY (2)
----------------------------
Terminal Value Multiple
Discount ------------------------------------------------------------
Rate 15.0 x 16.0 x 17.0 x 18.0 x 19.0 x
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
15.0% $252,835 $268,774 $284,712 $300,650 $316,589
17.5% 227,462 241,775 256,089 270,402 284,716
20.0% 205,116 217,999 230,882 243,766 256,649
22.5% 185,382 197,004 208,625 220,246 231,867
IMPLIED EQUITY VALUE PER SHARE (3)
-----------------------------------
Terminal Value Multiple
Discount ------------------------------------------------------------
Rate 15.0 x 16.0 x 17.0 x 18.0 x 19.0 x
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
15.0% $ 15.80 $ 16.80 $ 17.79 $ 18.79 $ 19.79
17.5% 14.22 15.11 16.01 16.90 17.79
20.0% 12.82 13.62 14.43 15.24 16.04
22.5% 11.59 12.31 13.04 13.77 14.49
</TABLE>
(1) Assumes value on December 31, 1994.
(2) Present value of free cash flow plus present value of terminal value.
(3) Based on 16,000,000 fully diluted shares outstanding.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREMIUM ANALYSIS
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRICE PER SUNSHINE
SHARE.............. $14.50 $15.00 $15.50 $16.00 $16.50 $17.00 $17.50 $18.00 $18.50
Fully-Diluted Sun-
shine Shares (1)... 15,584 16,086 16,139 16,202 16,262 16,319 16,381 16,444 16,503 16,564
Equity Transaction
Value.............. $233,248 $242,083 $251,132 $260,193 $269,266 $278,476 $287,765 $297,055 $306,438
Plus: Total Debt.... $ 2,553 $2,553 $2,553 $2,553 $2,553 $2,553 $2,553 $2,553 $2,553
Less: Cash & Short-
Term Investments... ($54,081) ($54,081) ($54,081) ($54,081) ($54,081) ($54,081) ($54,081) ($54,081) ($54,081)
AGGREGATE TRANSAC-
TION VALUE......... $181,720 $190,555 $199,604 $208,665 $217,738 $226,948 $236,237 $245,527 $254,910
PRICE PER SHARE
PREMIUM TO:
January 6, 1995
Close............ $12.25 18.4% 22.4% 26.5% 30.6% 34.7% 38.8% 42.9% 46.9% 51.0%
30 Trading Days
Prior............ $9.75 48.7% 53.8% 59.0% 64.1% 69.2% 74.4% 79.5% 84.6% 89.7%
30 Trading Day Av-
erage............ $11.72 23.7% 28.0% 32.3% 36.5% 40.8% 45.1% 49.3% 53.6% 57.8%
LTM High.......... $16.25 -10.8% -7.7% -4.6% -1.5% 1.5% 4.6% 7.7% 10.8% 13.8%
LTM Low........... $5.50 163.6% 172.7% 181.8% 190.9% 200.0% 209.1% 218.2% 227.3% 236.4%
One-year Average.. $9.83 47.5% 52.6% 57.7% 62.8% 67.9% 72.9% 78.0% 83.1% 88.2%
PRICE PER SHARE AS
MULTIPLE OF:
CY 1995 IBES EPS.. $0.60 24.1x 24.9x 25.7x 26.6X 27.4x 28.2x 29.0x 29.9x 30.7x
FY 1995 IBES EPS.. $0.49 29.6 30.6 31.6 32.7 33.7 34.7 35.7 36.7 37.8
FY 1995 Management
EPS.............. $0.61 23.8 24.6 25.4 26.2 27.0 27.9 28.7 29.5 30.3
FY 1996 IBES EPS.. $0.94 15.4 16.0 16.5 17.0 17.6 18.1 18.6 19.1 19.7
AGGREGATE TRANSAC-
TION VALUE AS MUL-
TIPLE OF:
LTM Revenues...... $220,616 0.82x 0.86x 0.90x 0.95X 0.99x 1.03x 1.07x 1.11x 1.16x
</TABLE>
(1) Treasury stock method used. Calculation based on 15,583,965 primary shares
and options data as of January 3, 1995.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
PYRAMID TECHNOLOGY CORP.
STOCK PRICE AND VOLUME GRAPH
Graph depicts weekly prices and trading volume of Pyramid Technology Corp
Common Stock for period January 20, 1992 to January 18, 1995, with a high, low
and ending price over such period of between $20 and $24, $4 and $8 and $12 and
$16, respectively, and a high, low and ending volume over such period of between
4.5 and 6.0 million, 0.0 and 1.5 million and 1.5 and 3.0 million, respectively.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
PYRAMID TECHNOLOGY CORP.
GRAPH OF PERCENT OF TOTAL VOLUME TRADED AT SPECIFIED PRICES
JANUARY 20, 1992 TO JANUARY 18, 1995
Bar graph depicts the percent of total volume of Pyramid Technology Corp.
stock traded in specified price ranges of 5 to 7, 7 to 9, 9 to 11, 11 to 13, 13
to 15, 15 to 17, 17 to 19, 19 to 21 and 21 to 23 for the period from January 20,
1992 to January 18, 1995; such percentages for those price ranges were 2.51,
13.48, 10.83, 7.97, 24.47, 21.24, 7.63, 8.13 and 3.74, respectively. The graph
shows 159,254,900 Cumulative Shares, 1023% of the 15,567,000 shares outstanding
as reported on 1/18/95.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
PYRAMID TECHNOLOGY CORP.
STOCK PRICE AND VOLUME GRAPH
Graph depicts daily prices and volume of Pyramid Technology Corp Common
Stock from January 19, 1994 to January 18, 1995, with a high, low and ending
price over such period of between $15.00 and $17.50, $5.00 and $7.50 and $12.50
and $17.50, respectively, and a high, low and ending volume over such period of
between 2.4 and 3.2 million, 0.0 and 1.5 million and 0.8 and 1.6 million,
respectively.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
PYRAMID TECHNOLOGY CORP.
GRAPH OF PERCENT OF TOTAL VOLUME TRADED AT SPECIFIED PRICES
JANUARY 19, 1994 TO JANUARY 18, 1995
Bar Graph depicts the percentage of total volume of Pyramid Technology Corp.
Common Stock traded at specified prices of 5 to 6, 6 to 7, 7 to 8, 8 to 9, 9 to
10, 10 to 11, 11 to 12, 12 to 13, 13 to 14, 14 to 15 and 15 to 16 for the period
January 19, 1994 to January 18, 1995; such percentages for these price ranges
were 2.46, 5.10, 15.33, 17.13, 5.69, 11.72, 4.67, 4.31, 6.19, 19.69 and 7.69,
respectively. Graph shows 47,307,500 Cumulative Shares, 304% of the 15,567,000
Shares outstanding as reported on 1/18/95.
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
GRAPH OF PYRAMID VS. INDEX OF COMPARABLE COMPANIES VS. INDEX OF SELECTED
COMPANIES WEEKLY: JANUARY 20, 1992 TO JANUARY 18, 1995
Graph depicts the weekly stock prices as a percentage of the price on the
initial date of January 20, 1992 of Pyramid Technology Corp, an index of
comparable companies, and an index of selected companies for the period
January 20, 1992 to January 18, 1995.
Index of Comparable Companies is a composite of: AMH, ASPX, CNX, DGN, DEC, HWP,
NETF, PLLN, SQNT, SGI, SRA, SUNW, TDM, TRCD
Index of Selected Companies is a composite of: ASPX, NETF, SQNT, SRA, TRCD
Smith Barney
------------
<PAGE>
Project Jupiter
January 1995
- --------------------------------------------------------------------------------
GRAPH OF PYRAMID VS. INDEX OF COMPARABLE COMPANIES VS. INDEX OF SELECTED
COMPANIES DAILY: JANUARY 19, 1994 TO JANUARY 18, 1995
Graph depicts the daily stock prices as a percentage of the price on the
initial date of January 19, 1994 of Pyramid Technology Corp, an index of
comparable companies, and an index of selected companies for the period
January 19, 1994 to January 18, 1995.
Index of Comparable Companies is a composite of: AMH, ASPX, CNX, DGN, DEC, HWP,
NETF, PLLN, SQNT, SGI, SRA, SUNW, TDM, TRCD
Index of Selected Companies is a composite of: ASPX, NETF, SQNT, SRA, TRCD
Smith Barney
------------
<PAGE>
EXHIBIT 99(b)(3)
CONFIDENTIAL
MATERIAL PRESENTED TO
CERTAIN OFFICERS
OF
SIEMENS NIXDORF INFORMATIONSSYSTEME AG
________________________
AT A MEETING ON
January 3, 1995
________________________
The following pages contain material that was provided to certain officers
of Siemens Nixdorf Informationssysteme AG ("SNI AG") in the context of a meeting
held to evaluate the proposed acquisition to be made by SNI AG and Siemens
Nixdorf Mid-Range Acquisition Corp. ("Purchaser") described in the Offer to
Purchase which is part of this Schedule 13E-3. The accompanying material was
compiled or prepared on a confidential basis solely for use by SNI AG and
Purchaser and not with a view toward public disclosure under the Securities Act
of 1933 or the Securities Exchange Act of 1934 (the "Federal Securities Laws").
The information contained in this material was obtained from SNI AG and other
sources. Any estimates and projections contained herein were prepared
separately by the management of either SNI AG or Pyramid Technology Corporation
(the "Company") and involve numerous and significant subjective determinations,
which may or may not be correct. No representation or warranty, expressed or
implied, is made as to the accuracy or completeness of such information and
nothing contained herein is, or shall be relied upon as, a promise or
representation, whether as to the past or the future. Because this material was
prepared for use in the context of an oral presentation to certain officers of
SNI AG, it was not prepared to comply with the disclosure standards set forth
under the Federal Securities Laws and because it may be used by readers not as
familiar with the business and affairs of the Company as such officers of SNI
AG, neither SNI AG, Purchaser nor Goldman, Sachs & Co., nor any of their
respective legal or financial advisors or accountants, takes any responsibility
for the accuracy or completeness of any of the material when used by persons
other than SNI AG. Neither SNI AG nor Goldman, Sachs & Co. expects to update or
otherwise revise the accompanying materials.
Discussion Materials
Project Highnoon
Prepared by
Goldman, Sachs & Co.
January 3, 1995
<PAGE>
Table of Exhibits
Summary Observations 1
Summary Financial Information 2
Summary of Selected Research Reports 3
Valuation Summary of Selected Companies 4
Historical Trading Performance 5
Future Value Analysis 6
Selected Computer Hardware Industry Acquisitions 7
Summary of Selected Valuations 8
Appendices
Other Financial Information A
Ownership Analysis for Highnoon B
List of Other Potential Buyers C
Merger Plans D
Analysis at Various Prices E
<PAGE>
Summary Observations
Long Term Investor Issues
Product/Market . Market size and growth opportunity
. Breadth of competition
Financial . Sustainability of Highnoon's revenue momentum
. Inherent profitability of Highnoon's business model
. Inability of most players to sustain profitability
year after year
. Continued restructuring efforts
Short Term Investor Issues
. Actual earnings relative to analysts' estimates
. Analysts' recommendations
. New product successes and future pipeline
. Costs of rebuilding direct sales capability
. Quality of earnings
. Stock price momentum
. Technology sector stock price momentum
<PAGE>
Summary Financial Information - Historical
Dollars in Millions
<TABLE>
<CAPTION>
For the Years Ended September 30 CAGR
------------------------------------------------------------------------ --------
1989 1990 1991 1992(a) 1993 1994 '89-'94
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Product revenue $ 86.5 $ 148.3 $ 178.6 $ 138.9 $ 174.4 $ 152.6 12.0 %
Service revenue 17.4 31.5 49.4 53.3 59.3 65.9 30.6
------- -------- -------- -------- -------- -------- --------
Total revenue 103.9 179.7 227.9 192.2 233.7 218.5 16.0
Gross profit 57.6 96.4 106.6 68.7 101.6 79.9 6.8
EBITDA 16.4 37.9 35.8 6.7 39.3 9.2 (11.0)
EBIT 10.0 22.1 16.5 (24.4) 9.3 (19.3) N.M.
Net income 8.4 16.8 12.0 (32.5) 8.6 (22.4) N.M.
EPS $ 0.96 $ 1.61 $ 1.02 $ (2.72) $ 0.67 $ (1.66) N.M.
Average shares outstanding 8,707 10,436 11,864 11,962 12,890 13,467 9.1
Other
Cash $18.2 $16.7 $31.6 $26.5 $31.4 $21.6 3.5 %
Net working capital 27.9 78.1 58.0 23.7 45.4 60.4 16.7
Long term debt 0.3 0.7 2.8 1.9 0.5 1.6 44.3
Equity 69.5 154.3 174.8 117.7 137.6 136.0 14.4
Capital expenditure 10.9 25.8 26.1 16.8 13.7 12.0 1.9
Growth
Product revenue 71.4 % 20.4 % (22.2)% 25.5 % (12.5)%
Service revenue 81.3 57.0 7.9 11.3 11.1
Total revenue 73.0 26.8 (15.7) 21.6 (6.5)
EPS 67.7 (36.6) N.M. N.M. N.M.
Margin
Product gross 62.1 % 60.7 % 54.0 % 43.3 % 50.2 % 42.5 %
Service gross 22.4 20.3 20.4 16.0 23.7 22.8
Total gross 55.5 53.7 46.8 35.7 43.5 36.6
R&D 14.0 11.3 10.7 14.8 11.9 11.7
SG&A 31.8 30.1 28.9 33.7 27.6 33.7
EBIT 9.6 12.3 7.2 (12.7) 4.0 (8.8)
Net income 8.1 9.4 5.3 (16.9) 3.7 (10.3)
</TABLE>
(a) Excludes a $41.2 million restructuring charge, tax effected at 34%.
<PAGE>
Historical Quarterly Performance
Highnoon
<TABLE>
<CAPTION>
Quarterly Revenue Growth
--------------------------------
% Growth Over Actual Actual
% Growth Over Same Period Gross Net
Previous Quarter Previous Year Margin Margin
---------------- ------------- ------ ------
<S> <C> <C> <C> <C>
FY1994
Q4 8.0% (4.0)% 40.5% (2.0)%
Q3 15.6 (10.3) 35.0 (11.0)
Q2 (22.4) (19.8) 27.1 (34.3)
Q1 (0.9) 8.9 41.6 1.1
FY1993
Q4 0.9 18.6 44.4 5.6
Q3 3.4 23.5 45.3 5.6
Q2 5.3 34.5 42.8 2.5
Q1 7.9 11.5 41.2 0.8
FY1992
Q4(a) 5.1 (13.7) 32.0 (28.4)
Q3 12.6 (11.4) 35.6 (8.2)
Q2 (12.7) (25.9) 35.1 (16.8)
Q1(b) (16.4) (11.3) 40.3 (12.5)
FY1991
Q4 7.8 6.2 44.3 3.7
Q3 (5.7) 12.7 44.6 0.8
Q2 4.4 44.3 48.1 8.3
Q1 0.1 59.2 50.1 8.3
</TABLE>
(a) Excludes a $23.4 million restructuring charge, tax effected at 34%
(b) Excludes a $17.8 million restructuring charge and a legal settlement charge
of $0.9 million, tax effected at 34%
<PAGE>
While SNI has reduced Highnoon's management projections, SNI believes
significant synergies are attainable.
IBES median EPS estimates of $0.50 and $1.02 for FY1995 and 1996,
respectively, are the highest of any projections without synergies.
Comparison of Projections
<TABLE>
<CAPTION>
For the Years Ended September 30,
---------------------------------------
FY 1995E FY 1996E FY 1997E
-------- -------- --------
<S> <C> <C> <C>
Sales
24% Ownership (a) $267 $386 $538
Highnoon Plan (b) 271 337 424
Revised Plan (c) 248 286 333
With Cost Savings (d) 299 475 730
Earnings per Share
24% Ownership (e) $0.30 $1.02 $1.43
Highnoon Plan (e) 0.35 0.80 1.29
Revised Plan (e) (0.18) 0.26 0.72
With Cost Savings (e) (1.84) 3.82 5.99
IBES Median (12/22/94) 0.50 1.02 1.19(f)
</TABLE>
(a) Management projections for Highnoon if SNI were to exercise warrant.
(b) Base plan as provided by Highnoon to SNI in August 1994.
(c) Highnoon plan adjusted by SNI management. Last revised December
1994.
(d) Implied realistic case for SNI. Includes SNI estimated synergies
and costs to achieve those synergies. Represents the difference
between SNI MR-Business Plan to Integrated Plan (SNI MR-Business pro
forma for acquisition of Highnoon).
(e) Assumes 16.275 million, 19.1 million, and 20.7 million shares
outstanding for fiscal years 1995-1997, respectively.
(f) IBES 5-year CAGR of 16.5% applied to FY 1996 estimate.
<PAGE>
Overview of Synergies (a)
Dollars in Millions
<TABLE>
<CAPTION>
Sales Pre-Tax Profit
----------------------------- -----------------------------
Description 94/95 95/96 96/97 94/95 95/96 96/97
- ---------------------------------------------------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Increased sales in Europe due to greater US presence (SNI) $ 20 $ 50 $140 $ 5 $ 15 $ 35
Increase in sales due to greater market share (Highnoon) 25 50 75 5 10 15
Increase in high-end capability (Highnoon) 10 50 80 0 15 30
Increase in low-end capability (direct) (SNI) 10 30 55 0 3 5
Increase in low-end capability (indirect) (SNI) 15 30 60 3 8 15
Indirect OEMs (Highnoon) (15) (20) (20) (3) (5) (5)
Cost to expand in US saved (SNI) 13 9 0
Consolidate into Germany (Highnoon) 6 9 15
R&D redundancy 0 7 20
Write-off of activated software (non-cash) (Highnoon) (18) -- --
Restructuring (roughly 2/3 cash) (20) (3) (9)
Miscellaneous (1) (3) (1)
---- ---- ---- ---- ---- ----
Total $ 65 $190 $390 $(10) $ 65 $120(b)
</TABLE>
(a) Estimated by management of SNI.
(b) SNI management estimates an additional $120 in 97/98.
<PAGE>
Financing History - Highnoon
Highnoon has had limited access to public financings, and none since
1990.
Over the past three years, Highnoon has had negative operating cash
flow.
<TABLE>
<CAPTION>
Offer Total Where Issue Type of
Date Amount Shares Offer Price Trades Security Syndicated
- ------- ------ ------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
12/4/85 (a) $25.1 1.5 mil $16.75 OTC Common Yes
3/14/90 57.0 2.0 28.50 NASDQ Common No
</TABLE>
<TABLE>
<CAPTION>
FY1992 FY1993 FY1994
- ------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Nonrecurring Operating System and
Manufacturing License Fees $4.9 $9.6 $5.0
====== ====== ======
Net Income ($32.5)(b) $8.6 ($22.4)
Plus: Depreciation and Amortization 18.8 30.0 28.5
Less: Net Working Capital Changes (25.8) 22.2 (9.6)
Capital Expenditures 16.8 13.7 12.0
Capitalized Software 6.1 7.3 6.8
After-tax License Fees(c) 2.3 4.4 2.3
------ ------ ------
Operating Cash Flow ($13.1) ($9.1) ($5.4)
====== ====== ======
</TABLE>
(a) Initial public offering.
(b) Restructuring charge of $41.2 million tax effected at 34%.
(c) 34% tax rate assumed.
<PAGE>
Summary of Selected Research Reports
The consensus of research analysts seems to be "hold."
Recent financial disappointments as well as large overhead expenses
detract from Highnoon's position in the high-performance server
category.
<TABLE>
<CAPTION>
Analyst/ Bank Date Comments
<S> <C> <C>
John B. Jones/ November 22, 1994 . Hold; FY 95 $0.45 estimates
Salomon Brothers
. Four quarter results as expected. Gross margins to rebound and trend
towards 42-43%
. 45 shipments of the Nile 100 and 150 midrange systems since
introduction in mid-May.
. Average price of Nile 100 is $250,000-$300,000 and Nile 150 $150,000.
- ------------------------------------------------------------------------------------------------------------------------
Shao F. Wang/ October 31, 1994 . Buy, high risk(1H); target price: $16; FY95 $0.49; FY 96 $.94 estimates
Smith Barney
. New products utilizing a new architecture to be announced and a sales
force that has been revamped
. Lowered losses and continued sequential improvements pending
. Looking to new head of marketing to justify symmetric multiprocessing
and MPP products.
. Expanding market for high-end systems remains key. Development of
new applications such as electronic messaging necessary.
. Current Nile product and pending introduction of MPP-based MESHine
could prove to be a conflict
- ------------------------------------------------------------------------------------------------------------------------
Jay P. Stevens/ October 31, 1994 . Neutral; FY95 $0.50 estimates
Dean Witter
. Fairly valued at current price ($9 7/8), which was 16.5 CY95 P/E
. Excellent products and technology but poor recent financial
performance
. Expect to benefit from move to MPP architecture
. Product lines require extensive review and analysis, resulting in
extended selling cycles
. Salesforce realignment required
. Competitors include Hewlett-Packard, Sequent Computer, Data General
and Digital Equipment
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
<PAGE>
Summary of Selected Research Reports
Continued
<TABLE>
<CAPTION>
Analyst/ Bank Date Comments
<S> <C> <C>
Thomas T. Rooney/ March 22, 1994 . Neutral; FY95 $1-$1.05 estimate.
Donaldson, Lufkin
& Jenrette . Target value at 15x P/E, or $15-16 per share
. Earlier optimism for rightsizing/re-hosting opportunity dimmed due to
IBM's expected announcement of new lower-cost CMOS mainframes.
. Replacing a mainframe with a Unix-based multiprocessing server
threatened by Compaq moving up from low end.
. Reduced growth prospects from 25-30% to 15-20%
. Only way to cut costs is to increase indirect distribution; recent
OEM deal with ICL
- ------------------------------------------------------------------------------------------------------------------------
Joseph Payne/ January 31, 1994 . Long-term buy, high risk; FY95 $1.40 estimate
Kemper Securities,
Inc. . Best positioned company in the high-performance server category
. Has focused on large systems for use in specific vertical markets and
has developed partnerships and alliances to support its strategy
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
VALUATION SUMMARY OF SELECTED COMPANIES
(Dollars in Millions)
<TABLE>
<CAPTION>
Latest Quarter Data
As % Capitalization Growth -------------------------------------------------
Latest of 52 ------------------- LQ Rev/ Annualized Enterprise Annualized Enterprise
Company Close(a) Wk High Equity Enterprise Yr. Ago Revenue Multiple EBITDA(b) Multiple
- ------------------------- -------- ------- ------ ---------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Highnoon $13.00 79% $ 203 $ 184 (4)% $ 233 0.79x $ 18 10.0x
RISC
Auspex Systems $ 6.75 68 155 142 17 95 1.49 17 8.4
Concurrent Computer 1.44 58 43 61 (16) 166 0.37 25 2.4
Data General 10.00 83 366 383 5 1,170 0.33 59 6.5
Encore Computer 3.13 49 106 160 (23) 66 2.41 (29) N.M.
Median 63% $ 130 $ 151 (5)% $ 131 0.93x $ 21 6.5x
OLTP
Sequent Computer Systems $19.75 96 615 653 33 485 1.35 87 7.5
Stratus Computer 38.00 95 921 690 15 583 1.18 135 5.1
Tandem Computers 17.13 90 1,963 1,981 9 2,418 0.82 455 4.4
Median 95% $ 921 $ 690 15% $ 583 1.18x $135 5.1x
Superserver
Netframe Systems $ 7.63 44 102 85 44 98 0.86 14 6.2
Parallan Computer 4.00 28 30 22 (98) 0 N.M. (5) N.M.
Tricord Systems 5.25 20 68 54 (12) 77 0.71 4 13.9
Median 28% $ 68 $ 54 (12)% $ 77 0.79x $ 4 10.0x
Technical
Convex Computer $ 7.88 89 207 248 (15) 146 1.70 190 1.3
Cray Research 15.63 46 401 493 9 879 0.56 211 2.3
Silicon Graphics 31.16 94 4,416 4,394 42 1,710 2.57 322 13.6
Sun Microsystems 35.50 94 3,367 3,146 33 5,094 0.62 481 6.5
Median 91% $1,884 $1,820 21% $1,294 1.16x $267 4.4x
- -------------------------------------------------------------------------------------------------------------------------------
High 96% $4,416 $4,394 44% $5,094 2.57x $481 13.9x
Low 20 30 22 (98) 0 0.33 (29) 1.3
Mean 68 911 894 3 928 1.15 140 6.5
Median 75 287 315 9 326 0.86 73 6.4
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Latest Quarter Data
-----------------------
Annualized Enterprise
Company EBIT Multiple
- ------------------------- ---------- ----------
<S> <C> <C>
Highnoon $ (4) (42.2)x
RISC
Auspex Systems 9 15.9
Concurrent Computer 13 4.9
Data General (45) N.M.
Encore Computer (40) N.M.
Median $ (15) 10.4x
Sequent Computer Systems 43 15.3
Stratus Computer 84 8.2
Tandem Computers 296 6.7
Median $ 84 8.2x
Superserver
Netframe Systems 10 8.8
Parallan Computer (5) N.M.
Tricord Systems (0) N.M.
Median $ (0) 8.8x
Technical
Convex Computer 172 1.4
Cray Research 87 5.7
Silicon Graphics 230 19.1
Sun Microsystems 215 14.6
Median $ 194 10.1x
- ----------------------------------------------------
High $ 296 19.1x
Low (45) 1.4
Mean 76 10.1
Median 28 8.5
- ----------------------------------------------------
</TABLE>
(a) Closing prices as of December 30, 1994.
(b) Latest quarter depreciation and amortization was estimated where not
available.
<PAGE>
VALUATION SUMMARY OF SELECTED COMPANIES
(Dollars in Millions)
<TABLE>
<CAPTION>
Last 12 Months Margin P/E Ratio 5Yr.
---------------------------------------------- ------------------------------------- IBES
Company Gross EBIT EBITDA Net Income SG&A R&D LTM LQ Annual. CY 1994E CY 1995E EPS Est.
- ------------------------- ----- ----- ------ ---------- ---- --- ------ ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Highnoon 37% (9)% 4% (10)% 34% 12% (7.8)x (40.6)x (11.6)x 20.6x 17%
RISC
Auspex Systems 56 9 18 9 31 14 20.7 18.8 17.2 13.9 25
Concurrent Computer 40 6 13 0 25 13 (7.6) 6.0 N.M. 5.2 15
Data General 35 (4) 5 (8) 30 8 (4.1) N.M. (5.7) 32.3 10
Encore Computer 30 N.M. N.M. N.M. 46 36 (1.9) (2.2) (2.7) 10.4 N.A.
Median 37% 6% 13% 0% 31% 13% (3.0)x 6.0x (2.7)x 12.2x 15%
OLTP
Sequent Computer Systems 46 7 18 1 31 8 N.M. 17.6 19.4 15.8 20
Stratus Computer 55 7 16 5 28 15 30.5 12.5 13.3 11.7 12
Tandem Computers 55 7 15 7 34 13 12.5 6.9 11.8 10.0 10
Median 55% 7% 16% 5% 31% 13% 21.5x 12.5x 13.3x 11.7x 12%
Superserver
Netframe Systems 53 9 13 9 31 12 13.0 10.0 10.9 9.5 30
Parallan Computer N.M. N.M. N.M. N.M. 14 33 N.M. N.M. (6.2) (6.3) 45
Tricord Systems 37 6 10 6 16 8 12.9 N.M. 30.9 13.8 23
Median 45% 7% 12% 8% 16% 12% 12.9x 10.0x 10.9x 9.5x 30%
Technical
Convex Computer 35 N.M. N.M. N.M. 44 22 (2.8) N.M. (4.9) 31.5 18
Cray Research 43 32 44 7 17 15 5.8 6.3 6.9 15.6 10
Silicon Graphics 18 14 19 10 9 4 31.0 28.8 28.8 21.9 29
Sun Microsystems 41 6 11 4 25 9 15.6 22.2 15.2 12.3 15
Median 38% 14% 19% 7% 21% 12% 10.7x 22.2x 11.1x 18.7x 16%
- -------------------------------------------------------------------------------------------------------------------------------
High 56% 32% 44% 10% 46% 36% 31.0x 28.8x 30.9x 32.3x 45%
Low 18 (4) 5 (8) 9 4 (7.6) (2.2) (6.2) (6.3) 10
Mean 42 9 17 5 27 15 10.5 12.7 10.4 14.1 20
Median 41 7 15 6 29 13 12.7 11.3 11.8 13.1 18
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total Debt/
Total
Company Capitalization
- ------------------------- --------------
<S> <C>
Highnoon 2%
RISC
Auspex Systems 1
Concurrent Computer 42
Data General 34
Encore Computer 98(a)
Median 38%
OLTP
Sequent Computer Systems 19
Stratus Computer 3
Tandem Computers 13
Median 13%
Superserver
Netframe Systems 0
Parallan Computer 0
Tricord Systems 0
Median 0%
Technical
Convex Computer 54
Cray Research 11
Silicon Graphics 20
Sun Microsystems 8
Median 16%
- -----------------------------------------
High 98%
Low 0
Mean 22
Median 12
- -----------------------------------------
</TABLE>
(a) Includes $59.5 million of revolving loan agreement with Gould Electronics.
46% debt to capitalization excluding revolver.
<PAGE>
HISTORICAL TRADING PERFORMANCE
Latest Two Weeks
STOCK PRICE AND VOLUME GRAPH
DAILY PRICES AND VOLUMES: December 16, 1994 to December 30, 1994
<PAGE>
HISTORICAL TRADING PERFORMANCE OF HIGHNOON
Since June 1, 1994
STOCK PRICE AND VOLUME GRAPH
DAILY PRICES AND VOLUMES: June 6, 1994 to December 30, 1994
<PAGE>
HISTORICAL TRADING PERFORMANCE OF HIGHNOON
Latest 3 Years
The highest Highnoon has closed within the past three years was $22.875 on
August 26, 1993. The lowest was $5.50 on July 22, 1994.
STOCK PRICE AND VOLUME GRAPH
WEEKLY PRICES AND VOLUMES: December 31, 1991 to December 31, 1994
<PAGE>
HISTORICAL TRADING PERFORMANCE OF HIGHNOON
Latest 9 Years (Since IPO)
The highest Highnoon has closed since its IPO on December 4, 1985 was $35 during
May 1990. The lowest was $4 during December 1986.
STOCK PRICE AND VOLUME GRAPH
MONTHLY PRICES AND VOLUMES: December 31, 1985 to December 31, 1994
<PAGE>
SHARES TRADED AT VARIOUS PRICES
Since the IPO, Highnoon's weighted average share price has steadily declined.
<TABLE>
<CAPTION>
Weighted Total Shares as
Average % of Shares
Period Price Range Outstanding (a)
- --------------- -------- -------------- ---------------
<S> <C> <C> <C>
Since IPO $15.68 $4.00 - $35.00 135%
Latest 5 years 16.34 5.50 - 35.00 200
Latest 3 years 13.79 5.50 - 22.88 203
Latest year 10.50 5.50 - 16.25 169
Latest 6 months 9.29 5.50 - 12.88 156
</TABLE>
(a) Annualized and normalized for NASDAQ trading (60% weight assumed).
<PAGE>
RELATIVE TRADING PERFORMANCE
Latest Week
Performance graph of the Company's stock price vs. three separate composite
indices: the Midrange Composite, the PC Composite and the Software Composite.
Daily: December 27, 1994 to December 30, 1994.
The Midrange Composite is a composite of Auspex Systems, Convex Computer,
Cray Research, Data General, Encore Computer, Netframe Systems, Parallan
Computer, Sequent Computer, Silicon Graphics, Stratus Computer, Sun
Microsystems, Tandem, Teradata Corp; the PC Composite is a composite of Apple,
AST, Compaq, Dell; and the Software Composite is a composite of Adobe, Lotus,
Microsoft, Novell, Symantec.
<PAGE>
RELATIVE TRADING PERFORMANCE
Latest Two Weeks
Performance graph of the Company's stock price vs. three separate composite
indices: the Midrange Composite, the PC Composite and the Software Composite.
Daily: December 16, 1994 to December 30, 1994.
The Midrange Composite is a composite of Auspex Systems, Convex Computer, Cray
Research, Data General, Encore Computer, Netframe Systems, Parallan Computer,
Sequent Computer, Silicon Graphics, Stratus Computer, Sun Microsystems, Tandem
and Teradata Corp; the PC Composite is a composite of Apple, AST, Compaq and
Dell; and the Software Composite is a composite of Adobe, Lotus, Microsoft,
Novell and Symantec.
<PAGE>
RELATIVE TRADING PERFORMANCE
Latest Month
Performance graph of the Company's state price vs. three separate composite
indices: the Midrange Composite, the PC Composite and the Software Composite.
Daily: November 30, 1994 to December 30, 1994.
The Midrange Composite is a composite of Auspex Systems, Convex Computer, Cray
Research, Data General, Encore Computer, Netframe Systems, Parallan Computer,
Sequent Computer, Silicon Graphics, Stratus Computer, Sun Microsystems, Tandem
and Teradata Corp; the PC Composite is a composite of Apple, AST, Compaq and
Dell; and the Software Composite is a composite of Adobe, Lotus, Microsoft,
Novell and Symantec.
<PAGE>
RELATIVE TRADING PERFORMANCE
July 1 - Present
Performance graph of the Company's stock price vs. three separate composite
indices: the Midrange Composite, the PC Composite, and the Software Composite.
Daily: July 1, 1994 to December 30, 1994.
The Midrange Composite is a composite of Auspex Systems, Convex Computer, Cray
Research, Data General, Encore Computer, Netframe Systems, Parallan Computer,
Sequent Computer, Silicon Graphics, Stratus Computer, Sun Microsystems, Tandem,
Teradata Corp.; the PC Composite is a composite of Apple, AST, Compaq, Dell; and
the Software Composite is a composite of Adobe, Lotus, Microsoft, Novell,
Symantec.
<PAGE>
RELATIVE TRADING PERFORMANCE
Latest Year
Performance graph of the Company's stock price vs. three separate composite
indices: the Midrange Composite, the PC Composite, and the Software Composite.
Daily: December 30, 1993 to December 30, 1994.
The Midrange Composite is a composite of Auspex Systems, Convex Computer, Cray
Research, Data General, Encore Computer, Netframe Systems, Parallan Computer,
Sequent Computer, Silicon Graphics, Stratus Computer, Sun Microsystems, Tandem
and Teradata Corp; the PC Composite is a composite of Apple, AST, Compaq and
Dell; and the Software Composite is a composite of Adobe, Lotus, Microsoft,
Novell and Symantec.
<PAGE>
RELATIVE TRADING PERFORMANCE
Latest 3 Years
Performance graph of the Company's stock price vs. three separate composite
indices: the Midrange Composite, the PC Composite, and the Software Composite.
Weekly: December 31, 1991 to December 30, 1994.
The Midrange Composite is a composite of Auspex Systems, Convex Computer, Cray
Research, Data General, Encore Computer, Netframe Systems, Parallan Computer,
Sequent Computer, Silicon Graphics, Stratus Computer, Sun Microsystems, Tandem,
Teradata Corp.; the PC Composite is a composite of Apple, AST, Compaq, Dell; and
the Software Composite is a composite of Adobe, Lotus, Microsoft, Novell,
Symantec.
<PAGE>
FUTURE VALUE ANALYSIS (a)
<TABLE>
<CAPTION>
Discount Rate
------------------------------------
$27 MM Net Income (b) 10% 12% 14% 16%
- --------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
10 x P/E $13.93 $13.50 $13.09 $12.70
12 16.48 15.97 15.48 15.02
14 18.93 18.34 17.78 17.25
16 21.38 20.71 20.08 19.48
</TABLE>
<TABLE>
<CAPTION>
Discount Rate
------------------------------------
$18 MM Net Income (c) 10% 12% 14% 16%
- --------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
10 x P/E $ 9.56 $ 9.27 $ 8.98 $ 8.71
12 11.32 10.96 10.63 10.31
14 13.33 12.91 12.52 12.15
16 15.17 14.70 14.25 13.82
</TABLE>
(a) Prices are fully diluted for in-the-money options.
(b) Per Highnoon stand-alone management projections for FY1997.
(c) FY1996 First Call median EPS estimate of $1.02 grown at 16.5% (IBES 5 year
CAGR) multiplied by 15.6 million shares.
<PAGE>
Selected Hardware Industry Acquisitions
<TABLE>
<CAPTION>
Levered Multiple
of Latest 12 Months
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate
Close Consideration
Date Acquiror Target (Millions) Sales EBIT EBITD
- ---------- ---------------------------------- ---------------------------------------- -------------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
10/94 Quantum Corp. Disk Drive division of Digital Equipment $ 360.00 NA NA NA
Corp.
07/93 AST Research PC Division of Tandy Corporation 105.00 NA NA NA
06/92 Silicon Graphics, Inc. MIPS Computer Systems, Inc. 209.53(a) 0.98x NA NA
02/92 FDS Corporation (of American Teradata Corporation 453.83(a) 1.64 17.7x 8.1x
Telephone and Telegraph Company)
11/91 Storage Technology Corporation XL/Datacomp, Inc. 160.53(a) 0.93 28.7 23.7
09/91 American Telephone & Telegraph Co. NCR Corporation 7,276.57(a) 1.24 9.6 7.0
09/90 Acer Incorporated Altos Computer Systems 91.64 0.50 NA NA
08/90 Forstmann Little & Co. General Instrument Corp. 1,442.57 1.08 8.7 5.7
04/90 Archive Corporation Cipher Data Products, Inc. 117.29 1.41 NA NA
04/90 Siemens AG Nixdorf Computer AG 256.00(b) 0.16 37.9 NA
04/90 Machines Bull SA Zenith Computer Group of Zenith 511.40 0.48 34.1 NA
01/90 J.H. Whitney & Co. Prime Computer, Inc. 1,056.66 0.78 7.3 3.6
06/89 Novell, Inc. Excelan, Inc. 154.97(a) 2.02 18.7 13.2
05/89 Hewlett-Packard Company Apollo Computer Inc. 477.26 0.92 56.1 11.3
06/88 Memorex International N.V The Telex Corporation 911.33 1.15 9.6 7.5
02/88 Prime Computer, Inc. Computervision Corporation 438.82 0.98 16.4 5.7
09/87 3Com Corporation Bridge Communications, Inc. 192.79(a) 2.84 14.3 11.9
09/86 Burroughs Corporation Sperry Corporation 4,772.81 0.86 9.1 6.4
11/84 International Business Machines ROLM Corporation 1,317.31 2.28 26.9 20.0
Corporation
High $7,276.57 2.84x 56.1x 23.7x
Low 91.64 0.16 7.3 3.6
Median 438.82 0.98 17.1 7.8
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Multiple of Latest
Close 12 Months EPS/Net Premium Over
Date Acquiror Target Income Market Value
- ---------- ---------------------------------- ---------------------------------------- ------------------- --------------
<S> <C> <C> <C> <C>
10/94 Quantum Corp. Disk Drive division of Digital Equipment NA NM
Corp.
07/93 AST Research PC Division of Tandy Corporation NA NM
06/92 Silicon Graphics, Inc. MIPS Computer Systems, Inc. NA 5.7%
02/92 FDS Corporation (of American Teradata Corporation 51.2x 22.8
Telephone and Telegraph Company)
11/91 Storage Technology Corporation XL/Datacomp, Inc. 58.2 57.4
09/91 American Telephone & Telegraph Co. NCR Corporation 19.3 129.2
09/90 Acer Incorporated Altos Computer Systems NA 42.1
08/90 Forstmann Little & Co. General Instrument Corp. 14.0 22.8
04/90 Archive Corporation Cipher Data Products, Inc. 9.9 69.2
04/90 Siemens AG Nixdorf Computer AG 6.7 NM
04/90 Machines Bull SA Zenith Computer Group of Zenith NA NM
01/90 J.H. Whitney & Co. Prime Computer, Inc. NA 10.9
06/89 Novell, Inc. Excelan, Inc. 33.0 33.3
05/89 Hewlett-Packard Company Apollo Computer Inc. NA 61.5
06/88 Memorex International N.V The Telex Corporation 16.8 48.5
02/88 Prime Computer, Inc. Computervision Corporation 29.4 66.7
09/87 3Com Corporation Bridge Communications, Inc. 30.8 6.8
09/86 Burroughs Corporation Sperry Corporation 15.5 39.1
11/84 International Business Machines ROLM Corporation 47.3 57.3
Corporation
High 58.2x 129.2%
Low 6.7 5.7
Median 24.4 42.1
</TABLE>
(a) Stock Consideration
(b) Acquisition of 51% majority interest. Multiples are pro forma for 100%
acquisition.
<PAGE>
Summary of Selected Valuations
GRAPH OF RANGES OF IMPLIED SHARE PRICES RESULTING FROM VARIOUS VALUATION
METHODOLOGIES, INCLUDING: (A) COMPARISON OF THE FOLLOWING RATIOS TO THOSE OF
CERTAIN SELECTED COMPANIES: THE PRICE TO 1995 EARNINGS ESTIMATES, MARKET
CAPITALIZATION AS A PERCENTAGE OF LATEST QUARTER ANNUALIZED SALES, MARKET
CAPITILIZATION TO LATEST QUARTER ANNUALIZED EBITDA; (B) COMPARISON OF THE
FOLLOWING MULTIPLES BASED ON PRICES PAID IN SELECTED MERGER AND ACQUISITION
TRANSACTIONS: AGGREGATE CONSIDERATION TO SALES FOR THE LATEST TWELVE MONTHS
PRIOR TO THE ANNOUNCEMENT OF EACH TRANSACTION, AGGREGATE CONSIDERATION TO EBITDA
FOR THE LATEST TWELVE MONTHS, AGGREGATE CONSIDERATION TO NET INCOME FOR THE
LATEST TWELVE MONTHS, AND THE MARKET PREMIUMS FOR THE SELECTED TRANSACTIONS; AND
(C) FUTURE VALUE ANALYSES BASED UPON CERTAIN FINANCIAL PROJECTIONS OF THE
COMPANY AND CERTAIN INDEPENDENT RESEARCH ANALYSTS' ESTIMATES OF FUTURE FINANCIAL
PERFORMANCE. THE GRAPH SHOWS THAT THE MEDIAN LOW END OF THE VARIOUS VALUATION
METHODOLOGIES IS $11.50 AND THE MEDIAN HIGH END IS $15.17.
<PAGE>
Summary Financial Information - Projected
Dollars in Millions
<TABLE>
<CAPTION>
BASE CASE-HIGHNOON(a) REVISED BASE CASE(b)
-------------------------------------------- -------------------------------------------
For the Years Ended September 30, For the Years Ended September 30,
-------------------------------------------- -------------------------------------------
1994 1995E 1996E 1997E 1994 1995E 1996E 1997E
------- ------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $219 $271 $337 $424 $219 $248 $286 $333
Cost of Sales 139 154 190 242 139 145 169 196
--- --- --- --- --- --- --- ---
Gross Profit 80 117 147 182 80 103 117 137
R&D 25 27 32 38 25 27 28 30
SG&A 74 86 97 112 74 79 83 89
--- --- --- --- --- --- --- ---
Operating Income (19) 4 18 32 (19) (3) 6 18
Other Income/Expense 0 2 1 1 0 0 0 0
--- --- --- --- --- --- --- ---
Income (Loss) Before Taxes (19) 6 19 33 (19) (3) 6 18
Income Taxes 3 0 4 6 3 0 1 3
--- --- --- --- --- --- --- ---
Income (Loss) After Taxes (22) 6 15 27 (22) (3) 5 15
Growth
Revenue 23.7% 24.4% 25.8% 13.2% 15.3% 16.4%
Gross Profit 46.3 25.6 23.8 28.8 13.6 17.1
R&D 8.0 18.5 18.8 8.0 3.7 7.1
SG&A 16.2 12.8 15.5 6.8 5.1 7.2
Operating Income (121.1) 350.0 77.8 (84.2) (300.0) 200.0
Income (Loss) After Taxes (127.3) 150.0 80.0 (86.4) (266.7) 200.0
Margins
Gross Profit 36.5% 43.2% 43.6% 42.9% 36.5% 41.5% 40.9% 41.1%
R&D 11.4 10.0 9.5 9.0 11.4 10.9 9.8 9.0
SG&A 33.8 31.7 28.8 26.4 33.8 31.9 29.0 26.7
Operating Income (8.7) 1.5 5.3 7.5 (8.7) (1.2) 2.1 5.4
Income (Loss) After Taxes (10.0) 2.2 4.5 6.4 (10.0) (1.2) 1.7 4.5
</TABLE>
(a) Prepared by Highnoon management.
(b) Restated by SNI management.
<PAGE>
Summary Financial Information - Projected
Dollars in Millions
<TABLE>
<CAPTION>
SNI MR-BUSINESS(a) INTEGRATED(b) INCREASE
-------------------------------- ------------------------ --------------------
For the Years Ended For the Years Ended For the Years Ended
September 30, September 30, September 30,
-------------------------------- ------------------------ --------------------
1994 1995E 1996E 1997E 1995E 1996E 1997E 1995E 1996E 1997E
------ ------- ------- ------- -------- ------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $816 $919 $994 $1,138 $1,218 $1,469 $1,868 $299 $475 $730
Cost of Sales 404 433 466 530 597 715 907 164 249 377
--- --- --- --- --- --- --- --- --- ---
Gross Profit 412 486 528 608 621 754 961 135 226 353
R&D 173 172 172 172 214 194 192 42 22 20
SG&A 242 279 303 346 376 426 524 97 123 178
--- --- --- --- --- --- --- --- --- ---
Operating Income (3) 35 53 90 31 134 245 (4) 81 155
Other Income/ Expense (13) 19 7 6 (7) (2) (9) (26) (9) (15)
--- --- --- --- --- --- --- --- --- ---
Income (Loss) Before Taxes (15) 54 59 96 24 132 236 (30) 73 140
Income Taxes 0 0 0 0 0 0 16 0 0 16
--- --- --- --- --- --- --- --- --- ---
Income (Loss) After Taxes (15) 54 59 96 24 132 220 (30) 73 124
Growth
Revenue 12.6% 8.2% 14.5% 49.3% 20.6% 27.2% 36.6% 12.4% 12.7%
Gross Profit 18.0 8.6 15.2 50.7 21.4 27.5 32.8 12.8 12.3
R&D (0.6) 0.0 0.0 23.7 (9.3) (1.0) 24.3 (9.3) (1.0)
SG&A 15.3 8.6 14.2 55.4 13.3 23.0 40.1 4.7 8.8
Operating Income N.M. 51.4 69.8 N.M. 332.3 82.8 133.3 280.8 13.0
Income (Loss) After Taxes N.M 9.3 62.7 N.M. 450.0 66.7 N.M. 440.7 4.0
Margins
Gross Profit 50.5% 52.9% 53.1% 53.4% 51.0% 51.3% 51.4% (1.9)% (1.8)% (2.0)%
R&D 21.2 18.7 17.3 15.1 17.6 13.2 10.3 (1.1) (4.1) (4.8)
SG&A 29.7 30.4 30.5 30.4 30.9 29.0 28.1 0.5 (1.5) (2.4)
Operating Income (0.4) 3.8 5.3 7.9 2.5 9.1 13.1 (1.3) 3.8 5.2
Income (Loss) After Taxes (1.8) 5.9 5.9 8.4 2.0 9.0 11.8 (3.9) 3.1 3.3
</TABLE>
(a)SNI estimates for midrange server business.
(b)SNI MR-Business merged with Highnoon (revised base case) with synergies.
<PAGE>
Contribution of Licensing Fees
(Dollars in Millions)
<TABLE>
<CAPTION>
FY 1992 FY 1993 FY 1994
------------------- -------------------- --------------------
$ % $ % $ %
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenue
- -------
Product $134.0 70% $164.8 71% $147.6 68%
License 4.9 3 9.6 4 5.0 2
------ --- ------ --- ------ ---
Total Product 138.9 72 174.4 75 152.6 70
Service 53.3 28 59.3 25 65.9 30
------ --- ------ --- ------ ---
Total $192.2 100% $233.7 100% $218.9 100%
Gross Profit
- ------------
Product $56.7 42% $ 80.8 49% $61.4 42%
License 3.4 70(a) 6.7 70(a) 3.5 70(a)
------ --- ------ --- ------ ---
Total Product 60.2 43 87.5 50 64.9 43
Service 8.5 16 14.0 24 15.1 23
------ --- ------ --- ------ ---
Total $68.7 36% $101.6 43% $79.9 37%
</TABLE>
(a) Assumed.
<PAGE>
Ownership Analysis for Highnoon (a)
Warrant Not Exercised
<TABLE>
<CAPTION>
Holder # of Shares %
- -------------------------------------------- ------------- -------
<S> <C> <C>
Siemens Nixdorf Information Systems Inc. (b) 2,717,743 17.4%
Managers and Directors (b) 582,759 3.7
Richard H. Lussier (c) 203,290 1.3
Institutional Holders
College Retirement Equities Fund 479,800 3.1
Wells Fargo Institutional Trust National 290,300 1.9
Mellon Bank Corporation 234,185 1.5
Dimensional Fund Advisors 218,800 1.4
Bankers Trust Company 193,700 1.2
Bankamerica Corp. 170,000 1.1
Merrill Lynch Asset Management 103,000 0.7
Florida State Board of Administration 78,000 0.5
QCI Asset Management Inc. 71,780 0.5
Travelers Inc. 53,508 0.3
California State Teachers Retirement System 52,180 0.3
Vanguard Index-Extended Market 45,300 0.3
Merrill Lynch & Co. Inc. 37,318 0.2
American National Bank & Trust 37,000 0.2
Vanguard Index-Small Cap St. 36,100 0.2
Total Top 15 2,100,971 13.5
Other Institutional 147,549 0.9
--------- -----
Total Institutional 2,248,520 14.4
Other 10,034,943 64.4
Total 15,583,965 100.0%
</TABLE>
(a) Source: Spectrum Institutional Ownership report, data as of
September 30, 1994.
(b) Source: Proxy Statement January 26, 1995.
(c) Included in Managers and Directors' holdings.
<PAGE>
Ownership Analysis for Highnoon (a)
Exercising the warrant would increase Siemens' ownership in Highnoon
from 17.4% to 23.9%
Warrant Exercised
<TABLE>
<CAPTION>
Holder # of Shares %
- ----------------------------------------------- ------------- --------
<S> <C> <C>
Siemens Nixdorf Information Systems Inc. (b) 4,047,743 23.9%
Managers and Directors (b) 582,759 3.4
Richard H. Lussier (c) 203,290 1.2
Institutional Holders
College Retirement Equities Fund 479,800 2.8
Wells Fargo Institutional Trust National 290,300 1.7
Mellon Bank Corporation 234,185 1.4
Dimensional Fund Advisors 218,800 1.3
Bankers Trust Company 193,700 1.1
Bankamerica Corp. 170,000 1.0
Merrill Lynch Asset Management 103,000 0.6
Florida State Board of Administration 78,000 0.5
QCI Asset Management Inc. 71,780 0.4
Travelers Inc. 53,508 0.3
California State Teachers Retirement System 52,180 0.3
Vanguard Index-Extended Market 45,300 0.3
Merrill Lynch & Co. Inc. 37,318 0.2
American National Bank & Trust 37,000 0.2
Vanguard Index-Small Cap St. 36,100 0.2
Total Top 15 2,100,971 12.4
Other Institutional 147,549 0.9
---------- -----
Total Institutional 2,248,520 13.3
Other 10,034,943 59.3
Total 16,913,965 100.0%
</TABLE>
(a) Source: Spectrum Institutional Ownership report, data as of
September 30, 1994.
(b) Source: Proxy Statement January 26, 1995.
(c) Included in Managers and Directors' holdings.
<PAGE>
Options
Stock Option Analysis - as of 12/16/94
<TABLE>
<CAPTION>
Number Outstanding Value Outstanding
Outstanding Outstanding
Options - Cumulative Cumulative Options - Cumulative Cumulative
Price Number % of Total % of Total % of Total Strike Value % of Total % of Total % of Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.313 463 0.0% 0.0% 100.0% $ 608 0.0% 0.0% 100.0%
5.000 16,358 0.6% 0.6% 100.0% 81,790 0.2% 0.2% 100.0%
6.500 4,938 0.2% 0.7% 99.4% 32,097 0.1% 0.3% 99.8%
6.625 19,600 0.7% 1.4% 99.3% 129,850 0.3% 0.6% 99.7%
7.125 25,000 0.8% 2.2% 98.6% 178,125 0.4% 1.1% 99.4%
7.750 364,982 12.3% 14.6% 97.8% 2,828,611 7.1% 8.2% 98.9%
8.500 56,830 1.9% 16.5% 85.4% 483,055 1.2% 9.4% 91.8%
8.875 314,300 10.6% 27.1% 83.5% 2,789,413 7.0% 16.4% 90.6%
9.375 18,500 0.5% 27.7% 72.9% 173,438 0.4% 16.8% 83.6%
10.250 104,126 3.5% 31.3% 72.3% 1,067,292 2.7% 19.5% 83.2%
10.500 6,944 0.2% 31.5% 68.7% 72,912 0.2% 19.7% 80.5%
11.000 87,500 3.0% 34.5% 68.5% 962,500 2.4% 22.1% 80.3%
11.250 6,411 0.2% 34.7% 65.5% 72,124 0.2% 22.3% 77.9%
11.750 900 0.0% 34.7% 65.3% 10,575 0.0% 22.3% 77.7%
12.000 11,152 0.4% 35.1% 65.3% 133,824 0.3% 22.6% 77.7%
12.875 70,250 2.4% 37.5% 64.9% 904,469 2.3% 24.9% 77.4%
13.250 63,487 2.1% 39.6% 62.5% 841,203 2.1% 27.0% 75.1%
13.500 3,000 0.1% 39.7% 60.4% 40,500 0.1% 27.1% 73.0%
14.250 15,645 0.5% 40.2% 60.3% 222,941 0.6% 27.7% 72.9%
14.500 45,374 1.5% 41.8% 59.8% 657,923 1.7% 29.3% 72.3%
14.625 14,000 0.5% 42.2% 58.2% 204,750 0.5% 29.8% 70.7%
14.750 793,021 26.8% 69.0% 57.8% 11,697,060 29.3% 59.2% 70.2%
14.875 10,500 0.4$ 69.4% 31.0% 156,188 0.4% 59.6% 40.8%
15.000 20,000 0.7% 70.1% 30.6% 300,000 0.8% 60.3% 40.4%
15.250 2,500 0.1% 70.1% 29.9% 38,125 0.1% 60.4% 39.7%
15.500 8,975 0.3% 70.4% 29.9% 139,113 0.3% 60.8% 39.6%
15.750 25,271 0.9% 71.3% 29.6% 398,018 1.0% 61.8% 39.2%
16.000 13,065 0.4% 71.7% 28.7% 209,040 0.5% 62.3% 38.2%
16.500 273,171 9.2% 81.0% 28.3% 4,507,322 11.3% 73.6% 37.7%
17.000 158,151 5.3% 86.3% 19.0% 2,688,567 6.7% 80.3% 26.4%
17.500 1,000 0.0% 86.4% 13.7% 17,600 0.0% 80.4% 19.7%
18.000 186,156 6.3% 92.6% 13.6% 3,350,808 8.4% 88.8% 19.6%
18.500 6,139 0.2% 92.9% 7.4% 113,572 0.3% 89.1% 11.2%
20.250 157,583 5.3% 98.2% 7.1% 3,191,056 8.0% 97.1% 10.9%
20.500 27,250 0.9% 99.1% 1.8% 558,625 1.4% 98.5% 2.9%
20.750 2,012 0.1% 99.2% 0.9% 41,749 0.1% 98.6% 1.5%
22.750 20,416 0.7% 99.9% 0.8% 464,464 1.2% 99.7% 1.4%
24.250 3,850 0.1% 100.0% 0.1% 93,363 0.2% 100.0% 0.3%
29.000 400 0.0% 100.0% 0.0% 11,600 0.0% 100.0% 0.0%
Total 2,959,220 39,864,165
</TABLE>
--------------------------------
Avg Exercise Price $ 13.47
--------------------------------
<PAGE>
LIST OF OTHER POTENTIAL BUYERS
A List Rationale
- ------------------------- ---------------------------------------------------
Fujitsu Joint venture in Australia with Highnoon; rumored
to have been interested in Highnoon in August 1994
Silicon Graphics Good business fit
Tandem Appeal of growth strategy
B List
- -------------------------
AT&T
Compaq
EDS
EMC
Hewlett Packard
Hitachi
IBM
LSI Logic
NEC
Toshiba
Western Digital
<PAGE>
LIST OF SELECTED COMPETITORS
MIPS Manufacturer Intel Manufacturer MIPS Users
- -------------------------- ---------------------- -------------------------
Control Data Sequent Acer Technologies
IDC Stratus Deskstation Technologies
LSI Logic NEC
NEC NeTpower
Performance Semiconductor Siemens
Siemens Silicon Graphics
Silicon Graphics Sony
Tandem Tandem
Toshiba Techtronic
<PAGE>
SUMMARY OF MERGER PLANS
(Dollars in millions)
Assumes IBES median EPS estimates for Highnoon, which are higher than
Highnoon's or SNI's estimates.
Assumes no synergies, 15 years for goodwill amortization, 34% tax rate,
and 9% cost of debt. Prices and earnings estimates as of January 1,
1995.
<TABLE>
<CAPTION>
50% Debt/ 100% Stock
Silicon Graphics 100% Debt 50% Stock Pooling
- ------------------------------------------------- ---------- ---------- ----------
<C> <S> <C> <C> <C>
At $15 FY 1995 Accretion/(Dilution) (14.6)% (13.0)% (7.9)%
FY 1996 Accretion/(Dilution) (5.8) (5.2) (1.9)
FY 1995 Pre-tax Synergies to Breakeven $ 40.3 $ 36.8 $ 23.0
FY 1996 Pre-tax Synergies to Breakeven 20.5 19.0 7.2
Total Debt to Total Capitalization 33.1% 24.9% 18.0%
At $20 FY 1995 Accretion/(Dilution) (21.0)% (18.6)% (9.7)%
FY 1996 Accretion/(Dilution) (10.8) (9.9) (3.8)
FY 1995 Pre-tax Synergies to Breakeven $ 58.0 $ 53.1 $ 28.6
FY 1996 Pre-tax Synergies to Breakeven 38.2 36.1 14.4
Total Debt to Total Capitalization 37.1% 26.4% 18.0%
<CAPTION>
50% Debt/ 100% Stock
Tandem 100% Debt 50% Stock Pooling
- ------------------------------------------------- ---------- ---------- ----------
<C> <S> <C> <C> <C>
At $15 FY 1995 Accretion/(Dilution) (6.6)% (8.6)% (7.3)%
FY 1996 Accretion/(Dilution) (2.7) (4.7) (3.3)
FY 1995 Pre-tax Synergies to Breakeven $20.0 $27.5 $24.7
FY 1996 Pre-tax Synergies to Breakeven 7.7 14.4 10.7
Total Debt to Total Capitalization 29.1% 20.1% 12.1%
At $20 FY 1995 Accretion/(Dilution) (12.5)% (14.8)% (11.1)%
FY 1996 Accretion/(Dilution) (8.9) (11.2) (7.2)
FY 1995 Pre-tax Synergies to Breakeven $37.7 $48.1 $38.9
FY 1996 Pre-tax Synergies to Breakeven 25.4 34.7 24.2
Total Debt to Total Capitalization 33.8% 22.1% 12.1%
</TABLE>
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Silicon Graphics Inc $15 per Share $15 per Share $15 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Structure Purchase Purchase Pooling
- --------- -------- -------- -------
Common Equity $ 0.0 0.0% $ 119.1(a) 50.0% $ 238.3(b) 100.0%
Long Term Debt 238.3 100.0 119.1 50.0 0.0 0.0
Cash 0.0 0.0 0.0 0.0 0.0 0.0
-------- ----- -------- ----- -------- -----
Aggregate
Consideration $ 238.3 100.0% $ 238.3 100.0% $ 238.3 100.0%
======== ===== ======== ===== ======== =====
Capitalization September 30, 1994 September 30, 1994
- -------------- ------------------- --------------------
Short Term Debt $ 1.4 1.0% $ 9.1 0.8% $ 10.6 0.7% $ 10.6 0.7% $ 10.6 0.7%
Long Term Debt 1.6 1.1 231.9 19.1 471.7 32.4 352.6 24.2 233.4 17.2
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total Debt 3.0 2.2 241.0 19.8 482.3 33.1 363.2 24.9 244.0 18.0
Convertible
Preferred
Stock 0.0 0.0 35.0 2.9 35.0 2.4 35.0 2.4 35.0 2.6
Common Equity 136.0 97.8 939.0 77.3 939.0 64.5 1,058.1 72.7 1,075.0 79.4
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total
Capitalization $ 139.0 100.0% $ 1,215.0 100.0% $ 1,456.3 100.0% $ 1,456.3 100.0% $ 1,354.0 100.0%
======= ===== ======== ===== ======== ===== ======== ===== ======== =====
Shares Outstanding 15,584,000 141,735,700 141,735,700 141,559,700 149,383,800
- ------------------
Cash/Market
Capitalization $ 21.6 $202.6 $ 297.4 $4,416.0 $ 319.0 $4,416.0 $ 319.0 $4,535.1 $ 319.0 $4,654.2
- ----------------
Market Information 12/21/94 12/21/94
- ------------------- -------- --------
Stock Price/P/E
Ratio $ 13 (325.0)x $ 31 1/8 24.9x
Market Premium/
Deal P/E 15.4% (375.0)x 15.4% (375.0)x 15.4% (375.0)x
Exchange Ratio 0.48x 0.48x 0.48x
Seller's
Ownership in
Pro Forma 0.0% 2.6% 5.1%
Breakdown of Book Book Book
Consideration Value Consideration Value Consideration Value Consideration
- --------------- ----- ------------- ----- ------------- ----- -------------
Common Equity 136.0 238.3(c)100.0 136.0 238.3(d)100.0 136.0 238.3(e)100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Total $136.0 $238.3 100.0% $136.0 $238.3 100.0% $136.0 $238.3 100.0%
===== ============ ===== ============ ===== ============
Costs After Tax(1)
- ---------------
Cost of Cash at
5.9% (g) $ 0.0 $ 0.0 $ 0.0
Interest on Debt $ 0.2 $ 14.3 14.2(h) $28.6 7.1(i) $21.6 0.0 $14.5
Amortization of
Goodwill (j) 0.0 0.0 6.8 6.8 6.8 6.8 0.0 0.0
----- ----- -------- ---- -------- ---- -------- ----
Total $ 0.2 $ 14.3 $ 21.0 $35.5 $ 13.9 $28.4 $ 0.0 $14.5
===== ===== ======== ==== ======== ==== ======== ====
</TABLE>
- -------------------------
(a) Represents 3,824,060 common shares.
(b) Represents 7,648,119 common shares.
(c) Based on $233.8MM paid for common plus $4.5MM for options
(d) Based on $233.8MM paid for common plus $4.5MM for options
(e) Based on $233.8MM paid for common plus $4.5MM for options
(f) Assumes a 34.0% tax rate for 1994.
(g) Cost of cash at 5.9% reflects the after tax effect of 9.0% opportunity cost.
(h) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
(i) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Silicon Graphics Inc $15 per Share $15 per Share $15 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Income to Common/
Primary Shares FYE June 30(k) FYE June 30
- ---------------- ------------------- --------------------
1994LTM $ (22.4) 13,467,000 $ 156.0 156,023,300 $ 112.7 160,023,300 $ 119.8 163,847,400 $ 133.7 167,671,400
1995E (0.6) 15,054,700 177.2 141,735,700 155.6 145,735,700 162.7 149,559,700 176.6 153,383,800
1996E 13.9 15,584,000 226.8 141,735,700 219.7 145,735,700 226.8 149,559,700 240.6 153,383,800
1997E - - - - - - - - - -
1998E - - - - - - - - - -
1999E - - - - - - - - - -
Primary EPS/%
Accretion/(Dilution) FYE June 30(l) FYE June 30
- -------------------- ------------------- --------------------
1994LTM $ (1.66) $ 1.00 $ 0.70 (29.6)% $ 0.73 (26.9)% $ 0.80 (20.3)%
1995E (0.04) 1.25 1.07 (14.6) 1.09 (13.0) 1.15 (7.9)
1996E 0.89 1.60 1.51 (5.8) 1.52 (5.2) 1.57 (1.9)
1997E 1.15 - - - - - - -
1998E - - - - - - - -
1999E - - - - - - - -
Pre-Tax Adjustments/Breakeven Adjustments (Primary/Fully Diluted)
- ----------------------------------------------------------------
1995E $ 0.0 $ 40.3 - $ 0.0 $ 36.8 - $ 0.0 $ 23.0 -
1996E 0.0 20.5 - 0.0 19.0 - 0.0 7.2 -
1997E 0.0 - - 0.0 - - 0.0 - -
1998E 0.0 - - 0.0 - - 0.0 - -
1999E 0.0 - - 0.0 - - 0.0 - -
</TABLE>
- -------------------------
(j) Positive excess cost amortized over 15.0 years. Negative excess cost
amortized over 10.0 years.
(k) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
(l) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Silicon Graphics Inc $20 per Share $20 per Share $20 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Structure Purchase Purchase Pooling
- --------- -------- -------- -------
Common Equity $ 0.0 0.0% $ 165.5(a) 50.0% $ 331.0(b) 100.0%
Long Term Debt 331.0 100.0 165.5 50.0 0.0 0.0
Cash 0.0 0.0 0.0 0.0 0.0 0.0
-------- ----- -------- ----- -------- -----
Aggregate
Consideration $ 331.0 100.0% $ 331.0 100.0% $ 331.0 100.0%
======== ===== ======== ===== ======== =====
Capitalization September 30, 1994 September 30, 1994
- -------------- ------------------- --------------------
Short Term Debt $ 1.4 1.0% $ 9.1 0.8% $ 10.6 0.7% $ 10.6 0.7% $ 10.6 0.8%
Long Term Debt 1.6 1.1 231.9 19.1 564.4 36.4 398.9 25.8 233.4 17.2
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total Debt 3.0 2.2 241.0 19.8 575.0 37.1 409.5 26.4 244.0 18.0
Convertible
Preferred
Stock 0.0 0.0 35.0 2.9 35.0 2.3 35.0 2.3 35.0 2.6
Common Equity 136.0 97.8 939.0 77.3 939.0 60.6 1,104.5 71.3 1,075.0 79.4
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total
Capitalization $ 139.0 100.0% $ 1,215.0 100.0% $ 1,549.0 100.0% $ 1,549.0 100.0% $ 1,354.0 100.0%
======= ===== ======== ===== ======== ===== ======== ===== ======== =====
Shares Outstanding 15,584,000 141,735,700 141,735,700 147,047,700 152,359,600
- ------------------
Cash/Market
Capitalization $ 21.6 $202.6 $ 297.4 $4,416.0 $ 319.0 $4,416.0 $ 319.0 $4,581.5 $ 319.0 $4,747.0
- ----------------
Market Information 12/21/94 12/21/94
- ------------------- -------- --------
Stock Price/P/E
Ratio $ 13 (325.0)x $ 31 1/8 24.9x
Market Premium/
Deal P/E 53.8% (500.0)x 53.8% (500.0)x 53.8% (500.0)x
Exchange Ratio 0.64x 0.64x 0.64x
Seller's
Ownership in
Pro Forma 0.0% 3.6% 7.0%
Breakdown of Book Book Book
Consideration Value Consideration Value Consideration Value Consideration
- --------------- ----- ------------- ----- ------------- ----- -------------
Common Equity 136.0 331.0(c)100.0 136.0 331.0(d)100.0 136.0 331.0(e)100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Total $136.0 $331.0 100.0% $136.0 $331.0 100.0% $136.0 $331.0 100.0%
===== ============ ===== ============ ===== ============
Costs After Tax(f)
- ---------------
Cost of Cash at
5.9% (g) $ 0.0 $ 0.0 $ 0.0
Interest on Debt $ 0.2 $ 14.3 19.7(h) $34.2 9.8(i) $24.3 0.0 $14.5
Amortization of
Goodwill (j) 0.0 0.0 13.0 13.0 13.0 13.0 0.0 0.0
----- ----- -------- ---- -------- ---- -------- ----
Total $ 0.2 $ 14.3 $ 32.7 $47.2 $ 22.8 $37.3 $ 0.0 $14.5
===== ===== ======== ==== ======== ==== ======== ====
</TABLE>
- -------------------------
(a) Represents 5,311,976 common shares.
(b) Represents 10,623,952 common shares.
(c) Based on $311.7MM paid for common plus $19.3MM for options.
(d) Based on $311.7MM paid for common plus $19.3MM for options.
(e) Based on $311.7MM paid for common plus $19.3MM for options.
(f) Assumes a 34.0% tax rate for 1994.
(g) Cost of cash at 5.9% reflects the after tax effect of 9.0% opportunity cost.
(h) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
(i) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Silicon Graphics Inc $20 per Share $20 per Share $20 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Income to Common/
Primary Shares FYE June 30(k) FYE June 30
- ---------------- ------------------- --------------------
1994LTM $ (22.4) 13,467,000 $ 156.0 156,023,300 $ 101.0 160,023,300 $ 110.8 163,335,300 $ 133.7 170,647,200
1995E (0.6) 15,054,700 177.2 141,735,700 143.9 145,735,700 153.7 151,047,700 176.6 156,359,600
1996E 13.9 15,584,000 226.8 141,735,700 208.0 145,735,700 217.8 151,047,700 240.6 156,359,600
1997E - - - - - - - - - -
1998E - - - - - - - - - -
1999E - - - - - - - - - -
Primary EPS/%
Accretion/(Dilution) FYE June 30(l) FYE June 30
- -------------------- ------------------- --------------------
1994LTM $ (1.66) $ 1.00 $ 0.63 (36.9)% $ 0.67 (33.0)% $ 0.78 (21.7)%
1995E (0.04) 1.25 0.99 (21.0) 1.02 (18.6) 1.13 (9.7)
1996E 0.89 1.60 1.43 (10.8) 1.44 (9.9) 1.54 (3.8)
1997E 1.15 - - - - - - -
1998E - - - - - - - -
1999E - - - - - - - -
Pre-Tax Adjustments/Breakeven Adjustments (Primary/Fully Diluted)
- ----------------------------------------------------------------
1995E $ 0.0 $ 58.0 - $ 0.0 $ 53.1 - $ 0.0 $ 28.6 -
1996E 0.0 38.2 - 0.0 36.1 - 0.0 14.4 -
1997E 0.0 - - 0.0 - - 0.0 - -
1998E 0.0 - - 0.0 - - 0.0 - -
1999E 0.0 - - 0.0 - - 0.0 - -
</TABLE>
- -------------------------
(j) Positive excess cost amortized over 15.0 years. Negative excess cost
amortized over 10.0 years.
(k) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
(l) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Tandem Computers Inc $15 per Share $15 per Share $15 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Structure Purchase Purchase Pooling
- --------- -------- -------- -------
Common Equity $ 0.0 0.0% $ 119.1(a) 50.0% $ 238.3(b) 100.0%
Long Term Debt 238.3 100.0 119.1 50.0 0.0 0.0
Cash 0.0 0.0 0.0 0.0 0.0 0.0
-------- ----- -------- ----- -------- -----
Aggregate
Consideration $ 238.3 100.0% $ 238.3 100.0% $ 238.3 100.0%
======== ===== ======== ===== ======== =====
Capitalization September 30, 1994 September 30, 1994
- -------------- ------------------- --------------------
Short Term Debt $ 1.4 1.0% $ 58.1 5.4% $ 59.6 4.5% $ 59.6 4.5% $ 59.6 4.9%
Long Term Debt 1.6 1.1 86.5 8.0 326.3 24.6 207.2 15.6 88.0 7.2
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total Debt 3.0 2.2 144.6 13.3 385.9 29.1 266.7 20.1 147.6 12.1
Common Equity 136.0 97.8 938.8 86.7 938.8 70.9 1,058.0 79.9 1,074.9 87.9
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total
Capitalization $ 139.0 100.0% $ 1,083.4 100.0% $ 1,324.7 100.0% $ 1,324.7 100.0% $ 1,222.5 100.0%
======= ===== ======== ===== ======== ===== ======== ===== ======== =====
Shares Outstanding 15,584,000 114,628,100 114,628,100 121,585,400 128,542,600
- ------------------
Cash/Market
Capitalization $ 21.6 $202.6 $ 124.0 $1,963.0 $ 145.6 $1,963.0 $ 145.6 $2,082.1 $ 145.6 $2,201.3
- ----------------
Market Information 12/21/94 12/21/94
- ------------------- -------- --------
Stock Price/P/E
Ratio $ 13 28.0x $ 17 1/8 9.9x
Market Premium/
Deal P/E 15.4% 30.0x 15.4% 30.0x 15.4% 30.0x
Exchange Ratio 0.68x 0.88x 0.88x
Seller's
Ownership in
Pro Forma 0.0% 5.7% 10.8%
Breakdown of Book Book Book
Consideration Value Consideration Value Consideration Value Consideration
- --------------- ----- ------------- ----- ------------- ----- -------------
Common Equity 136.0 238.3(c)100.0 136.0 238.3(d)100.0 136.0 238.3(e)100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Total $136.0 $238.3 100.0% $136.0 $238.3 100.0% $136.0 $238.3 100.0%
===== ============ ===== ============ ===== ============
Costs After Tax(f)
- ---------------
Cost of Cash at
5.9% (g) $ 0.0 $ 0.0 $ 0.0
Interest on Debt $ 0.2 $ 8.6 14.2(h) $22.9 7.1(i) $15.8 0.0 $ 8.8
Amortization of
Goodwill (j) 0.0 0.4 6.8 7.3 6.8 7.3 0.0 0.4
----- ----- -------- ---- -------- ---- -------- ----
Total $ 0.2 $ 9.0 $ 21.0 $30.2 $ 13.9 $23.1 $ 0.0 $ 9.2
===== ===== ======== ==== ======== ==== ======== ====
</TABLE>
- -------------------------
(a) Represents 6,957,287 common shares.
(b) Represents 13,914,574 common shares.
(c) Based on $233.8MM paid for common plus $4.5MM for options.
(d) Based on $233.8MM paid for common plus $4.5MM for options.
(e) Based on $233.8MM paid for common plus $4.5MM for options.
(f) Assumes a 34.0% tax rate for 1994.
(g) Cost of cash at 5.9% reflects the after tax effect of 9.0% opportunity cost.
(h) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
(i) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Tandem Computers Inc $15 per Share $15 per Share $15 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Income to Common/
Primary Shares FYE September 30(k) FYE September 30
- ---------------- ------------------- --------------------
1994LTM $ (22.4) 13,467,000 $ 170.2 113,449,000 $ 126.8 113,449,000 $ 133.9 120,406,300 $ 147.8 127,363,600
1995E 7.8 15,584,000 198.3 114,628,100 185.1 114,628,100 192.2 121,585,400 206.1 128,542,600
1996E 15.9 15,584,000 189.1 114,628,100 184.1 114,628,100 191.1 121,585,400 205.0 128,542,600
1997E - - - - - - - - - -
1998E - - - - - - - - - -
1999E - - - - - - - - - -
Primary EPS/%
Accretion/(Dilution) FYE September 30(l) FYE September 30
- -------------------- ------------------- --------------------
1994LTM $ (1.66) $ 1.50 $ 1.12 (25.5)% $ 1.11 (25.8)% $ 1.16 (22.6)%
1995E 0.50 1.73 1.62 (6.6) 1.58 (8.6) 1.60 (7.3)
1996E 1.02 1.65 1.61 (2.7) 1.57 (4.7) 1.60 (3.3)
1997E 1.19 - - - - - - -
1998E - - - - - - - -
1999E - - - - - - - -
Pre-Tax Adjustments/Breakeven Adjustments (Primary/Fully Diluted)
- ----------------------------------------------------------------
1995E $ 0.0 $ 20.0 - $ 0.0 $ 27.5 - $ 0.0 $ 24.7 -
1996E 0.0 7.7 - 0.0 14.4 - 0.0 10.7 -
1997E 0.0 - - 0.0 - - 0.0 - -
1998E 0.0 - - 0.0 - - 0.0 - -
1999E 0.0 - - 0.0 - - 0.0 - -
</TABLE>
- -------------------------
(j) Positive excess cost amortized over 15.0 years. Negative excess cost
amortized over 10.0 years.
(k) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
(l) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Tandem Computers Inc $20 per Share $20 per Share $20 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Structure Purchase Purchase Pooling
- --------- -------- -------- -------
Common Equity $ 0.0 0.0% $ 165.5(a) 50.0% $ 331.0(b) 100.0%
Long Term Debt 331.0 100.0 165.5 50.0 0.0 0.0
Cash 0.0 0.0 0.0 0.0 0.0 0.0
-------- ----- -------- ----- -------- -----
Aggregate
Consideration $ 331.0 100.0% $ 331.0 100.0% $ 331.0 100.0%
======== ===== ======== ===== ======== =====
Capitalization September 30, 1994 September 30, 1994
- -------------- ------------------- --------------------
Short Term Debt $ 1.4 1.0% $ 58.1 5.4% $ 59.6 4.2% $ 59.6 4.2% $ 59.6 4.9%
Long Term Debt 1.6 1.1 86.5 8.0 419.0 29.6 253.5 17.9 88.0 7.2
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total Debt 3.0 2.2 144.6 13.3 478.6 33.8 313.1 22.1 147.6 12.1
Common Equity 136.0 97.8 938.8 86.7 938.8 66.2 1,104.3 77.9 1,074.9 87.9
------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total
Capitalization $ 139.0 100.0% $ 1,083.4 100.0% $ 1,417.4 100.0% $ 1,417.4 100.0% $ 1,222.5 100.0%
======= ===== ======== ===== ======== ===== ======== ===== ======== =====
Shares Outstanding 15,584,000 114,628,100 114,628,100 124,292,400 133,956,700
- ------------------
Cash/Market
Capitalization $ 21.6 $202.6 $ 124.0 $1,963.0 $ 145.6 $1,963.0 $ 145.6 $2,128.5 $ 145.6 $2,294.0
- ----------------
Market Information 12/21/94 12/22/94
- ------------------- -------- --------
Stock Price/P/E
Ratio $ 13 26.0x $ 17 1/8 9.9x
Market Premium/
Deal P/E 53.8% 40.0x 53.8% 40.0x 53.8% 40.0x
Exchange Ratio 1.17x 1.17x 1.17x
Seller's
Ownership in
Pro Forma 0.0% 7.8% 14.4%
Breakdown of Book Book Book
Consideration Value Consideration Value Consideration Value Consideration
- --------------- ----- ------------- ----- ------------- ----- -------------
Common Equity 136.0 331.0(c)100.0 136.0 331.0(d)100.0 136.0 331.0(e)100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Total $136.0 $331.0 100.0% $136.0 $331.0 100.0% $136.0 $331.0 100.0%
===== ============ ===== ============ ===== ============
Costs After Tax(f)
- ---------------
Cost of Cash at
5.9% (g) $ 0.0 $ 0.0 $ 0.0
Interest on Debt $ 0.2 $ 8.6 19.7(h) $28.4 9.8(i) $18.6 0.0 $ 8.8
Amortization of
Goodwill (j) 0.0 0.4 13.0 13.4 13.0 13.4 0.0 0.4
----- ----- -------- ---- -------- ---- -------- ----
Total $ 0.2 $ 9.0 $ 32.7 $41.9 $ 22.8 $32.0 $ 0.0 $ 9.2
===== ===== ======== ==== ======== ==== ======== ====
</TABLE>
- -------------------------
(a) Represents 9,664,322 common shares.
(b) Represents 19,328,644 common shares.
(c) Based on $311.7MM paid for common plus $19.3MM for options.
(d) Based on $311.7MM paid for common plus $19.3MM for options.
(e) Based on $311.7MM paid for common plus $19.3MM for options.
(f) Assumes a 34.0% tax rate for 1994.
(g) Cost of cash at 5.9% reflects the after tax effect of 9.0% opportunity cost.
(h) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
(i) Interest Expense on Debt at 5.9% reflects the after tax effect of debt at
9.0%.
Goldman Sachs
<PAGE>
Project Highnoon
PRO FORMA MERGER PLANS
(US Dollars in millions, except per share data)
<TABLE>
<CAPTION>
100% Straight Debt 50% Straight Debt 100% Common Stock
50% Common Stock
Seller Buyer Merger Pro Forma Merger Pro Forma Merger Pro Forma
Highnoon Tandem Computers Inc $20 per Share $20 per Share $20 per Share
------------------- -------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Income to Common/
Primary Shares FYE September 30(k) FYE September 30
- ---------------- ------------------- --------------------
1994LTM $ (22.4) 13,467,000 $ 170.2 113,449,000 $ 115.2 113,449,000 $ 125.0 123,113,300 $ 147.8 132,777,600
1995E 7.8 15,584,000 198.3 114,628,100 173.4 114,628,100 183.3 124,292,400 206.1 133,956,700
1996E 15.9 15,584,000 189.1 114,628,100 172.4 114,628,100 182.2 124,292,400 205.0 133,956,700
1997E - - - - - - - - - -
1998E - - - - - - - - - -
1999E - - - - - - - - - -
Primary EPS/%
Accretion/(Dilution) FYE September 30(l) FYE September 30
- -------------------- ------------------- --------------------
1994LTM $ (1.66) $ 1.50 $ 1.02 (32.3)% $ 1.02 (32.3)% $ 1.11 (25.8)%
1995E 0.50 1.73 1.51 (12.5) 1.47 (14.8) 1.54 (11.1)
1996E 1.02 1.65 1.50 (8.9) 1.47 (11.2) 1.53 (7.2)
1997E 1.19 - - - - - - -
1998E - - - - - - - -
1999E - - - - - - - -
Pre-Tax Adjustments/Breakeven Adjustments (Primary/Fully Diluted)
- ----------------------------------------------------------------
1995E $ 0.0 $ 37.7 - $ 0.0 $ 48.1 - $ 0.0 $ 38.9 -
1996E 0.0 25.4 - 0.0 34.7 - 0.0 24.2 -
1997E 0.0 - - 0.0 - - 0.0 - -
1998E 0.0 - - 0.0 - - 0.0 - -
1999E 0.0 - - 0.0 - - 0.0 - -
</TABLE>
- -------------------------
(j) Positive excess cost amortized over 15.0 years. Negative excess cost
amortized over 10.0 years.
(k) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
(l) Seller's Fiscal Data has been adjusted to match Buyer's Fiscal Year End.
Goldman Sachs
<PAGE>
Project Highnoon
Analysis at Various Prices
(US Dollars in millions, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consideration Per Share $ 10.00 $ 12.00 $ 14.00 $ 16.00 $ 18.00 $ 20.00 $ 22.00 $ 24.00 $ 26.00
- ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Aggregate Consideration(a) $ 155.8 $ 187.0 $ 219.7 $ 256.8 $ 293.9 $ 331.0 $ 368.1 $ 405.2 $ 442.3
- --------------------------
Levered Consideration(b) $ 137.3 $ 168.5 $ 201.2 $ 238.3 $ 275.4 $ 312.4 $ 349.5 $ 386.6 $ 423.7
- ------------------------
Premium Over Market Price Per Share
- -----------------------------------
December 30, 1994 $ 13.00 -23.1% -7.7% 7.7% 23.1% 38.5% 53.8% 69.2% 84.6% 100.0%
Multiple of Revenue (Levered)
- -----------------------------
1993 $ 233.7 0.6x 0.7x 0.9x 1.0x 1.2x 1.3x 1.5x 1.7x 1.8x
1994 218.5 0.6 0.8 0.9 1.1 1.3 1.4 1.6 1.8 1.9
1995E 271.0 0.5 0.6 0.7 0.9 1.0 1.2 1.3 1.4 1.6
1996E 336.8 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.3
Multiple of EBIT (Levered)
- --------------------------
1993 $ 9.3 14.7x 18.0x 21.6x 25.5x 29.6x 33.5x 37.4x 41.4x 45.4x
1994 -19.3 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
1995E 4.5 30.7 37.7 45.0 53.3 61.6 69.9 78.2 86.5 94.8
1996E 17.8 7.8 9.6 11.4 13.5 15.7 17.8 19.9 22.0 24.1
Multiple of Earnings Per Share
- ------------------------------
1993 $ 0.67 14.9x 17.9x 20.9x 23.9x 26.9x 29.9x 32.8x 35.8x 38.8x
1994 -1.66 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
1995E 0.35 28.6 34.3 40.0 45.7 51.4 57.1 62.9 68.6 74.3
1996E 0.80 12.5 15.0 17.5 20.0 22.5 25.0 27.5 30.0 32.5
Premium Over Tangible Book Value Per Share
- ------------------------------------------
September 30, 1994 $ 8.74 14.4% 37.3% 60.2% 83.1% 106.0% 128.9% 151.7% 174.6% 197.5%
Aggregate Goodwill Per Share(c) $ 1.27 $ 3.27 $ 5.37 $ 7.75 $ 10.13 $ 12.51 $ 14.69 $ 17.27 $ 19.65
- -------------------------------
Transaction Costs Per Share(d)
- ------------------------------
Interest Expense(s) $ 1.00 $ 1.20 $ 1.41 $ 1.65 $ 1.89 $ 2.12 $ 2.36 $ 2.60 $ 2.84
Purchase Accounting Adjustments(f) 0.08 0.22 0.36 0.52 0.68 0.83 0.99 1.15 1.31
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Transaction Costs $ 1.08 $ 1.42 $ 1.77 $ 2.16 $ 2.56 $ 2.96 $ 3.35 $ 3.75 $ 4.15
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- ----------
(a) Based on 15,683,965 shares outstanding on 9/30/94 and 2,959,220 options
with an average exercise price of $13.47.
(b) Aggregate Consideration plus Debt and Preferred Outstanding minus Cash and
Equivalents.
(c) Aggregate Consideration minus Tangible Book Value of $136.OMM.
(d) Based on Aggregate Consideration and 15,583,965 shares outstanding.
(e) Assumes a 0.0% tax rate and an interest rate of 10.0%.
(f) Estimated. Assumes positive excess cost is amortized over 15 years.
Goldman Sachs
<PAGE>
EXHIBIT 99(c)(2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
dated as of August 21, 1994
by and between
PYRAMID TECHNOLOGY CORPORATION
and
SIEMENS NIXDORF INFORMATION SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 - SALE OF COMMON STOCK AND WARRANT..................... 1
1.1 Sale of Common Stock and Warrant..................... 1
1.2 Closing Date......................................... 1
1.3 Delivery............................................. 1
1.4 Legend............................................... 1
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY........ 2
2.1 Organization......................................... 2
2.2 Capitalization....................................... 3
2.3 Authorization........................................ 4
2.4 No Conflict.......................................... 5
2.5 Accuracy of Reports.................................. 5
2.6 Financial Statements and Changes..................... 6
2.7 Consents, etc........................................ 7
2.8 Amendment to Rights Agreement........................ 7
2.9 Intellectual Property Rights......................... 8
2.10 Litigation........................................... 9
2.11 Taxes................................................ 9
2.12 Agreements........................................... 10
2.13 Compliance........................................... 11
2.14 Disclosure........................................... 11
2.15 Certain Transactions................................. 12
2.16 Insurance............................................ 12
2.17 Definitions.......................................... 12
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...... 12
3.1 Investment........................................... 12
3.2 Organization......................................... 13
3.3 Authority............................................ 13
3.4 Government Consents, etc............................. 13
3.5 Investigation........................................ 14
3.6 Financing............................................ 14
SECTION 4 - CONDITIONS TO OBLIGATIONS OF THE PURCHASER........... 14
4.1 Representations and Warranties Correct............... 14
4.2 Covenants............................................ 14
4.3 Opinion of Company's Counsel......................... 14
4.4 No Order Pending..................................... 14
4.5 HSR Act.............................................. 14
4.6 No Law Prohibiting or Restricting Such Sale.......... 15
4.7 Compliance Certificate............................... 15
4.8 Technology Agreement................................. 15
4.9 Registration Rights Agreement........................ 15
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
4.10 Material Adverse Change.............................. 15
4.11 Corporate Authorizations............................. 15
SECTION 5 - CONDITIONS TO OBLIGATIONS OF COMPANY................. 16
5.1 Representations and Warranties Correct............... 16
5.2 Covenants............................................ 16
5.3 No Order Pending..................................... 16
5.4 HSR Act.............................................. 16
5.5 No Law prohibiting or Restricting Such Sale.......... 16
5.6 Compliance Certificate............................... 17
5.7 Technology Agreement................................. 17
5.8 Registration Rights Agreement........................ 17
SECTION 6 - COVENANTS OF THE COMPANY............................. 17
6.1 Sale of Additional Shares............................ 17
6.2 Membership on the Board of Directors................. 17
6.3 Information Rights................................... 18
6.4 Access to Records.................................... 19
6.5 Affirmative Covenants................................ 19
6.6 Three-Year Business Plan............................. 19
6.7 Emergency Business Plan.............................. 19
SECTION 7 - COVENANTS OF THE PURCHASER........................... 20
7.1 Limitation on Ownership of Voting Stock.............. 20
7.2 Voting............................................... 21
7.3 Voting Trust, etc.................................... 22
7.4 Solicitation of Proxies.............................. 22
7.5 Acts in Concert with Others.......................... 22
7.6 Restrictions on Transfer of Voting Stock............. 22
7.7 Confidential Information............................. 23
7.8 Right to Maintain.................................... 24
7.9 Acquisition of Stock................................. 27
7.10 Termination of Certain Sections...................... 28
7.11 Further Termination.................................. 28
7.12 Repurchase Option.................................... 28
SECTION 8 - COMPANY RIGHT OF FIRST REFUSAL....................... 28
8.1 Right of First Refusal............................... 28
8.2 Tender Offer Sale.................................... 29
8.3 Assignment of Rights................................. 31
8.4 Termination.......................................... 31
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
SECTION 9 - INDEMNIFICATION...................................... 31
9.1 Survival of Representations and Warranties........... 31
9.2 Obligation to Indemnify.............................. 31
9.3 Notice and Opportunity to Defend..................... 32
SECTION 10 - MISCELLANEOUS....................................... 33
10.1 Certain Definitions.................................. 33
10.2 Termination of Agreement............................. 35
10.3 Effect of Termination................................ 35
10.4 Best Efforts......................................... 35
10.5 Governing Law........................................ 36
10.6 Successors and Assigns............................... 36
10.7 Entire Agreement; Amendment.......................... 37
10.8 Notices.............................................. 37
10.9 Brokers.............................................. 38
10.10 Severability......................................... 38
10.11 Injunctive Relief.................................... 38
10.12 Attorneys' Fees...................................... 39
10.13 Costs and Expenses................................... 39
10.14 No Third Party Rights................................ 39
10.15 Publicity............................................ 39
10.16 Counterparts......................................... 39
-iii-
<PAGE>
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is dated
as of August 21, 1994, by and between Pyramid Technology Corporation, a Delaware
corporation (the "Company") and Siemens Nixdorf Information Systems, Inc., a
Massachusetts corporation (the "Purchaser").
SECTION 1
SALE OF COMMON STOCK AND WARRANT
1.1 Sale of Common Stock and Warrant. Subject to the terms and conditions
--------------------------------
hereof, the Company will issue and sell to the Purchaser, and the Purchaser will
purchase from the Company, at the Closing (as defined below), for an aggregate
purchase price of $17,250,000 (i) 2,000,000 shares (the "Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), and (ii) a warrant
to purchase up to 1,330,000 shares of Common Stock (the "Warrant Shares") at an
exercise price of $10.00 per share and on such other terms and conditions as are
specified in substantially the form of warrant attached as Exhibit A hereto (the
---------
"Warrant").
1.2 Closing Date. The closing of the purchase and sale of the Shares and
------------
the Warrant (the "Closing") shall be held at the law offices of Wilson, Sonsini,
Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California at 10:00 a.m.
not later than the third business day following expiration or early termination
of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") and satisfaction of all closing conditions set forth
in Sections 4 and 5 hereof or at such other time and place upon which the
Company and the Purchaser shall mutually agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
1.3 Delivery. At the Closing, the Company will deliver to the Purchaser
--------
(i) a certificate registered in the name of the Purchaser representing the
Shares, against payment of the purchase price of $17,250,000 therefor by check
payable to the order of the Company or by wire transfer in same day funds to the
Company's account, (ii) the duly executed Warrant, and (iii) all documents and
certificates required to be delivered under Section 4 of this Agreement.
1.4 Legend. The certificate for the Shares and the Warrant shall be
------
subject in each case to a legend restricting transfer under the Securities Act
of 1933, as amended (the "Securities Act"), and referring to restrictions on
transfer and rights of first refusal herein, such legend to be substantially as
follows:
<PAGE>
"The securities represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933.
Such securities may not be sold or transferred in the absence of such
registration or an exemption from such registration.
"The securities represented by this certificate are subject to
restrictions on transfer, including any sale, pledge or other
hypothecation, and rights of first refusal set forth in a certain Common
Stock and Warrant Purchase Agreement dated as of August 19, 1994, a copy of
which may be obtained at no cost by written request made by the holder of
record of this certificate to the secretary of the Company at the Company's
principal executive offices."
None of the Shares or the Warrant may be sold, assigned, transferred or
otherwise disposed of unless registered under the Securities Act of 1933, as
amended (the "Securities Act"), or unless an exemption from such registration is
available and perfected.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the disclosure statement dated the date hereof (the
"Disclosure Schedule"), delivered in connection with this Agreement, the Company
hereby represents and warrants to the Purchaser as follows:
2.1 Organization. The Company is a corporation duly organized and validly
------------
existing under the laws of the State of Delaware and is in good standing under
such laws. The Company has all requisite corporate power and authority to own,
lease and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified
to do business as a foreign corporation in each jurisdiction in which the
ownership of its property or the nature of its business requires such
qualification, except where failure to so qualify would not have a material
adverse effect on the Company or any of its Subsidiaries, their condition
(financial or otherwise), their results of operations, their assets, their
liabilities or their business, taken as a whole ("Material Adverse Effect").
The Company has furnished to the Purchaser true and correct copies of its
Certificate of Incorporation and Bylaws, as amended to date, and will furnish
true and correct copies of any amendments thereto through the term of this
Agreement.
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<PAGE>
2.2 Capitalization. The authorized capital stock of the Company consists
--------------
of 30,000,000 shares of Common Stock, $.01 par value, of which at August 11,
1994, 13,418,189 shares were issued and outstanding. All such issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. As of August 11, 1994, the Company has duly reserved a
total of 6,116,666 shares of its Common Stock for issuance under its Amended
1982 Incentive Stock Option Plan, of which 2,670,788 shares are duly reserved
for issuance upon exercise of outstanding options; a total of 400,000 shares
for issuance under its Executive Officers Nonstatutory Stock Option Plan, of
which 20,313 shares are duly reserved for issuance upon exercise of outstanding
options; a total of 160,000 shares for issuance under its Amended and Restated
Directors' Option Plan, of which 99,500 shares are duly reserved for issuance
upon exercise of outstanding options; and a total of 1,150,000 shares for
issuance under its 1987 Employee Stock Purchase Plan. On December 8, 1988, the
Company entered into a Common Shares Rights Agreement (the "Rights Agreement")
with Bank of America, NT & SA, and has announced the distribution of rights
under the Rights Agreement to all stockholders of record as of January 17, 1989.
In addition, effective upon the Closing, the Company has duly authorized the
reservation of such number of shares of Common Stock as shall be necessary to
provide for the exercise of the Warrant. Except as provided or described in
this Agreement, there are no other options, warrants, conversion privileges,
convertible securities or other contractual rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of any of the
Company's capital stock or other securities. Schedule 2.2 to the Disclosure
Statement identifies, assuming the consummation at the Closing of the
transactions contemplated hereby (1) to the best of the Company's knowledge,
based upon filings pursuant to Section 13(g) of the Securities Exchange Act of
1934 (the "Exchange Act") received by the Company as of December 31, 1993, and
based upon filings pursuant to Section 13(d) of the Exchange Act received as of
the date hereof, each record and beneficial owner of 5% or more of the
outstanding Common Stock, including the name, address and number of shares of
Common Stock held by each such holder. Except as provided in this Agreement,
immediately prior to the Closing there were, and upon the Closing there will be,
no preemptive or similar rights to purchase or otherwise acquire shares of
Voting Stock of the Company or its Subsidiaries pursuant to any provision of
law, the Certificates of Incorporation or By-laws of the Company, in each case
as amended to the date hereof, or any agreement to which the Company is a party,
or otherwise; there was, and upon the Closing there will be, no agreement,
restriction or encumbrance (such as a right of first refusal, right of first
offer, proxy, voting trust, etc.) with respect to the sale or voting of any
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<PAGE>
shares of the Company's Voting Stock (whether outstanding or issuable upon
conversion or exercise of outstanding securities), except as contemplated by
this Agreement. To the best of the Company's knowledge, the Company has not
violated Section 5 of the Securities Act or any state securities or blue sky
laws in connection with the issuance of any shares of Common Stock or other
securities prior to or on the date hereof to the extent any such violation would
have a material adverse effect on the Company or any of its Subsidiaries, taken
as a whole.
Subject to normal year-end adjustment and except for obligations incurred
in the normal course of business that are not required to be reflected, reserved
against, accrued for or otherwise disclosed on the Company's unaudited
consolidated balance sheet in order for such balance sheet to fairly present the
financial condition of the Company and the Subsidiaries as of July 1, 1994 in
accordance with generally accepted accounting principles consistently applied,
to the best of the Company's knowledge (a) the Company and the subsidiaries of
the Company which are consolidated with the Company for financial accounting
purposes (the "Subsidiaries") had no liabilities, obligations, payments or
commitments exceeding $100,000 (whether matured or unmatured, fixed or
contingent) that were not provided for on such balance sheet or described in the
notes thereto and (b) all reserves established by the Company and set forth on
the balance sheet were adequate in all material respects.
2.3 Authorization. The Company has all corporate right, power and
-------------
authority to enter into this Agreement, the Registration Rights Agreement in
substantially the form attached hereto as Exhibit B (the "Registration Rights
---------
Agreement") and the Warrant and to consummate the transactions contemplated
hereby and thereby. All requisite corporate and stockholder action on the part
of the Company, its directors and stockholders necessary for (i) the
authorization, execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrant by the Company, (ii) the
authorization, sale, issuance and delivery of the Shares and the Warrant Shares
upon exercise of the Warrant pursuant to the terms thereof, and (iii) the
performance of the Company's obligations hereunder and under the Registration
Rights Agreement and the Warrant have been duly authorized and taken. This
Agreement and, as of the Closing, the Registration Rights Agreement and the
Warrant will have been duly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company enforceable in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable
-4-
<PAGE>
remedies, and to limitations of public policy as they may apply to Section 7 of
the Registration Rights Agreement. Upon their issuance and delivery pursuant to
this Agreement, the Shares will be duly authorized, validly issued, fully paid
and nonassessable. Upon exercise of the Warrant in accordance with the terms
thereof, the Warrant Shares will be duly authorized, validly issued, fully paid
and nonassessable. The issuance and sale of the Shares, the Warrant and the
Warrant Shares upon exercise of the Warrant will not give rise to any preemptive
rights or rights of first refusal on behalf of any person in existence either on
the date hereof or immediately prior to the Closing.
2.4 No Conflict. Subject to compliance with the HSR Act, the execution
-----------
and delivery of this Agreement, the Registration Rights Agreement and the
Warrant do not, and the consummation of the transactions contemplated hereby and
thereby and compliance with the provisions hereof and thereof will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to the creation of any lien, security
interest or encumbrance, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of (i) the Certificate of Incorporation or Bylaws of the Company or
any judgment, order decree, statute, law, ordinance, rule ore regulation
applicable to the Company, its properties or assets, or (ii) any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, which violation under this Section 2.4(ii) would have a
Material Adverse Effect on the Company or any of its Subsidiaries, taken as a
whole, or materially impair or restrict its power to perform its obligations as
contemplated hereby or thereby.
2.5 Accuracy of Reports. The Company has, since September 30, 1990, filed
-------------------
with the Securities and Exchange Commission ("SEC") all forms, reports and
documents (collectively, the "SEC Reports") which it has been required to file
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder. Each of the SEC Reports
complied as of its filing date in all material respects with all applicable
requirements of the Exchange Act. Except as subsequently disclosed or corrected
in an SEC Report filed prior to the date of this Agreement, none of such SEC
Reports, including, without limitation, any financial statement, schedule or
footnote included therein, contained at the time filed any untrue statement of a
material fact or omitted to state a material fact required to be stated therein,
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
-5-
<PAGE>
2.6 Financial Statements and Changes. The Company's (a) unaudited
--------------------------------
consolidated balance sheet as of July 1, 1994 and the related consolidated
statement of income, cash flows and stockholders' equity for the interim period
then ended contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1994 (together with footnotes), and (b) audited
consolidated balance sheets as of September 30, 1993 and 1992 and the related
audited consolidated statements of income, cash flows and stockholders' equity
for the fiscal years then ended contained in the Company's Annual Report on Form
10-K for the years ended September 30, 1993 and 1992 (together with footnotes)
(i) comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, (ii) are in accordance with the books and records of the
Company and its Subsidiaries, (iii) have been prepared in accordance with
generally accepted accounting principles (except to the extent that certain
footnote disclosures regarding any period may have been omitted in accordance
with the applicable rules of the SEC under the Exchange Act) consistently
applied except as noted therein and except, in the case of unaudited interim
financial statements, for normal year-end adjustments, (iv) fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the respective dates set forth therein and the results of operations and
cash flows for the Company and its consolidated Subsidiaries for the respective
fiscal periods set forth therein and (v) are true and correct in all material
respects. Except as otherwise disclosed herein or in the SEC Reports, since
July 1, 1994, there has been no material adverse change in the business
condition (financial or otherwise), results of operations, assets, liabilities
or obligations of the Company and its consolidated Subsidiaries, taken as a
whole. Except as set forth on Schedule 2.6 to the Disclosure Schedule, since
July 1, 1994 there has not been (a) any material adverse change in the condition
(financial or otherwise), operations, results of operations, assets,
liabilities, or business of the Company or any of the Subsidiaries, (b) any
liabilities or obligations that involve payments or commitments in excess of
$100,000 (whether contingent or otherwise) incurred by the Company or any of the
Subsidiaries, other than current liabilities or obligations incurred in the
ordinary course of business, (c) any assets or properties of the Company or any
of the Subsidiaries having a value in excess of $100,000 individually or
$250,000 in the aggregate made subject to a lien of any kind, (d) any
cancellation of any debts or claims held by the Company or any of the
subsidiaries, in either case having a value in excess of $100,000 individually
or $250,000 in the aggregate, (e) any payment of dividends on, or otherwise
distributions with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Company
-6-
<PAGE>
or any of the Subsidiaries, or any agreement or commitment therefor, (f) any
issuance of any stock, bonds or other securities of the Company or any of the
Subsidiaries except as contemplated by this Agreement and except for the grant
or exercise of options and the issuance of stock to directors, officers,
employees and consultants in connection with their service to the Company and
the Subsidiaries, (g) any sale, assignment, transfer or other disposition (other
than in the ordinary course of business) of any tangible or intangible assets of
the Company or any of the Subsidiaries, having a value in excess of $100,000
individually or $250,000 in the aggregate, (h) any loan by the Company to any
officer, director, employee or stockholder of the Company or any of the
Subsidiaries, or any agreement or commitment therefor other than travel advances
or other advances not in excess of $2,500 as to any such person or $25,000 as to
all such persons, (i) any increase, direct or indirect, in the compensation paid
or payable to any officer, director, employee or agent of the Company or any of
the Subsidiaries by an amount exceeding 10% of such compensation prior to such
increase or (j) any change in the accounting methods or practices followed by
the Company or any of the Subsidiaries or any change in depreciation policies or
rates therefore adopted.
2.7 Consents, etc. No consent, approval or authorization of or
-------------
designation, declaration or filing with (i) any governmental authority or (ii)
any third party (pursuant to any of the Company's contracts or otherwise) which
absence of such third party consent would have a Material Adverse Effect on the
Company or any of its Subsidiaries, taken as a whole, or materially impair or
restrict its power to perform its obligations hereunder, on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Shares, the Warrant or the
Warrant Shares upon exercise of the Warrant, or the consummation of any other
transaction contemplated hereby, except the filing of such forms with the United
States Department of Justice and the Federal Trade Commission as shall be
required by the HSR Act and the expiration of any waiting periods thereunder and
such filings as may be required to be made with the SEC and the NASD, filings or
notices, if any, to be made in compliance with applicable blue sky requirements
and any other filings agreed by counsel to the Company and counsel to the
Purchaser to be required under applicable law.
2.8 Amendment to Rights Agreement. All necessary corporate action
-----------------------------
required under the Rights Agreement to amend the Rights Agreement has been duly
authorized and taken (or will have been duly authorized and taken prior to the
Closing) so that the issuance of the Shares, the Warrant and the Warrant Shares
upon exercise of the Warrant and any purchases by the Purchaser of
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<PAGE>
Voting Stock pursuant to Section 7.8 below shall not cause the Purchaser to
become an "Acquiring Person" or cause a "Shares Acquisition Date", "Distribution
Date" or "Triggering Event" to occur (each as defined in the Rights Agreement).
2.9 Intellectual Property Rights. In each case, except as set forth on
----------------------------
Schedule 2.9 to the Disclosure Schedule:
(a) each of the Company and the Subsidiaries owns, possesses, and has
the right to use, has the right to bring actions for the infringement of, or
where necessary, has made timely and proper application for, all Intellectual
Property Rights (as hereinafter defined) necessary or required for the conduct
of its business as currently conducted.
(b) no royalties, honorariums or fees in excess of $50,000 per annum
are payable by the Company or its Subsidiaries to other persons by reason of the
ownership or use of said Intellectual Property Rights;
(c) to the best of the Company's knowledge, no product or service that
is manufactured, marketed, performed or sold by the Company or the Subsidiaries
violates any license or infringes any Intellectual Property Rights of another,
nor is there any pending or written threat of a claim or litigation against the
Company or Subsidiaries (nor does there exist any basis therefor) contesting the
validity of, or right to use, any of the foregoing Intellectual Property Rights;
(d) none of the Company or the Subsidiaries has received notice that
any of such Intellectual Property Rights, or that the operation or proposed
operation of the Company's or the Subsidiaries' businesses, conflicts or will
conflict with the asserted rights of others; and
(e) the Company has not granted any exclusive rights to any third
party to develop, manufacture, use, market or service the Company's current
products.
As used herein, the term "Intellectual Property Rights" means all
industrial and intellectual property rights, including, without limitation,
Proprietary Technology (as hereinafter defined), patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, know-how, certificates of public
convenience and necessity, franchises, licenses, trade secrets, proprietary
processes and formulae used by the Company in its businesses. As used herein,
"Proprietary Technology" means all source code,
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<PAGE>
designs, algorithms, layouts, processes, inventions, trade secrets, know-how and
other proprietary rights owned or licensed by the Company or the Subsidiaries
pertaining to any product or service manufactured, marketed, performed or sold,
or proposed to be manufactured, marketed, performed or sold (as the case may
be), by the Company or the Subsidiaries or used, employed or exploited in the
development, license, sale, marketing, distribution or maintenance thereof, and
all documentation and media embodying or relating to the above, including,
without limitation, manuals, models, prototypes, memoranda, know-how, notebooks,
patents and patent applications, trademarks and trademark applications,
copyrights and copyright applications, records and disclosures.
2.10 Litigation. Except as set forth on Schedule 2.10 to the Disclosure
----------
Schedule, there are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings (collectively, "Claims"), pending and
served or of which the Company or any Subsidiary has received written
notification or, to the Company's best knowledge, threatened against the Company
or any of the Subsidiaries, whether at law or in equity, whether civil or
criminal in nature or whether before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign; except as set forth on Schedule 2.10 to
the Disclosure Schedule, to the best of the Company's knowledge, there are no
orders, judgments or decrees of any court or governmental agency which would
have a Material Adverse Effect on the Company or any of its Subsidiaries, taken
as a whole, that apply to the Company or any of the Subsidiaries. Also set
forth on Schedule 2.10 are all lawsuits filed and served by or against the
Corporation or any Subsidiary during the previous two (2) years that involves
claims in excess of $500,000.
2.11 Taxes. The Company and the Subsidiaries have filed all Federal,
-----
state, local and foreign tax returns that are required to be filed by them on or
prior to the Closing and all such returns are true and complete. The Company
and the Subsidiaries have paid all taxes pursuant to such returns or pursuant to
any assessments received by them or which they are obligated to withhold from
amounts owing to any employee, creditor or third party. Except as disclosed on
Schedule 2.11 to the Disclosure Schedule, the Company has not been notified in
writing of any examination by the Internal Revenue Service or by appropriate
state or departmental tax authorities of any Federal, state or local income tax
or franchise tax returns of or with respect to the Company or any of the
Subsidiaries through all relevant periods. The liability for taxes payable on
the Company's unaudited consolidated balance sheet as of July 1, 1994 are
sufficient for the future payment of all accrued
-9-
<PAGE>
and unpaid Federal, state, local and foreign taxes as of such date, the failure
for which to provide would have a Material Adverse Effect on the Company or any
of its Subsidiaries, taken as whole. Except as set forth on Schedule 2.11 to
the Disclosure Schedule, the Company and the Subsidiaries have not waived any
statute of limitations with respect to taxes or agreed to any extension of time
with respect to any tax assessment or deficiency.
2.12 Agreements. Except as set forth on Schedule 2.12 to the Disclosure
----------
Schedule, to the best of the Company's knowledge, the Company and the
Subsidiaries are not parties to any material written or oral contract or
commitment not made in the ordinary course of business and, whether or not made
in the ordinary course of business, the Company and the Subsidiaries are not
parties to any written or oral (i) contract or commitment with any labor union,
(ii) contract or commitment for the future purchase of fixed assets in excess of
$250,000 in the aggregate or for the future purchase of materials, supplies or
equipment in excess of normal operating requirements, (iii) contract or
commitment for the employment of any officer, individual employee or other
person on a full-time basis or any contract with any individual on a consulting
basis, except for such similar contracts listed in the documents filed by the
Company with the SEC pursuant to the Exchange Act, (iv) bonus, pension, profit-
sharing, retirement, stock purchase, stock option, or extraordinary
hospitalization, medical insurance or similar plan, contract or understanding in
effect with respect to employees or any of them or the employees of others, (v)
agreements, indentures or commitments relating to the borrowing of money in
excess of $250,000 in the aggregate or to the mortgaging, pledging or otherwise
placing a lien on any assets of the Company or the Subsidiaries (other than
relating to equipment held under capitalized leases or secured by purchase money
security interests), (vi) guaranty of any obligation (other than any obligation
of a Subsidiary) in excess of $250,000 in the aggregate, (vii) lease or
agreement under which the Company or the Subsidiaries are lessees of or hold or
operate (A) any real property or (B) personal property pursuant to which annual
rental payments to the lessor thereof exceed $250,000 (other than as incidental
to the leasing of any real property), (viii) lease or agreement under which the
Company or the Subsidiaries are lessor of or permits any third party to hold or
operate any property, real or personal, owed or controlled by the Company or the
Subsidiaries, (ix) agreement or other commitment for capital expenditures in
excess of $250,000 individually, (x) contract or agreement under which the
Company or the Subsidiaries are obligated to pay any broker's fees, finder's
fees or any such similar fees to any third party (other than as are incidental
to the operation of its business in the ordinary course of business consistent
with industry practices), (xi) contract or agreement for
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<PAGE>
the payment or receipt of any royalty, (xii) license for the use of any patent,
know-how, trademark, trade name, copyright or other intellectual property which
is material to the financial condition or operations of the Company or (xiii)
any other contract, agreement, arrangement or understanding that is material to
the financial condition or operations of the Company and the Subsidiaries, taken
as a whole. The Company has furnished or made available to counsel for the
Purchaser true and correct copies of all such agreements and such other
documents as have been requested by the Purchaser or their authorized
representatives. Each of the foregoing contracts are valid, binding and in full
force and effect in accordance with its terms.
2.13 Compliance. Except as set forth on Schedule 2.13 to the Disclosure
----------
Schedule, to the best of the Company's knowledge, the Company and the
Subsidiaries have (or have applied for and which none of the Company or any
Subsidiary has any reason to believe and does not believe will not be obtained
in due course) all governmental approvals, authorizations, consents,
qualifications, licenses and permits necessary or required to conduct their
business as currently conducted or as planned to be conducted where the failure
to obtain such approvals, authorizations, consents, qualifications, licenses and
permits would result in liability in excess of $200,000 or materially impede the
timely development of any of the products being developed by the Company or any
Subsidiary. To the best of the Company's knowledge, the Company and the
Subsidiaries are currently and at all times since inception have been in
compliance with all Federal, state, local or foreign laws, ordinances,
regulations and orders (including, without limitation, those relating to the
provisions of health insurance, environmental protection, occupational safety
and health, Federal securities laws, equal employment opportunity, consumer
protection, credit reporting, "truth-in-lending", warranties and trade
practices) applicable to their business where the failure to be in compliance
would result in liability in excess of $250,000 or materially impede the timely
development of any of the products being developed by the Company or any
Subsidiary; and, to the best of the Company's knowledge, all such licenses,
qualifications and permits are in full force and effect and no violations exist
in respect of any such licenses or permits and no proceeding is pending or
threatened to revoke or limit any thereof.
2.14 Disclosure. Neither this Agreement, the Disclosure Schedule, the
----------
Warrant, or the Registration Rights Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary, in light of the
circumstances under such statements were made, in order to make the statements
contained herein and therein, not misleading.
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<PAGE>
2.15 Certain Transactions. Except as set forth in the Company's SEC
--------------------
Reports, no executive officer or director of the Company or any Subsidiary has
engaged in any transaction since September 30, 1990 that would require
disclosure in the document filed with the Commission pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.
2.16 Insurance. Each of the Company and the Subsidiaries maintains such
---------
insurance coverage, including amounts, described on Schedule 2.16 to the
Disclosure Schedule. Such insurance listed on Schedule 2.16 to the Disclosure
Schedule is outstanding and in full force and effect and all premiums with
respect to such policies are currently paid. Each of the Company and the
Subsidiaries has not during the past three (3) fiscal years been denied or had
revoked or rescinded any insurance policy.
2.17 Definitions. As used in this Section 2, the term "to the best of the
-----------
Company's knowledge" shall mean actual knowledge of the officers, directors and
key employees of the Company or the Subsidiaries obtained in the management of
his or her business affairs after making due inquiry of officers, directors, and
key employees of the Company and the Subsidiaries.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
3.1 Investment. The Purchaser will acquire the Shares, the Warrant and
----------
any Warrant Shares purchased from the Company pursuant to this Agreement for
investment for its own account, not as a nominee or agent, and not with a view
to, or for resale in connection with, any distribution thereof. The Purchaser
understands that the Shares, the Warrant and any Warrant Shares purchased by it
from the Company pursuant to this Agreement have not been, and will not be,
registered (unless sold in connection with a public offering by the Company or
pursuant to a demand registration under the Registration Rights Agreement) under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the Purchaser's investment intent and the accuracy of the
Purchaser's representations as expressed in this Section 3.1.
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<PAGE>
3.2 Organization. The Purchaser is a corporation duly organized and
------------
validly existing and in good standing under the laws of the state of its
incorporation, with all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as presently
conducted and as proposed to be conducted.
3.3 Authority. The Purchaser has all corporate right, power and authority
---------
to enter into this Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Registration Rights Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on behalf of the Purchaser. This Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Purchaser and constitute
legal, valid and binding obligations of the Purchaser, enforceable in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to Section 7 of the Registration
Rights Agreement. Subject to compliance with the HSR Act and such filings as
may be required to be made with the SEC and any exchange or quotation system on
which the Purchaser's securities are listed or designated, the execution and
delivery of this Agreement and the Registration Rights Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with or result in any violation of any obligation under any provision
of the Certificate or Articles of Incorporation or Bylaws of the Purchaser or
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Purchaser.
3.4 Government Consents, etc. No consent, approval or authorization of or
------------------------
designation, declaration or filing with any governmental authority on the part
of the Purchaser is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Shares or the Warrant,
the issuance of the Warrant Shares upon exercise of the Warrant or the
consummation of any other transaction contemplated hereby, except the filing of
such forms with the United States Department of Justice and the Federal Trade
Commission as shall be required by the HSR Act and the expiration of any waiting
periods thereunder and such filings as may be required to be made with the SEC
and any exchange or quotation system on which the Purchaser's securities are
listed or principally traded.
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<PAGE>
3.5 Investigation. The Purchaser has had a reasonable opportunity to
-------------
discuss the Company's business management and financial affairs with the
Company's management.
3.6 Financing. The Purchaser has or will have the funds to provide the
---------
Company with the funds necessary to consummate the transactions to occur at the
Closing.
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase the Shares and the Warrant at
the Closing is subject to the fulfillment on or prior to the Closing Date of the
following conditions, any or all of which may be waived at the option of the
Purchaser:
4.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 2 hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
4.2 Covenants. All covenants, agreements and conditions (including
---------
corporate proceedings) contained in this Agreement to be performed by the
Company on or prior to the Closing Date shall have been performed or complied
with in all material respects.
4.3 Opinion of Company's Counsel. The Purchaser shall have received from
----------------------------
Wilson Sonsini Goodrich & Rosati, P.C., counsel to the Company, an opinion
addressed to it, dated the Closing Date, in substantially the form attached
hereto as Exhibit C.
---------
4.4 No Order Pending. There shall not then be pending or threatened in
----------------
writing any order, injunction or other action by any court, arbitrator or
governmental body or authority enjoining or restraining the transactions
contemplated by this Agreement or imposing any material condition on the
consummation thereof.
4.5 HSR Act. The Purchaser and the Company shall have filed such forms
-------
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act and the applicable waiting periods under such
HSR Act shall have expired (or been terminated) without notice from such
governmental agencies that additional inquiries are being made.
-14-
<PAGE>
4.6 No Law Prohibiting or Restricting Such Sale. There shall not be in
-------------------------------------------
effect any law, rule or regulation prohibiting or restricting such sale, or
imposing material conditions on such sale, or requiring any consent or approval
of any person which shall not have been obtained (including blue sky filings) to
issue the Shares, the Warrant or the Warrant Shares (except as otherwise
provided in this Agreement).
4.7 Compliance Certificate. The Company shall have delivered to the
----------------------
Purchaser a certificate in substantially the form attached hereto as Exhibit D,
---------
executed on behalf of the Company by the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Closing Date, and certifying to the
fulfillment of the conditions specified in Sections 4.1 and 4.2 of this
Agreement.
4.8 Technology Agreement. The Company shall have delivered to the
--------------------
Purchaser a duly executed counterpart of the license and OEM agreements on terms
and conditions satisfactory to Purchaser in its sole discretion, which agreement
shall include at a minimum the terms and conditions set forth on Exhibit E
---------
attached hereto (the "Technology Agreement"). Notwithstanding anything to the
contrary herein, in the event of a material breach by the Company of its
obligations under the Technology Agreement, all of the restrictions on
Purchaser's ability to transfer Voting Stock set forth in Section 7.6 shall
terminate and, except with respect to a transfer by the Purchaser of Voting
Stock then held by the Purchaser which represents 20% or more of the Total
Voting Power of the Company in a single transaction to a single person or group
(as defined hereinafter), the Company's right of first refusal set forth in
Section 8 hereof, shall terminate.
4.9 Registration Rights Agreement. The Company shall have delivered to
-----------------------------
the Purchaser a duly executed counterpart of the Registration Rights Agreement.
4.10 Material Adverse Change. There shall not have occurred or been
-----------------------
discovered (whether through due diligence review or otherwise) since July 1,
1994, the date of the Company's most recent balance sheet any material adverse
change in the condition (financial or otherwise), results of operations, assets,
liabilities or business of the Company and its Subsidiaries, taken as a whole.
4.11 Corporate Authorizations. Purchaser shall have received (i) certified
------------------------
copies of the resolutions adopted by the Company's Board of Directors,
authorizing the execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Warrant, the Technology Agreement and (ii)
copies of the
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<PAGE>
Company's Certificate of Incorporation and By-Laws, as in effect on the Closing
Date.
SECTION 5
CONDITIONS TO OBLIGATIONS OF COMPANY
The Company's obligation to sell and issue the Shares and the Warrant at
the Closing is subject to the fulfillment on or prior to the Closing Date of the
following conditions, any or all of which may be waived at the option of the
Company:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Purchaser in Section 3 hereof shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions (including
---------
corporate proceedings) contained in this Agreement to be performed by the
Purchaser on or prior to the Closing Date shall have been performed or complied
with in all material respects.
5.3 No Order Pending. There shall not then be pending or threatened in
----------------
writing in effect any order, injunction or other action by any court, arbitrator
or governmental body or authority enjoining or restraining the transactions
contemplated by this Agreement or imposing any material condition on the
consummation thereof.
5.4 HSR Act. The Purchaser and the Company shall have filed such forms
-------
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act and the applicable waiting periods under such
HSR Act shall have expired (or been terminated)without notice from such
governmental agencies that additional inquiries are being made.
5.5 No Law prohibiting or Restricting Such Sale. There shall not be in
-------------------------------------------
effect any law, rule or regulation prohibiting or restricting such sale, or
imposing material conditions on such sale, or requiring any consent or approval
of any person which shall not have been obtained (including blue sky filings) to
issue the Shares, the Warrant or the Warrant Shares (except as otherwise
provided in this Agreement).
-16-
<PAGE>
5.6 Compliance Certificate. The Purchaser shall have delivered to the
----------------------
Company a certificate substantially in the form attached hereto as Exhibit E,
---------
executed on behalf of the Purchaser by an executive officer of the Purchaser,
dated the Closing Date, and certifying to the fulfillment of the conditions
specified in Sections 5.1 and 5.2 of this Agreement.
5.7 Technology Agreement. The Purchaser shall have delivered to the
--------------------
Company a duly executed counterpart of the Technology Agreement on terms and
conditions satisfactory to the Company in its sole discretion, which agreement
shall include at a minimum the terms and conditions set forth on Exhibit E
hereto.
5.8 Registration Rights Agreement. The Purchaser shall have delivered to
-----------------------------
the Company a duly executed counterpart of the Registration Rights Agreement.
SECTION 6
COVENANTS OF THE COMPANY
Until the termination of this Agreement in accordance with Section 10.2
hereof or the particular covenant, as the case may be:
6.1 Sale of Additional Shares. The Company shall take such action as is
-------------------------
reasonably necessary, including any necessary amendment to the Rights Agreement
and any action required under the Registration Rights Agreement, subject to
compliance with applicable law (including federal and state securities laws), to
issue and sell to the Purchaser any Shares or Warrant Shares or any additional
securities which the Purchaser shall be entitled to purchase from the Company
pursuant to this Agreement.
6.2 Membership on the Board of Directors.
------------------------------------
(a) Upon or after the Closing, the Company shall cause to be appointed
as a director to the Company's Board of Directors, at the request of the
Purchaser, any person designated by the Purchaser and approved by the Company,
which approval shall not unreasonably be withheld. Any such person shall serve
until such person's successor has been duly elected and qualified. Thereafter,
the Company shall include in the slate of nominees recommended by the Company's
Board of Directors or management to stockholders for election as directors at
each annual meeting of stockholders of the Company any person designated
pursuant to this paragraph, or such substitute as may be designated by the
Purchaser and who is reasonably acceptable to the Company, and the Company
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<PAGE>
shall use its best efforts to cause the shares for which the Company's
management or directors hold proxies or are otherwise entitled to vote to be
voted in favor of the election of such designee to the extent necessary to
ensure his election, assuming that all Voting Stock beneficially owned by the
Purchaser is voted for such designee. In the event that any such designee shall
cease to serve as a director for any reason, the Company shall use its best
efforts to fill such vacancy by a designee of the Purchaser approved by the
Company, which approved shall not be unreasonably withheld. Notwithstanding the
foregoing, the Company's obligation under this paragraph and under paragraphs
6.3, 6.4 and 6.5 below shall terminate if the percentage interest of the
Purchaser in the Total Voting Power of the Company, after adjustment for the
exercise, or failure to exercise, of the right to maintain by the Purchaser
pursuant to Section 7.8 below (except in the event of a delaying notice pursuant
to Section 7.8(e)) is less than 5% (even if the Purchaser's percentage interest
should subsequently increase for any reason to 5% or more).
(b) The Company shall be entitled to excuse any designee of the
Purchaser serving as a director on the Company's Board of Directors from all
discussions and deliberations of the Board of Directors of the Company (or any
committee constituted by the Board) concerning competitors of the Purchaser or
relationships between the Company and the Purchaser. Upon notice to the
Purchaser's designee, the Company may refrain from sending or providing to the
Purchaser, or the Purchaser may refuse to receive, any information otherwise
disseminated to the directors of the Company concerning competitors of the
Purchaser or relationships between the Company and the Purchaser. The Company
shall not be obligated to compensate a designee-director of the Purchaser on the
same terms as other outside directors but shall provide all rights and benefits
of indemnity to such designee-director as are provided such other directors.
6.3 Information Rights. So long as Purchaser holds at least 5% of the
------------------
Total Voting Power of the Company, the Company shall provide to the Purchaser
copies of all SEC Reports filed by Company with the Securities and Exchange
Commission and all business plans, budgets, financial statements and other
information made available to the Company's Board of Directors, subject to the
Company's fiduciary duties and obligations to keep such materials confidential.
-18-
<PAGE>
6.4 Access to Records. Each of the Company and the Subsidiaries shall
-----------------
afford to the Purchaser and the Purchaser's authorized employees, counsel,
accountants and other representatives free and full access, at all reasonable
times to all of the books, records and properties of the Company or the
Subsidiaries, as the case may be, and to all officers of the Company or the
Subsidiaries, as the case may be, upon reasonable advance notice by the
Purchaser to the Company or its Subsidiaries, as the case may be, in order to
verify the representations and warranties made and information delivered to the
Purchaser pursuant to this Agreement.
6.5 Affirmative Covenants. Each of the Company and the Subsidiaries
---------------------
covenants and agrees with the Purchasers as follows:
(a) Corporate Existence Properties, Etc. Each of the Company and the
-----------------------------------
Subsidiaries shall, and shall cause each of its Affiliates (as defined in
Section 10.1(i) below) to: maintain, preserve, and keep in full force and effect
its corporate existence and all rights, franchises, licenses, insurance policies
and permits necessary to the proper conduct of its business and to the
ownership, lease, or operation of its properties which, if not so maintained,
could reasonably be expected to have a $100,000 or greater adverse effect on it,
except that this provision shall not restrict the Company's ability to effect
merger of the Subsidiaries of the Company. The Company agrees to take all
action that may be reasonably required to obtain, preserve, renew and extend all
material licenses, permits, authorizations, trade names, trademarks, service
names, service marks, copyrights and patents that are necessary for the
continuance of the operation of any such property by it.
(b) Payment of Taxes. Each of the Company and the Subsidiaries shall,
----------------
and shall cause each of its Affiliates to, pay all taxes, assessments and
governmental charges or liens imposed upon it or upon its income or receipts or
upon any of its properties (except with respect to taxes being contested in good
faith by appropriate legal proceedings), which if not so paid could reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company or any of its Subsidiaries, taken as a whole.
6.6 Three-Year Business Plan. The Company agrees to provide to the
------------------------
Purchaser, as soon as practicable after it is available, copies of the Company's
Three-Year Business Plan.
6.7 Emergency Business Plan. The Company will provide the Purchaser prior
-----------------------
to Closing with copies of its emergency business plans.
-19-
<PAGE>
SECTION 7
COVENANTS OF THE PURCHASER
Until the termination of this Agreement in accordance with the provisions
of Section 10.2 hereof or the particular covenant, as the case may be:
7.1 Limitation on Ownership of Voting Stock. The Purchaser shall not (and
---------------------------------------
Purchaser shall not permit any of its Affiliates to) acquire, directly or
indirectly, beneficial ownership of any Voting Stock, any securities convertible
into or exchangeable for Voting Stock, or any other right to acquire Voting
Stock (except, in any case, as provided in this Agreement or the Warrant or by
way of stock dividends or other distributions or offerings made available to
holders of any Voting Stock generally) or authorize or make a tender, exchange
or other offer, without the written consent of the Company, if the effect of
such acquisition or offer would be to increase the Voting Power of all Voting
Stock then owned by Purchaser or its Affiliates or which it has a right to
acquire to more than the percentage of the Total Voting Power of the Company
which Purchaser is entitled to hold at such time as provided in this Section
7.1:
(a) The Purchaser shall be entitled to hold Voting Stock up to, and
not to exceed except as permitted by this Agreement, 25% of the Total Potential
Voting Power of the Company. Subject to such limitation, shares of Voting Stock
not acquired by the Purchaser from the Company upon exercise of the Warrant or
pursuant to Section 7.8 may be acquired by the Purchaser in the open market,
from third parties or otherwise, so long as the Warrant has been exercised prior
to such purchases.
(b) The Purchaser may acquire Voting Stock without regard to the
limitations in this Section 7.1 if a tender offer is made (as evidenced by the
filing with the SEC of a Schedule 14D-1 (or any successor schedule or form
promulgated or adopted for such purpose by the SEC) and the actual dissemination
of tender offer materials to security holders) by another person or group to
purchase or exchange for cash or other consideration any Voting Stock which, if
successful, would result in such person or group owning or having the right to
acquire shares of Voting Stock with aggregate Voting Power of at least 40% of
the Total Voting Power of the Company then in effect; provided, however, that
this provision shall not be effective until such time as the Purchaser in the
exercise of the sole reasonable judgment of its Board of Directors, after
consultation with its advisors, shall reasonably conclude
-20-
<PAGE>
that such tender offeror can finance such tender offer. If an offer or proposed
acquisition is made by any person or group which pursuant to this Section 7.1(b)
releases the Purchaser from the limitations set forth herein, which offer or
proposed acquisition subsequently expires, is enjoined or terminated prior to
any purchases thereunder or is otherwise withdrawn, upon the effectiveness of
such expiration, injunction or termination the limitations of this Section
7.1(b) shall be reimposed, except that the Purchaser shall not be obligated to
dispose of any Voting Stock acquired of record or beneficially during the
pendency of such tender offer or proposed acquisition.
(c) Purchaser may acquire Voting Stock (or rights to acquire Voting
Stock) without regard to the limitations in this Section 7.1 as soon as it is
publicly disclosed or Purchaser otherwise learns that another person or group
subject to the filing requirements of Section 13(d)(i) of the Exchange Act with
respect to such purchase has acquired, whether from the Company or otherwise,
any Voting Stock (or rights to acquire Voting Stock), which results in such
person or group owning or having the right to acquire Voting Stock with Total
Voting Power of not less than 20%.
(d) The Purchaser will not be obligated to dispose of any shares of
Voting Stock if the aggregate percentage ownership of the Purchaser in the Total
Voting Power of the Company is increased as a result of a recapitalization of
the Company or a repurchase of securities by the Company or any other action
taken by the Company or its affiliates, but the Purchaser shall not acquire any
additional Voting Stock above the limitations then applicable pursuant to
Section 7.1, unless such acquisition would otherwise be permitted under this
Agreement. If, after the Purchaser has acquired Voting Stock in response to the
acquisition of Voting Stock by another person or group, as permitted by this
Section 7.1, then the Purchaser shall not be obligated to dispose of any shares
of Voting Stock if the aggregate percentage ownership of such third party or
group is thereafter reduced.
(e) Notwithstanding the other provisions of this Section 7.1, the
covenants and agreements of the Purchaser under this Section 7.1 shall terminate
September 1, 1996.
7.2 Voting. The Purchaser shall take such action as may be required so
------
that all shares of Voting Stock owned by the Purchaser are voted for the
Purchaser's nominee to the Board of Directors of the Company in accordance with
the recommendation of the Board of Directors consistent with the provisions of
Section 6.2. Unless the Company otherwise consents in writing, the Purchaser
shall take such action as may be required so that all shares of Voting Stock
-21-
<PAGE>
owned by the Purchaser are voted in accordance with the recommendations of the
Board of Directors on all matters to be voted on by holders of Voting Stock in
not less than the same proportion as the votes cast by the other holders of
Voting Stock with respect to such matters; provided, however, that Voting Stock
owned by Purchaser may be voted as the Purchaser determines in its sole
discretion on any Significant Event (as defined in Section 10.1(c) below)
presented to be voted on by the holders of Voting Stock. The Purchaser, as a
holder of shares of Voting Stock, shall be present, in person or by proxy, at
all meetings of stockholders of the Company so that all shares of Voting Stock
beneficially owned by the Purchaser may be counted for the purposes of
determining the presence of a quorum at such meetings. Notwithstanding any
other provision of this Section 7.2, the provisions of this Section 7.2 shall
terminate and be of no further force and effect should the provisions of
Sections 7.1 and 7.6 be terminated for any reason.
7.3 Voting Trust, etc. So long as Section 7.1 hereof is in effect and has
------------------
not been terminated for any reason, the Purchaser shall not deposit any shares
of Voting Stock in a voting trust or, except as otherwise provided herein,
subject any Voting Stock to any arrangement or agreement with respect to the
voting of such Voting Stock.
7.4 Solicitation of Proxies. So long as Section 7.1 hereof is in effect
-----------------------
and has not been terminated for any reason, without the Company's prior written
consent, the Purchaser shall not solicit proxies with respect to any Voting
Stock or become a "participant" in any "election contest" (as such terms are
used in Rule 14a-11 of Regulation 14A under the Exchange Act relating to the
election of directors of the Company); provided, however, that the Purchaser
shall not be deemed to be a "participant" by reason of the exercise of any right
permitted by Section 6.2.
7.5 Acts in Concert with Others. So long as Section 7.1 hereof is in
---------------------------
effect and has not been terminated for any reason, the Purchaser shall not join
a partnership, limited partnership, syndicate or other group, or otherwise act
in concert with any third person, for the purpose of acquiring, holding, or
disposing of Voting Stock; provided, however, that Purchaser shall be permitted
to act in concert with any of its Affiliates or Subsidiaries to transfer the
Voting Stock the Purchaser is then authorized to hold pursuant to this Section 7
among such entities.
7.6 Restrictions on Transfer of Voting Stock. Prior to September 1, 1996,
----------------------------------------
Purchaser and its Affiliates shall not, directly or indirectly, without the
written consent of the Company, sell or
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<PAGE>
transfer any Voting Stock except (i) to the Company or any person or group
approved by the Company; (ii) to any Subsidiary or Affiliate of the Purchaser,
all of the voting stock of which is owned by the Purchaser or its Affiliates (a
"Wholly-Owned Subsidiary"); (iii) pursuant to a bona fide public offering
registered under the Securities Act of either Voting Stock or securities
exchangeable or exercisable for Voting Stock or pursuant to a rights offering or
a dividend or other ratable distribution to stockholders of the Purchaser; (iv)
pursuant to Rule 144 under the Securities Act (but only to the extent the sale
or transfer of Voting Stock at any time is in compliance with the volume
limitations under paragraph (e) thereunder); (v) in any other transactions not
otherwise described in this Section 7.6 (including open market transactions),
subject to the Company's right of first refusal as set forth in Section 8.1
hereof or in response to (1) an offer to purchase or exchange for cash or other
consideration any Voting Stock (a) which is made by or on behalf of the Company
or (b) which is made by another person or group and is not opposed by the Board
of Directors of the Company within the time such Board is required, pursuant to
regulations under the Exchange Act, to advise the Company's stockholders of such
Board's position on such offer, or (2) subject to the Company's right of first
refusal as set forth in Section 8.2, any other offer made by another person or
group to purchase or exchange for cash or other consideration any Voting Stock
which, if successful, would result in such person or group owning or having the
right to acquire Voting Stock with aggregate Voting Power of more than 40% of
the Total Voting Power of the Company then in effect. Notwithstanding the
foregoing, with respect to Section 7.6(v), Purchaser shall not sell or transfer
any Voting Stock in single transactions exceeding 5% of the Total Voting Power
of the Company to any single person or group and such sales or transfers shall
not directly or indirectly, result, to the best knowledge of the Purchaser after
reasonable inquiry, in any single person or group owning or having the right to
acquire Voting Stock with aggregate Voting Power of 10% or more of the Total
Voting Power of the Company then in effect.
Notwithstanding the foregoing, upon the acquisition by a single person or
group (as defined hereinafter) of Voting Stock, whether from the Company or
otherwise, representing 20% or more of the Company's Total Voting Power, the
restrictions set forth in this Section 7.6 shall terminate.
7.7 Confidential Information. The Company may from time to time pursuant
------------------------
to this Agreement (including pursuant to Section 6.4 hereof) disclose to
Purchaser certain strategic, technical, financial or other information which the
Company deems to be confidential. The Purchaser agrees that all such
confidential information
-23-
<PAGE>
will be kept confidential unless such information (i) is already lawfully in the
Purchaser's or its Affiliates' possession, (ii) becomes generally available to
the public other than as a result of a disclosure by the Purchaser or any of its
directors, officers, employees, agents, advisors or Affiliates, (iii) becomes
available to the Purchaser or its Affiliates on a nonconfidential basis from a
source other than the Company or its advisors, provided that such source is not
known to the Purchaser or its Affiliates to be bound by a confidentiality
agreement with or other obligation of secrecy to the Company or another party,
(iv) is required to be disclosed by the Purchaser or its Affiliates by operation
of law, (v) is disclosed by the Purchaser or its Affiliates with the Company's
prior written approval, (vi) has been held by the Purchaser or its Affiliates
for not less than two (2) years from the date of receipt, provided that the
confidentiality of confidential information furnished to an individual
designated by the Purchaser as a director on the Company's Board of Directors
(and not additionally furnished to other representatives of the Purchaser) shall
not lapse by virtue of this clause, or (vii) is independently developed by the
Purchaser or its Affiliates. Notwithstanding anything to the contrary, the
Purchaser may disclose such confidential information to its directors, officers,
employees, agents or advisors so long as it takes appropriate measures to
protect the confidentiality thereof, which measures shall include at least the
same degree of care that the Purchaser uses to protect its own confidential
information of a similar nature. In the event that the Purchaser or any of its
representatives is requested or required to disclose any of the confidential
information referred to above, the Purchaser will provide the Company with
prompt notice of such request or requirement so that the Company may, at the
Company's expense, seek a protective order or waive the Purchaser's compliance
with this Section 7.7, as appropriate. The Purchaser further acknowledges and
understands that any information so obtained which may be considered "insider"
nonpublic information will not be utilized by the Purchaser in connection with
purchases and/or sales of the Company's securities except in compliance with
applicable state and federal securities laws.
7.8 Right to Maintain.
-----------------
(a) If the percentage interest of the Purchaser in the Total Potential
Voting Power of the Company is at or less than 25%, (the "Threshold Interest"),
and is reduced as a result of an issuance by the Company of any Voting Stock
(including any issuance following conversion of any security convertible into or
exchangeable for Voting Stock or upon exercise of any option, warrant or other
right to acquire any Voting Stock, but excluding issuance of
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<PAGE>
the Warrant Shares), the Purchaser shall have the right to purchase from the
Company for cash upon the terms set forth in this Section 7.8 up to and
including that number of shares of Voting Stock which, if purchased by the
Purchaser, would result in the Purchaser's retaining the Threshold Interest held
by the Purchaser immediately prior to such reduction of the Purchaser's
interest.
(b) The purchase price per share at which the Purchaser shall be
entitled to purchase Voting Stock under this Section 7.8 shall be determined as
follows:
(i) If the event giving rise to the Purchaser's rights is one
or more issuances of Voting Stock (including any issuance resulting from the
conversion or exercise of any security or other right to acquire Voting Stock,
but excluding issuance of the Warrant Shares) pursuant to the Company's present
or future stock option, stock purchase or other stock plans for the benefit of
employees, directors, officers, consultants or others, the price shall be the
Average Market Price per share of Voting Stock determined as of the date of the
issuance and sale of such Voting Stock.
(ii) If the event giving rise to the Purchaser's rights is a
sale or issuance of Voting Stock for cash or property, including, without
limitation, for securities or assets or by way of merger in connection with the
acquisition of another company, and is not treated under paragraph 7.8(b)(i)
above, the price shall be the price per share specified in the agreement
relating to such issuance or, if no such price is specified, the Average Market
Price per share of Voting Stock determined as of the date of issuance and sale
of such Voting Stock;
(iii) If the event giving rise to the Purchaser's rights is an
issuance of Voting Stock upon conversion of any security convertible into or
exchangeable for Common Stock or upon exercise of any option, warrant or right
to acquire any Voting Stock, but excluding issuance of the Warrant Shares, and
is not treated under paragraph 7.8(b)(i) or (ii) above, the price shall be the
Average Market Price per share of Voting Stock determined as of the date of such
conversion or exercise.
(iv) If the event giving rise to the Purchaser's rights is an
underwritten public offering or an institutional private placement, the price
shall be the price per share at which the Voting Stock was sold by the Company.
-25-
<PAGE>
(v) In all other cases, the price shall be the Average Market
Price per share of Voting Stock determined as of the date of the issuance and
sale of such Voting Stock.
(c) The Company shall notify the Purchaser by written, dated notice
not later than ten (10) business days after an issuance giving rise to the
Purchaser's rights under this Section 7.8 and, if such offer is accepted in
writing within thirty (30) days of such offer (except as provided in the next
sentence), effect the sale of the securities to the Purchaser in accordance with
this paragraph. If the event giving rise to the Purchaser's rights is an
underwritten public offering or an institutional private placement of securities
by the Company, and if the Company gives the Purchaser notice of such offering
at least fifteen (15) days in advance of the effective date of the offering,
then unless the Purchaser notifies the Company of its irrevocable acceptance of
such offer within the first ten (10) days of such 15-day period (for the purpose
of permitting the Company to disclose the fact of the Purchaser's intention in
the prospectus relating to such underwritten public offering or institutional
private placement), the Company shall be under no obligation to sell securities
to the Purchaser under this Section 7.8 as a result of such underwritten public
offering or institutional private placement.
(d) The purchase and sale of any shares of Voting Stock pursuant to
any offer made under this Section 7.8 that is accepted by the Purchaser shall
take place at 10:00 a.m. on the third business day following the expiration or
early termination of all waiting periods imposed on such purchase and sale by
the HSR Act and the receipt of all other applicable regulatory approvals, or, if
no waiting period is imposed on such purchase and sale by the HSR Act, on the
third business day following the Purchaser's acceptance of such offer and
compliance with applicable laws and regulations, at the offices of the Company
located at the address set forth in this Agreement, or at such other time and
place as the Company and the Purchaser may agree. The purchase price shall be
payable by wire transfer in same day funds. The Company and the Purchaser shall
comply with all federal and state laws and regulations and requirements of the
NASD, or any securities exchange on which the Company's securities may then be
listed, applicable to any purchase and sale of shares of Voting Stock under this
Section 7.8.
(e) Notwithstanding the foregoing, if any issuance of securities
requiring the Company to make an offer of Voting Stock to the Purchaser under
this Section 7.8 shall be for a number of securities representing less than 2%
of the Total Voting Power of the Company immediately following such issuance,
the Company shall
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<PAGE>
have the right to delay giving the notice otherwise required by Section 7.8(c)
until the earlier of (i) the next issuance which, together with all issuances
after which notice was delayed pursuant to this sentence, shall represent an
aggregate of 2% or more of the Total Voting Power of the Company then in effect
or (ii) the 45th calendar day preceding the last day of the Company's fiscal
year for accounting purposes, and, thereupon, the Company shall give such notice
with respect to all shares of Voting Stock which it shall be obligated to offer
to sell to the Purchaser at the price determined in Section 7.8(b) hereof and
which shall not have been the subject of a previous notice pursuant to Section
7.8(c); provided, however, that the Purchaser shall have the right to request
the purchase of all shares of Voting Stock which the Purchaser has a right to
acquire under this Section 7.8 at any time (a) if a bona fide tender or exchange
offer is made by another person or group to purchase or exchange for cash or
other consideration any Voting Stock from the Company's stockholders generally,
or (b) upon the Company's publication or setting of a record date of its
stockholders; and, in either such event and upon the receipt of such request,
the Company shall use its reasonable efforts to issue all such shares to the
Purchaser pursuant to the provisions of this Section 7.8.
(f) If Purchaser sells any Voting Stock, or fails to exercise its
right to acquire additional Voting Stock as permitted in this Section 7.8 within
the time period prescribed, the Threshold Interest which the Purchaser is then
entitled to maintain under this Section 7.8 shall be reduced to the Purchaser's
percentage ownership that results immediately following such sale or failure to
exercise.
(g) The Purchaser shall forfeit all rights under this Section 7.8 if
at any time the Purchaser's Voting Stock represents less than 5% (inclusive of
the shares the Purchaser is entitled to purchase under an outstanding offer
pursuant to this Section 7.8) of the Total Voting Power the Company (even if the
Purchaser's percentage interest should subsequently increase for any reason to
5% or more).
7.9 Acquisition of Stock. The Purchaser shall advise management of the
--------------------
Company as to the Purchaser's general plans to acquire any additional shares of
Voting Stock, or rights thereto, reasonably in advance of any such acquisitions;
provided, however, that if advance notice of acquisitions of Voting Stock, or
rights thereto, in the open market is not reasonably practicable, notice of any
such acquisition shall be made promptly following such acquisition. All of the
Purchaser's purchases of Voting Stock
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<PAGE>
shall be in compliance with applicable laws and regulations and the provisions
of this Agreement.
7.10 Termination of Certain Sections. Notwithstanding any other provision
-------------------------------
in this Section 7, the provisions of Sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.8
and 7.9 shall terminate and be of no further force and effect on the earliest of
(i) September 1, 1996, (ii) such time as Purchaser holds less than 5% of the
Total Voting Power of the Company, or (iii) such earlier time as may be provided
in the relevant section of this Agreement.
7.11 Further Termination. Notwithstanding any other provision in this
-------------------
Section 7, the provisions of Sections 7.1, 7.2, 7.3, 7.4, 7.5 and 7.6 of this
Agreement shall terminate upon the commencement of any bankruptcy, insolvency or
reorganization action by the Company or against the Company by any other party.
7.12 Repurchase Option. A separate agreement will be negotiated between
-----------------
the Company and the Purchaser covering measures to ensure continuity of core
management. As part of this agreement, the Purchaser will offer to the Company
the option to repurchase to 300,000 shares of the Shares purchased by the
Purchaser under this Agreement at $8.625 per share.
SECTION 8
COMPANY RIGHT OF FIRST REFUSAL
8.1 Right of First Refusal. Prior to making any sale or transfer of
----------------------
Voting Stock of the Company pursuant to Section 7.6(v), Purchaser shall give the
Company the opportunity to purchase such Voting Stock in the following manner:
(a) The Purchaser shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the names of the proposed
purchasers or transferees, the amount of Voting Stock proposed to be sold or
transferred, the proposed price per share therefor (the "Transfer Price") and
the other material terms upon which such disposition is proposed to be made.
(b) The Company shall have the right, exercisable by written notice
given by the Company to the Purchaser within twenty (20) days after receipt of
such Transfer Notice, to purchase all or any portion of the Voting Stock
specified in such Transfer Notice for cash per share equal to the Transfer
Price.
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<PAGE>
(c) If the Company exercises its right of first refusal hereunder, the
closing of the purchase of the Voting Stock with respect to which such right has
been exercised shall take place within sixty (60) days after the Company gives
notice of such exercise, which period of time shall be extended if necessary to
comply with applicable securities laws and regulations. Upon exercise of its
right of first refusal, the Company and the Purchaser shall be legally obligated
to consummate the purchase contemplated thereby and shall use their best efforts
to secure any approvals required in connection therewith.
(d) If the Company does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Purchaser shall be
free, during the period of ninety (90) days following the expiration of such
time for exercise, to sell the Voting Stock specified in such Transfer Notice on
terms no less favorable to the Purchaser than the terms specified in such
Transfer Notice, which period shall be extended, if necessary, to comply with
applicable securities laws and regulations. The transferee shall acquire such
Voting Stock free from any of the provisions of this Agreement, provided,
however, such Voting Stock shall be subject to any restrictions imposed under
applicable securities laws and regulations.
(e) The right of first refusal granted under this Section 8.1 shall
expire on September 1, 1996, subject to the provisions of Sections 4.8 and 7.6
above.
8.2 Tender Offer Sale. Prior to making any sale or exchange of Voting
-----------------
Stock pursuant to Section 7.6(vi)(2) in response to a tender or exchange offer,
Purchaser shall give the Company the opportunity to purchase such Voting Stock
in the following manner:
(a) The Purchaser shall give notice (the "Tender Notice") to the
Company in writing of such intention no later than ten (10) days prior to the
latest time (as the same may be extended) by which Voting Stock must be tendered
in order to be accepted pursuant to such offer or to qualify for any proration
applicable to such offer (the "Tender Date"), specifying the amount of Voting
Stock proposed to be tendered. For purposes hereof, a tender offer to purchase
Voting Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or conditions
to the offeror's obligation to purchase (assuming such conditions are not
impossible to fulfill when the offer is made, without giving effect to the
Company's right of first refusal).
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<PAGE>
(b) If the Tender Notice is given, the Company shall have the right,
exercisable by giving notice (the "Purchase Notice") to the Purchaser at least
five (5) business days prior to the Tender Date, to purchase all or any portion
of the Voting Stock specified in the Tender Notice for cash. If the Company
exercises such right by giving such notice, the closing of the purchase of such
Voting Stock shall take place on the fifth business day after the tender offer
is consummated, or such earlier time as the Company and Purchaser shall agree;
provided that the Company's obligation to purchase such shares of Voting Stock
following delivery of any Purchase Notice shall be contingent on consummation of
the tender offer referred to in the corresponding Tender Notice. As a condition
to the effectiveness of any exercise by the Company of its rights to purchase
under this Section 8.2, at the time the Company delivers a Purchase Notice, it
shall have provided for the payment to the Purchaser of the purchase price for
such shares by an escrow of funds, letter of credit facility, bank guarantee or
similar arrangement reasonably acceptable to the Purchaser. Upon exercise of
this right of first refusal (including provision for payment as described
above), the Company and the Purchaser shall be legally obligated to consummate
the purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith, subject only to consummation of the
tender offer referred to in the corresponding Tender Notice.
(c) The purchase price to be paid by the Company pursuant to this
Section 8.2, if such tender offer is consummated, shall be the purchase price
that the Purchaser would have received if it had tendered the Voting Stock
purchased by the Company and all such Voting Stock had been purchased in such
tender offer, including any increases in the price paid by the tender offeror
after exercise by the Company of its right of first refusal hereunder. If the
purchase price paid by the tender offeror includes any property other than cash,
the value of such property shall be determined in good faith by the Board of
Directors of the Company. The Company and the Purchaser shall use their best
efforts to cause any determination of the value of any such property included in
the purchase price to be made within two (2) business days after consummation of
the tender offer. The Company and the Purchaser shall each share equally the
costs of any investment banking firm selected hereunder.
(d) If the Company does not exercise such right by giving such notice
or fails to complete the purchase, then the Purchaser shall be free to accept
the tender offer with respect to which the Tender Notice was given.
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<PAGE>
(e) The provisions of this Section 8.2 shall expire on September 1,
1996, subject to the provisions of Sections 4.8 and 7.6 above.
8.3 Assignment of Rights. In the event that the Company elects to
--------------------
exercise a right of first refusal under this Section 8, the Company may specify
prior to closing such purchase another person as its designee to purchase all or
part of the Voting Stock to which such notice relates. Any such designee shall
be subject to the approval of the Purchaser proposing to sell or tender, as the
case may be, any of its Shares, which approval shall not unreasonably be
withheld. If the Company shall designate another person as the purchaser
pursuant to this Section 8, the giving of notice of acceptance of the right of
first refusal by the Company shall constitute a legally binding obligation of
the Company to complete such purchase if such person shall fail to do so.
8.4 Termination. Notwithstanding any other provision of this Section 8,
-----------
the provisions of this Section shall terminate and be of no further force and
effect if the Total Voting Power then held by the Purchaser becomes less than
five percent (5%) of the Total Voting Power of the Company.
SECTION 9
INDEMNIFICATION
9.1 Survival of Representations and Warranties. Notwithstanding any right
------------------------------------------
of Purchaser fully to investigate the affairs of the Company and notwithstanding
any knowledge of facts determined or determinable by Purchaser pursuant to such
investigation or right of investigation, the Purchaser has the right to rely
fully upon the representations, warranties, covenants and agreements of the
Company contained in this Agreement. All representations and warranties here
shall survive the execution and delivery of this Agreement for a period of two
and one-half (2 1/2) years after the Closing and all covenants and agreements
shall survive until performed or waived.
9.2 Obligation to Indemnify.
-----------------------
(a) The Company agrees to indemnify, defend and hold harmless the
Purchaser and its Affiliates (and the directors, officers, employees, successors
and assigns of each of them) from and against all claims, actions, suits,
losses, liabilities, damages, deficiencies, judgments, settlements, costs of
investiga-
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<PAGE>
tion or other expenses (including but not limited to interest, penalties and
reasonable attorneys' fees and disbursements incurred in connection with
enforcing this indemnification or otherwise in connection with any of the
foregoing) (collectively, the "Losses") based upon, arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation or warranty
or non-performance or non-compliance of any covenant of the Company contained in
this Agreement, the Registration Rights Agreement (except as otherwise provided
therein) and the Warrant.
(b) The Purchaser agrees to indemnify, defend and hold harmless the
Company and its Affiliates (and the directors, officers, employees, successors
and assigns of each of them) from and against all Losses based upon, arising out
of or otherwise in respect of any inaccuracy in or any breach of any
representation or warranty of the Purchaser or non-performance or non-compliance
of any covenant of the Purchaser contained in this Agreement, the Registration
Rights Agreement (except as otherwise provided therein) and the Warrant.
9.3 Notice and Opportunity to Defend.
--------------------------------
(a) In the event that any party hereto shall sustain or incur any
Losses in respect of which indemnification may be sought by such person pursuant
to Section 9.2, the person seeking such indemnification (the "Indemnitee") shall
assert a claim for indemnification by giving prompt written notice thereof (a
"Claims Notice") which shall describe in reasonable detail the facts and
circumstances upon which the asserted claim for indemnification is based, to the
party providing indemnification (the "Indemnitor") and shall thereafter keep the
Indemnitor reasonably informed with respect thereto; provided that failure of
the Indemnitee to give the Indemnitor prompt notice as provided herein shall not
relieve the Indemnitor of any of its obligations hereunder, except to the extent
that the Indemnitor is materially prejudiced by such failure. In case any
claim, action, suit, hearing or other proceeding (a "Claim") is brought against
any Indemnitee, the Indemnitor shall have the right to assume, conduct and
control the defense, compromise or settlement thereof, by written notice to the
Indemnitee of its intention to do so within ten (10) days after receipt of the
Claims Notice, with counsel reasonably satisfactory to the Indemnitee, at the
Indemnitor's own expense, and thereupon to prosecute in the name and on behalf
of the Indemnitee any available cross-claims, counterclaims or third-party
claims arising with respect to the Claim. If the Indemnitor shall assume the
defense of such Claim, it shall not settle such Claim unless such settlement
includes as an unconditional term thereof the giving by the claimant or the
plaintiff of a release of the Indemnitee, satisfactory
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<PAGE>
to the Indemnitee, from all liability with respect to such Claim nor shall the
Indemnitor settle such Claim without the written consent of the Indemnitee. As
long as the Indemnitor is contesting any such Claim in good faith and on a
timely basis, the Indemnitee shall not pay or settle any such Claim.
Notwithstanding the assumption by the Indemnitor of the defense of any Claim as
provided in this Section 9.3.(a) and without limiting the Indemnitor's right to
assume, conduct and control the defense, compromise or settlement thereof, the
Indemnitee shall be permitted to join in the defense of such Claim and to employ
counsel at its own expense, so long as such joining does not interfere with the
Indemnitor's right to conduct and control such matter.
(b) If the Indemnitor shall fail to notify the Indemnitee of its
desire to assume the defense of any such Claim within the prescribed ten (10)
day period set forth in Section 9.3.(a), or shall notify the Indemnitee that it
will not assume the defense of any such Claim, or if the Indemnitee shall have
defenses available to it which conflict with or are different than the defenses
of the Indemnitor, then the Indemnitee may assume the defense of any such Claim
at the Indemnitor's expense, in which event it may do so in such manner as it
may deem appropriate, and the Indemnitor shall be bound by any determinations
made in any litigation or other proceeding with respect to such Claim or any
settlement thereof effected by the Indemnitee.
SECTION 10
MISCELLANEOUS
10.1 Certain Definitions. As used in this Agreement:
-------------------
(a) The term "Total Voting Power of the Company" means the total
number of votes which may be cast in the election of directors of the Company at
any meeting of stockholders of the Company if all securities entitled to vote in
the election of directors of the Company were present and voted at such meeting.
(b) The term "Voting Stock" means the Common Stock and any other
securities issued by the Company, including the Warrant Shares when issued upon
exercise of the Warrant, having the ordinary power to vote in the election of
directors of the Company.
(c) The term "Significant Event" means (i) any proposed amendment to
the Certificate of Incorporation or Bylaws of the Company (other than a proposal
to create an authorized class of Preferred Stock or increase the number of
authorized shares of
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<PAGE>
Common Stock or Preferred Stock), (ii) disposition of the Company (by way of
merger, sale of stock or disposition of all or substantially all assets or
otherwise), (iii) recapitalization, (iv) liquidation or dissolution, (v) any
vote pursuant to any provision of law or the Company's Certificate of
Incorporation or Bylaws requiring or permitting stockholders to approve any
business combination proposed by or with another person or its affiliates which
have acquired a certain percentage of the Company's shares or to grant voting
rights to such person or to waive or adopt provisions requiring such a vote, or
(vi) any action, including a change in the size, structure or membership of the
Company's Board of Directors which the Purchaser, in its sole discretion,
determines would be materially adverse to the Purchaser's interest in the
Company (other than actions contemplated by this Agreement).
(d) "Average Market Price" of the Voting Stock at any date shall be
the average, based on the ten (10) consecutive trading days ending on the
trading date last preceding the date of determination of such price (the
"Average"), of the closing prices for a share of such security on the principal
national securities exchange on which such security is listed, or, if such
security is not listed on any national securities exchange, the Average of the
closing prices for a share of such security on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if such closing
prices shall not be reported on NASDAQ, the Average of the mean between the
closing bid and asked prices of a share of such security in such case as
reported by The Wall Street Journal, or, if such prices shall not be so
-----------------------
reported, as the same shall be reported by the National Quotation Bureau
Incorporated, or, in all other cases, the value as determined by a single
nationally recognized investment banking firm jointly selected by the Company
and the Purchaser. For this purpose, the parties shall use their best efforts
to cause any determination of the value to be made within ten (10) business days
after the date on which the value is to be measured. The determination by the
investment banking firm selected in the manner set forth above shall be
conclusive.
(e) The terms "beneficial ownership" or "beneficial owner" refer to
the meaning of such terms as provided in Rule 13d-3 promulgated under the
Exchange Act. References to the acquiring, holding or ownership of Voting Stock
hereunder mean beneficial ownership.
(f) The term "group" shall have the meaning comprehended by Section
13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder.
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<PAGE>
(g) The term "person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(h) The term "Total Potential Voting Power," as it relates to
Purchaser's equity position in the Company shall mean Purchaser's percentage of
Total Voting Power after taking into account the exercise by Purchase of the
Warrant and any other securities or other instruments held by Purchaser which
are convertible into Voting Stock.
(i) The term "Affiliate" shall mean any person that controls, is
controlled by or is under common control with the referenced person.
10.2 Termination of Agreement. This Agreement may be terminated:
------------------------
(a) by either party prior to the Closing if the other party violates
or fails to perform any of the material covenants or agreements of the other
party under this Agreement; provided, however, that neither party shall be
entitled to terminate this Agreement pursuant to this sentence unless it shall
have delivered written notice of such default to the other party and such
default shall not have been cured within thirty (30) days after delivery of such
notice;
(b) by Purchaser or the Company if the Closing shall not have taken
place on or before October 31, 1994; or
(c) upon mutual consent of Purchaser of the Company.
10.3 Effect of Termination. From and after the termination of this
---------------------
Agreement, the covenants, obligations and agreements of the parties set forth
herein shall be of no further force or effect and the parties shall be under no
further obligation with respect thereto; provided, however, that in the event of
such termination, to the extent the terms thereof continue to be applicable, the
covenant of the Purchaser contained in Section 7.7 shall continue in full force
and effect.
10.4 Best Efforts. The Company and Purchaser shall use their respective
------------
best efforts to take all actions required under the HSR Act and under any law,
rule or regulation adopted subsequent to the date hereto in order that the
Company may sell the Shares and the Warrant to the Purchaser and the Purchaser
may purchase the Shares and the Warrant and any Voting Stock it may wish to
purchase in the
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<PAGE>
future and to ensure that the conditions to the Closing set forth herein are
satisfied on or before the scheduled date of such Closing.
10.5 Governing Law; Disputes. This Agreement is made subject to and shall
-----------------------
be construed under the laws of the State of Delaware as applied to contracts
entered into solely between residents of, and to be performed entirely within,
such state. The parties agree that the state and federal courts situated in the
State of Delaware shall have exclusive jurisdiction to resolve any disputes with
respect to this Agreement, with each party irrevocably consenting to the
jurisdiction thereof for any actions, suits or proceedings arising out of or
relating to this Agreement. The parties hereto irrevocably waive trial by jury.
In the event of any litigation hereunder, the prevailing party shall be entitled
to costs and reasonable attorneys' fees. In the event of any breach of the
provisions of this Agreement, the parties shall be entitled to equitable relief,
including in the form of injunctions and orders for specific performance, where
the applicable legal standards for such relief in such courts are met, in
addition to all other remedies available to the parties with respect thereto at
law or in equity. Notwithstanding anything to the contrary herein or which may
be based on facts or circumstances pertaining to this Agreement, the Company
hereby irrevocably and unconditionally waives and releases all rights and claims
that it may now or hereafter have that Purchaser's parent, Siemens
Aktiengesellschaft or any of Purchaser's Affiliates organized outside the United
States (including Siemens Nixdorf Informationssysteme AG, ("SNI")), is subject
to the jurisdiction of the federal or state courts of the United States with
respect to this Agreement, provided that nothing in such waiver and release
--------
shall affect the Company's rights, if any, to pursue any claim whatsoever
against Siemens Aktiengesellschaft or SNI in the courts of the Federal Republic
of Germany. In addition, Purchaser hereby irrevocably and unconditionally
waives and releases all rights and claims that it may now or hereafter have that
the Company is subject to the jurisdiction of the courts of the Federal Republic
of Germany with respect to this Agreement, provided that nothing in such waiver
and release shall affect Purchaser's rights, if any, to pursue any claim
whatsoever against the Company in the federal or state courts of the United
States.
10.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by a party without the
prior written consent of the other party; provided, however, that the Purchaser
shall have the right, upon prior notice to the Company, to assign this Agreement
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<PAGE>
to any Wholly-Owned Subsidiary of the Purchaser, the principal offices of which
are located in the United States.
10.7 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede all prior agreements and understandings among the parties
relating to the subject matter hereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
10.8 Notices and Dates. Any notice or other communication given under this
-----------------
Agreement shall be sufficient if in writing and sent by registered, certified
mail or facsimile, return receipt requested, postage prepaid, to a party at its
address set forth below (or at such other address as shall be designated for
such purpose by such party in a written notice to the other party hereto):
(a) if to the Company, to it at:
Pyramid Technology Corporation
3860 North First Street
San Jose, CA 95134
Attn: General Counsel
(408) 428-8820 (fax)
with a copy to:
Larry W. Sonsini, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
(415) 496-4084 (fax)
(b) if to Purchaser, to it at:
Siemens Nixdorf
Information Systems, Inc.
c/o Siemens Nixdorf Informationssysteme AG
Postcach 2160
Furstenalle 7W-4790
Paderborn, Germany
Attn: Mr. G. Schulmeyer
011-4989-636-2519 (fax)
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<PAGE>
with a copy to:
Siemens Corporation
1301 Avenue of the Americas, 42nd Floor
New York, NY 10019
Attn: E. Robert Lupone, Esq., Legal Department
(212) 258-4945 (fax)
All such notices and communications shall be effective when received by the
addressee. In the event that any date provided for in this Agreement falls on a
Saturday, Sunday or legal holiday, such date shall be deemed extended to the
next business day.
10.9 Brokers.
-------
(a) The Company has not engaged, consented to or authorized any
broker, finder or intermediary, except Smith Barney Inc. ("Smith Barney"), to
act on its behalf, directly or indirectly, as a broker, finder or intermediary
in connection with the transactions contemplated by this Agreement. All fees,
commissions and other payments owing to Smith Barney as a result of its or its
employees' participation, negotiations, or other actions, taken in connection
with this Agreement are the sole responsibility and obligation of the Company.
The Company hereby agrees to indemnify and hold harmless the Purchaser from and
against all fees, commissions or other payments owing to Smith Barney or any
other party acting on behalf of the Company hereunder.
(b) The Purchaser has not engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. The Purchaser hereby agrees to indemnify and
hold harmless the Company from and against all fees, commissions or other
payments owing to any party acting on its behalf.
10.10 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restriction of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
10.11 Injunctive Relief. Purchaser, on the one hand, and the Company,
-----------------
on the other, acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that
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<PAGE>
the parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specific performance
of the terms and provisions hereof in any court of the United States or any
state thereof having jurisdiction, this being in addition to any other remedy to
which they may be entitled at law or equity.
10.12 Attorneys' Fees. The prevailing party in any litigation between
---------------
Purchaser and the Company involving this Agreement, the Registration Rights
Agreement or the Warrant shall be entitled to recover from the other party its
reasonable attorneys' fees and costs.
10.13 Costs and Expenses. Each party hereto shall pay its own costs
------------------
and expenses incurred in connection herewith, including the fees of its counsel,
auditors and other representatives, whether or not the transactions contemplated
herein are consummated.
10.14 No Third Party Rights. Nothing in this Agreement shall create or
---------------------
be deemed to create any rights in any person or entity not a party to this
Agreement.
10.15 Publicity. Purchaser and the Company shall not, without the
---------
prior approval of each other party hereto, make or cause to be made any press
release or other public statement concerning the transactions contemplated from
time to time by this Agreement, except as and to the extent that any party
hereto is so obligated by law or the regulations of any stock exchange or the
NASD (but only after the Company or the Purchaser, as the case may be, shall
have consulted with the other party in advance regarding the form and substance
of such press release or public statement).
10.16 Counterparts. This Agreement may be executed in counterpart
------------
copies, each of which shall be deemed as original and all of which, when taken
together, shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
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<PAGE>
"COMPANY" PYRAMID TECHNOLOGY CORPORATION
By: ________________________________
Name:
Title:
"PURCHASER" SIEMENS NIXDORF INFORMATION SYSTEMS, INC.
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
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<PAGE>
EXHIBIT 99(d)(2)
SUPPLEMENT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PYRAMID TECHNOLOGY CORPORATION
AT
$16.00 NET PER SHARE
BY
SIEMENS NIXDORF MID-RANGE ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SIEMENS NIXDORF INFORMATIONSSYSTEME AG
A DIRECT WHOLLY OWNED SUBSIDIARY OF
SIEMENS AKTIENGESELLSCHAFT
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 24, 1995, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT, WHEN ADDED TO THE SHARES OWNED OF RECORD BY SIEMENS NIXDORF
INFORMATIONSSYSTEME AG OR ANY OF ITS SUBSIDIARIES ON THE DATE HEREOF (OTHER
THAN SHARES ISSUABLE UPON EXERCISE OF THE WARRANT (AS DEFINED BELOW)), SHALL
CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS
(OTHER THAN ANY SHARES ISSUABLE UPON THE EXERCISE OF THE WARRANT AND OTHER
THAN THE RIGHTS (AS DEFINED IN THE OFFER TO PURCHASE)) AND (II) THE EXPIRATION
OR TERMINATION OF ALL WAITING PERIODS IMPOSED UPON CONSUMMATION OF THE OFFER
BY ANY APPLICABLE FOREIGN COMPETITION STATUTES AND REGULATIONS, AS WELL AS THE
OTHER CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE. SEE SECTION 14 OF THE
OFFER TO PURCHASE, WHICH SETS FORTH IN FULL THE CONDITIONS OF THE OFFER, AS
WELL AS SECTION 15 OF THE OFFER TO PURCHASE AND THE SECTION OF THIS SUPPLEMENT
ENTITLED "CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS", WHICH DISCUSS
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
THE BOARD OF DIRECTORS OF PYRAMID TECHNOLOGY CORPORATION HAS DETERMINED THAT
EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF PYRAMID TECHNOLOGY CORPORATION, AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
--------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share (the "Shares"), of Pyramid
Technology Corporation should either (1) complete and sign the Letter of
Transmittal which was mailed together with the Offer to Purchase (or a
facsimile thereof) in accordance with the instructions in such Letter of
Transmittal and mail or deliver it together with the certificate(s) evidencing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedure for book-entry transfer set forth in
Section 3 of the Offer to Purchase or (2) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee must contact such broker, dealer, commercial bank, trust company or
other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in Section 3 of the
Offer to Purchase.
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover of this
Supplement. Questions or requests for assistance may also be directed to the
Dealer Managers at their address on the back cover of this Supplement.
Additional copies of this Supplement, the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent or from brokers, dealers, commercial banks or trust
companies.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
--------------
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
--------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 1
SPECIAL FACTORS........................................................... 3
1. Recommendation of the Board; Position of the Company Regarding the
Fairness of the Offer and the Merger................................. 3
2. Opinion of Smith Barney as Financial Advisor to the Company.......... 5
3. Position of SNI AG Regarding the Fairness of the Offer and the Merg-
er................................................................... 8
4. Analysis of Goldman Sachs as Financial Advisors to SNI AG............ 9
5. Purpose and Structure of the Offer and the Merger; Reasons of SNI AG
for the Offer and the Merger......................................... 11
6. Plans for the Company After the Offer and the Merger; Certain
Effects of the Offer and the Merger.................................. 11
7. Rights of Stockholders in the Merger................................. 12
8. Interests of Certain Persons in the Offer and the Merger............. 13
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS............................ 14
FEES AND EXPENSES......................................................... 14
MISCELLANEOUS............................................................. 15
</TABLE>
<TABLE>
<C> <S>
Annex A --Summary of Stockholder Appraisal Rights and Text of Section 262 of
the Delaware General Corporation Law
Annex B --Audited Consolidated Financial Statements (and Related Notes) for
the Company for the Fiscal Years ended September 30, 1993 and
September 30, 1994 and Unaudited Consolidated Financial Statements
(and Related Notes) for the Company for the First Quarter of the
Fiscal Year ending September 30, 1995
</TABLE>
<PAGE>
To the Holders of Common Stock of Pyramid Technology Corporation:
INTRODUCTION
The information contained in this Supplement (the "Supplement") amends and
supplements the Offer to Purchase dated January 27, 1995 (the "Offer to
Purchase") of Siemens Nixdorf Mid-Range Acquisition Corp. ("Purchaser"), a
Delaware corporation and an indirect wholly owned subsidiary of Siemens
Nixdorf Informationssysteme AG ("SNI AG"), a company organized under the laws
of the Federal Republic of Germany and a direct wholly owned subsidiary of
Siemens Aktiengesellschaft ("Siemens AG"), a company organized under the laws
of the Federal Republic of Germany. Pursuant to the Offer to Purchase and this
Supplement, Purchaser hereby offers to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Pyramid Technology
Corporation, a Delaware corporation (the "Company"), at a price of $16.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in this Supplement, the Offer to Purchase and in the related Letter
of Transmittal (which together constitute the "Offer"). Purchaser is a direct
wholly owned subsidiary of Siemens Nixdorf Information Systems, Inc., a
Massachusetts corporation ("SNI U.S."), which is itself a direct wholly owned
subsidiary of SNI AG.
This Supplement is being provided to the Company's stockholders in response
to the Commission's position that SNI AG controls the Company and therefore is
an "affiliate" of the Company for purposes of Rule 13e-3 ("Rule 13e-3")
promulgated under the Securities Exchange Act of 1934, as amended. Although
neither SNI AG nor the Company believes that SNI AG controls the Company and
therefore is an "affiliate" of the Company for purposes of Rule 13e-3, SNI AG
and the Company are nevertheless providing this Supplement to the Company's
stockholders in order to supplement the information already provided to them
in the Offer to Purchase which was mailed to the Company's stockholders on
January 27, 1995.
Except as otherwise set forth in this Supplement, the terms and conditions
previously set forth in the Offer to Purchase remain applicable in all
respects to the Offer, and this Supplement should be read in conjunction with
the Offer to Purchase. Unless the context requires otherwise, terms not
defined herein have the meanings ascribed to them in the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY (WITH ONE
DIRECTOR RECUSING HIMSELF) HAS DETERMINED THAT EACH OF THE OFFER AND THE
MERGER (AS DEFINED BELOW) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Smith Barney Inc. ("Smith Barney"), the Company's financial advisor, has
delivered to the Company's Board of Directors its written opinion to the
effect that, as of the date of such opinion, the consideration to be received
by the stockholders of the Company pursuant to each of the Offer and the
Merger is fair from a financial point of view. A copy of the opinion of Smith
Barney is attached as Annex B to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which was mailed to the
Company's stockholders on January 27, 1995.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT, WHEN ADDED TO THE SHARES OWNED OF RECORD BY SNI AG OR ANY OF ITS
SUBSIDIARIES ON THE DATE HEREOF (OTHER THAN SHARES ISSUABLE UPON EXERCISE OF
THE WARRANT (AS DEFINED BELOW)), SHALL CONSTITUTE A MAJORITY OF THE THEN
OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT LIMITATION,
ALL SHARES ISSUABLE UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS
(OTHER THAN ANY SHARES ISSUABLE UPON THE EXERCISE OF THE WARRANT AND OTHER
THAN
1
<PAGE>
THE RIGHTS (AS DEFINED IN THE OFFER TO PURCHASE))) (THE "MINIMUM CONDITION")
AND (II) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED UPON
CONSUMMATION OF THE OFFER BY ANY APPLICABLE FOREIGN COMPETITION AND ANTITRUST
STATUTES AND REGULATIONS, AS WELL AS THE OTHER CONDITIONS DESCRIBED IN SECTION
14 OF THE OFFER TO PURCHASE WHICH SETS FORTH IN FULL THE CONDITIONS TO THE
OFFER.
On February 3, 1995, Purchaser was informed by the Federal Trade Commission
that early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), relating to
the purchase of Shares pursuant to the Offer had been granted. Accordingly,
the condition to the Offer requiring the expiration or termination of any
applicable waiting period under the HSR Act prior to expiration of the Offer
has been satisfied. The Offer remains subject to the other conditions set
forth in Section 14 of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of January 20, 1995 (the "Merger Agreement") among SNI AG, Purchaser and the
Company. 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"), Purchaser 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 an indirect wholly owned subsidiary of SNI AG. At the effective time of
the Merger (the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the
treasury of the Company or owned by Purchaser, SNI AG or any direct or
indirect wholly owned subsidiary of SNI AG or the Company, and other than
Shares held by stockholders who shall have demanded and perfected appraisal
rights, if any, under Delaware Law) will be cancelled and converted
automatically into the right to receive $16.00 in cash, or any higher price
that may be paid per Share in the Offer, without interest (the "Merger
Consideration"). The Merger Agreement is more fully described in Section 10 of
the Offer to Purchase.
The Company has advised Purchaser that as of January 31, 1995, 15,644,971
Shares were issued and outstanding and that the Shares were held by
approximately 751 record holders. The Company has advised Purchaser that as of
January 31, 1995, the Company had reserved a total of 3,344,996 Shares for
future issuance pursuant to outstanding employee stock options or stock
incentive rights, 339,697 Shares were reserved for future issuance pursuant to
future grants of employee stock options or stock incentive rights and a total
of 1,330,000 Shares were reserved for issuance upon exercise of the Warrant
(as defined below). SNI AG currently owns 2,717,743 Shares, which it acquired
in a series of transactions. In 1985, the Company entered into a Convertible
Subordinated and Preferred Stock Purchase Agreement (the "Nixdorf Stock
Agreement") with Nixdorf Computer AG ("Nixdorf"). Under the Nixdorf Stock
Agreement, Nixdorf purchased approximately 5% of the Company's Shares. The
Nixdorf Stock Agreement also gave Nixdorf the right to purchase its pro rata
share of certain equity financings of the Company as long as Nixdorf held a
minimum 5% stock interest. In March 1990, Nixdorf exercised its right to
purchase approximately 140,000 Shares as part of the Company's secondary
public offering of the Shares, to maintain Nixdorf's pro rata equity ownership
at approximately 5% of the Company's Shares. In 1990, Nixdorf became majority-
owned by Siemens AG, which renamed Nixdorf as Siemens Nixdorf
Informationssysteme AG ("SNI AG" herein). Subsequently, on August 21, 1994,
the Company and SNI U.S. entered into the Common Stock and Warrant Purchase
Agreement (the "Purchase Agreement") pursuant to which, on September 13, 1994,
SNI U.S. purchased (i) 2,000,000 Shares and (ii) a warrant (the "Warrant") to
purchase up to 1,330,000 Shares, for an aggregate purchase price of
$17,250,000. Subsequently, SNI U.S. transferred to SNI AG the 2,000,000 Shares
and the Warrant. In connection with such transfer, SNI AG assumed all of SNI
U.S.'s rights and obligations under the Purchase Agreement and the
Registration Rights Agreement, dated
2
<PAGE>
as of September 13, 1994, between the Company and SNI U.S. The Shares
beneficially owned by SNI AG on the date hereof (excluding any Shares issuable
upon exercise of the Warrant) constitute 17.37% of the issued and outstanding
Shares as of January 31, 1995. SNI AG intends to transfer the 2,717,743 Shares
it owns on the date hereof to Purchaser immediately following the purchase of
Shares by Purchaser pursuant to the Offer. SNI AG does not currently intend to
exercise the Warrant in connection with the Offer and the Merger.
Consequently, as of the date hereof, the Minimum Condition would be satisfied
if Purchaser acquired 6,947,090 Shares.
Pyramid and SNI AG have entered into equipment sales and technology
licensing transactions during fiscal years 1993, 1994 and the first quarter of
fiscal 1995. Revenues attributable to SNI AG and the associated percentage of
Pyramid's total revenues were $14,983,000 in fiscal year 1993 (6.4% of
Pyramid's total revenues), $11,312,000 in fiscal year 1994 (5.2%), and
$6,587,000 in the first quarter of fiscal year 1995 (10.6%).
PROCEDURES FOR TENDERING SHARES ARE SET FORTH IN SECTION 3 OF THE OFFER TO
PURCHASE.
THIS SUPPLEMENT AND THE OFFER TO PURCHASE CONTAIN IMPORTANT INFORMATION
WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
SPECIAL FACTORS
1. RECOMMENDATION OF THE BOARD; POSITION OF THE COMPANY REGARDING THE FAIRNESS
OF THE OFFER AND THE MERGER
In the spring of 1994, the Company began to consider alternative means of
raising additional working capital to support its operations. Because the
Company's financial performance at that time did not permit the Company access
to the public capital markets on terms acceptable to the Company, the Company
evaluated the possibility of establishing financing or strategic relationships
with other companies in its industry. In this context, management of the
Company contacted and had talks with representatives of two companies about
the possibility of a variety of arrangements, including product licensing
arrangements, a minority equity investment in the Company and an acquisition
of or other corporate combination with the Company. The discussions with these
companies ended in each case without any agreement as to any possible
arrangement. In the summer of 1994, another company in the Company's industry
contacted management of the Company concerning a possible acquisition while
the Company was in the process of negotiating a strategic equity investment
with SNI U.S. (which culminated in the Purchase Agreement). However, because
of the Company's belief in the favorable benefits that could be expected from
a closer relationship with SNI U.S., this contact never proceeded beyond
preliminary discussions.
The Company has not received any other inquiries or expressions of interest
concerning a potential transaction with the Company from other potential
buyers following the joint public announcement by the Company and SNI AG on
January 9, 1995 of their entering into discussions concerning a potential
negotiated merger transaction.
The Board at a special meeting held on January 20, 1995 determined that the
Offer and the transactions contemplated by the Merger Agreement are fair to,
and in the best interests of, the Company's stockholders (other than SNI AG
and its affiliates), approved and adopted the Merger Agreement and the
transactions contemplated thereby and recommended that stockholders accept the
Offer and (if a shareholder vote is required under Delaware Law) approve the
Merger Agreement and the Merger. The January 20 meeting of the Board was
attended by all directors other than Dr. Rudolph Bodo, SNI AG's designee on
the Company's Board, who is also Vice President and General Manager of SNI
AG's Mid-Range Systems Unit. Dr. Bodo recused himself from all deliberations
of the Board concerning, and has not acted on behalf of SNI AG in connection
with, the Offer and the Merger. Subject to Dr. Bodo's absence as a
participating Board member, the approval and recommendation of the Board
concerning the Offer and the Merger were unanimous. A copy of the Company's
letter to
3
<PAGE>
stockholders dated January 27, 1995 was filed as Exhibit 20.2 to the Schedule
14D-9 and is incorporated herein by reference.
Reference is made to the Offer to Purchase for a summary of SNI AG's
contacts with the Company leading to the execution of the Merger Agreement.
In reaching the determination described above, the Board considered a number
of factors, including, without limitation, the following:
(i) The historical financial condition and results of operations of the
Company, and the projected financial condition and results of operations of
the Company on both a long-term and short-term basis;
(ii) The business and strategic objectives of the Company, and the
attendant risks involved in achieving those objectives;
(iii) A review of the possible alternatives to the Offer and the Merger
(including the possibility of continuing to operate the Company as an
independent entity and the sale of the Company through a merger or by any
other means to other potential buyers), the range of possible values to the
Company's stockholders of such alternatives and the timing and the
likelihood of actually accomplishing those alternatives;
(iv) The detailed financial and valuation analyses presented to the Board
by Smith Barney, including market prices and financial data relating to
other companies engaged in businesses considered comparable to the Company
and the prices and premiums paid in recent selected acquisitions of
companies engaged in businesses considered comparable to those of the
Company;
(v) The relationship of the Offer price to current and historical market
prices of the Shares and to other relevant valuation measures;
(vi) The presentation of Smith Barney at the January 20, 1995 Board
meeting and the written opinion of Smith Barney as of that date, that the
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;
(vii) A review of discussions between the Company and representatives of
other companies in the Company's industry concerning strategic, financing
and other relationships which had taken place prior to the Company's
discussions and negotiations with SNI AG with respect to the Offer and the
Merger;
(viii) The absence of any inquiries or expressions of interest concerning
a potential transaction with the Company from other potential buyers
following the joint public announcement by the Company and SNI AG on
January 9, 1995 of their entering into discussions concerning a potential
negotiated merger transaction, and the fact that the Merger Agreement does
not preclude the Company from discussing with third parties unsolicited
competing offers or, subject to payment of a "break-up" fee and expenses,
from accepting a competing offer which the Board determines, in the
exercise of its fiduciary duties, to be more favorable to the Company's
stockholders than the Offer and the Merger;
(ix) The likelihood that the proposed acquisition would be consummated,
including the experience, reputation and financial condition of SNI AG and
its ultimate parent, Siemens AG, and the risks to the Company that the
acquisition would not be consummated; and
(x) The effect of the transaction on the Company's relationship with its
employees and the communities in which it operates.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to
the specific factors considered in reaching its respective determinations.
4
<PAGE>
The Board recognized that the Offer and the Merger are not structured to
require the approval of a majority of the stockholders of the Company other
than SNI AG, and that Purchaser, if it purchases a sufficient number of Shares
to satisfy the Minimum Condition, would have sufficient voting power to
approve the Merger without the affirmative vote of any other stockholder of
the Company. While consummation of the Offer would result in the stockholders
of the Company receiving a premium for their Shares over the trading prices of
the Shares prior to the announcement of the Offer and the Merger, it would
eliminate any opportunity for stockholders of the Company other than SNI AG to
participate in the potential future growth prospects of the Company. The
Board, however, believed that this was reflected in the Offer price to be
paid.
The Board determined that it was not necessary to appoint a committee of
independent directors or an unaffiliated representative to act solely on
behalf of the unaffiliated stockholders of the Company for the purpose of
negotiating the terms of the Merger Agreement. In making such determination,
the Board noted that of the seven directors who participated in the
deliberations concerning the Offer and the Merger, five are not employed by
the Company and will have no financial interest in the Company following
consummation of the Merger. Dr. Bodo, SNI AG's designee on the Board, did not
participate in any Board deliberations concerning, or act on behalf of
Purchaser in connection with, the Offer and the Merger. As noted above, the
Board unanimously (with Dr. Bodo recusing himself) has determined that each of
the Offer and the Merger is fair to, and in the best interests of, the
stockholders of the Company.
The Company has advised Purchaser that, to the Company's knowledge after
reasonable inquiry, each of the Company's executive officers, directors and
affiliates, with the exception of SNI AG and any subsidiary of SNI AG,
including Purchaser, presently intends to tender all Shares held of record or
beneficially owned by such person pursuant to the Offer, other than Shares, if
any, held by any such person which when tendered, could subject such person to
liability under the provisions of Section 16(b) of the Exchange Act. See Item
6 of the Schedule 14D-9. Except for the recommendation of the Board contained
in this Supplement and in the Schedule 14D-9, to the Company's knowledge after
reasonable inquiry, no executive officer, director or affiliate of the Company
has made a recommendation in support of or opposed to the Offer or the Merger.
2. OPINION OF SMITH BARNEY AS FINANCIAL ADVISOR TO THE COMPANY
Smith Barney was retained by the Company to act as its financial advisor in
connection with the Board's consideration of the Offer and the Merger. In
connection with such engagement, the Company requested that Smith Barney
evaluate the fairness, from a financial point of view, to the stockholders of
the Company of the consideration to be received by such stockholders pursuant
to the Offer and Merger. On January 20, 1995, Smith Barney rendered to the
Board its written opinion to the effect that, as of such date and based upon
and subject to certain considerations and assumptions, the consideration to be
received by the stockholders of the Company pursuant to the Offer and Merger
was fair, from a financial point of view.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives of the Company concerning the business, operations and
prospects of the Company. Smith Barney examined certain publicly available
business and financial information relating to the Company and SNI AG, as well
as certain financial forecasts and other data for the Company which were
provided to Smith Barney by senior management of the Company. Smith Barney
reviewed the financial terms of the Merger as set forth in the Merger
Agreement in relation to, among other things, the Company's historical and
projected earnings and the capitalization and financial condition of the
Company. Smith Barney considered, to the extent publicly available, the
financial terms of certain other similar transactions which Smith Barney
considered comparable to the Merger and analyzed certain financial and other
publicly available
5
<PAGE>
information relating to the businesses of other public companies whose
operations Smith Barney considered comparable to those of the Company. In
addition to the foregoing, Smith Barney conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as Smith Barney deemed necessary to arrive at its opinion. Smith Barney noted
that its opinion was necessarily based upon financial, stock market and other
conditions and circumstances existing and disclosed to Smith Barney as of the
date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of the financial
and other information publicly available or furnished to or otherwise
discussed with Smith Barney. With respect to financial forecasts and other
information provided to or otherwise discussed with Smith Barney, Smith Barney
assumed that such forecasts and other information were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
management of the Company as to the expected future financial performance of
the Company. Smith Barney assumed the correctness of, and relied upon, the
representations of the Company and SNI AG, pursuant to the Merger Agreement,
and did not attempt to independently verify any such information. In addition,
Smith Barney did not make or obtain an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company nor did
Smith Barney make any physical inspection of the properties or assets of the
Company. Although Smith Barney evaluated the financial terms of the Merger,
Smith Barney was not asked to and did not recommend the specific consideration
to be paid by Purchaser in the Merger. No other limitations were imposed by
the Company on Smith Barney with respect to the investigations made or
procedures followed by Smith Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED JANUARY 20, 1995,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THE SCHEDULE 14D-9, WHICH WAS
MAILED TO THE COMPANY'S STOCKHOLDERS ON JANUARY 27, 1995. STOCKHOLDERS OF THE
COMPANY ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. SMITH
BARNEY'S OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION TO BE
RECEIVED BY THE STOCKHOLDERS OF THE COMPANY FROM A FINANCIAL POINT OF VIEW AND
HAS BEEN PROVIDED SOLELY FOR THE USE OF THE COMPANY'S BOARD OF DIRECTORS IN
ITS EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER
OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER OF THE COMPANY AS TO WHETHER SUCH STOCKHOLDER SHOULD ACCEPT THE
OFFER. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In preparing its opinion to the Board of Directors of the Company, Smith
Barney performed a variety of financial and comparative analyses, including
those described below, and provided the Board of Directors with a written
presentation with respect to such analyses. A copy of Smith Barney's written
presentation to the Board of Directors has been included as Exhibit (b)(2) to
the Statement on Schedule 13E-3 filed by Purchaser, SNI AG, Siemens AG and the
Company with the Commission and will be available for inspection and copying
at the principal executive offices of the Company during its regular business
hours by any interested stockholder of the Company or such stockholder's
representative duly designated in writing. The summary of such analyses set
forth herein does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. In arriving at its opinion,
Smith Barney did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Smith Barney believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying such
analyses and
6
<PAGE>
its opinion. In its analyses, Smith Barney made numerous assumptions with
respect to the Company, industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond
the control of the Company. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty.
Comparable Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples
of computer hardware/systems companies, including Amdahl Corporation, Auspex
Systems, Convex Computer, Data General, Digital Equipment Corp., Hewlett-
Packard, NetFrame, Parallan Computer, Sequent Computer Systems, Silicon
Graphics, Stratus Computer, Sun Microsystems, Tandem Computers and Tricord
Systems (collectively, the "Comparable Companies"). Smith Barney compared
market values per share as multiples of, among other things, latest 12 months
net earnings per share and earnings per share for calendar 1994 and projected
calendar 1995. The multiples of latest 12 months net earnings per share and
earnings per share for calendar 1994 and projected calendar 1995 of the
Comparable Companies were between the following ranges: (i) latest 12 months:
10.7x to 50.3x (with a mean of 21.7x and a median of 17.7x); (ii) calendar
1994: 8.8x to 34.9x (with a mean of 19.1x and a median of 17.6x); and (iii)
projected calendar 1995: 7.7x to 47.1x (with a mean of 19.0x and a median of
14.8x). Purchaser's offer of $16 per Share represents a multiple of projected
calendar 1995 net income per Share of 26.6x. The Company's net earnings per
Share for the latest 12 months and for calendar 1994 were negative; therefore,
the latest 12 months multiple and the calendar 1994 multiple were not
meaningful.
Smith Barney compared adjusted market values (equity market value, plus the
book value of debt and preferred stock, less cash and cash equivalents) to
latest 12 months net revenues and operating income. The multiples of latest 12
months net revenues and operating income of the Comparable Companies were
between the following ranges: (i) latest 12 months net revenues: 0.32x to
3.06x (with a mean of 1.12x and a median of 1.05x); and (ii) latest 12 months
operating income: 8.5x to 22.6x (with a mean of 14.7x and a median of 13.6x).
Purchaser's offer of $16 per Share represents a multiple of the Company's net
revenues for the latest 12 months of 0.95x. The Company's latest 12 months
operating income was negative; therefore, the operating income multiple was
not meaningful.
Smith Barney also considered the profit margins, debt to capitalization
ratios, historic revenue growth and projected earnings per share growth of the
Comparable Companies with those of the Company. All projected earnings per
share figures for the Comparable Companies were based on the consensus
estimates as provided by the Institutional Brokers Estimate System. All
multiples for Comparable Companies were based on closing stock prices as of
January 18, 1995.
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed the purchase prices and implied
transaction multiples in the following selected merger and acquisition
transactions in the computer hardware/systems industry: MIPS Computer
Systems/Silicon Graphics; Teradata/AT&T; NCR/AT&T; Prime Computer/JH Whitney &
Company; Apollo Computer/Hewlett-Packard; and Convergent/Unisys (the "Selected
Acquisitions"). In this analysis, Smith Barney compared transaction values as
multiples of latest 12 months revenues of the Selected Acquisitions and
compared these multiples to the multiple of the Company's revenue as set forth
in the Comparable Companies analysis. The multiples of revenue of the Selected
Acquisitions were between the range of 0.8x to 1.7x (with a mean of 1.1x).
Purchaser's offer of $16 per Share represents a multiple of the Company's net
revenues for the last 12 months of 0.95x. Also, Smith Barney compared the
latest 12 months earnings before interest, taxes, depreciation and
amortization ("EBITDA") margins of the targets in the Selected Acquisitions
with the latest 12 months EBITDA margin of the Company. The EBITDA margins of
the targets in the Selected Acquisitions were between the range of 6.8% to
21.5% (with a mean of 12.4%). The latest twelve months EBITDA margin for the
Company was 4.2%.
7
<PAGE>
No company, transaction or business used in the Comparable Companies and
Selected Acquisitions analyses as a comparison is identical to the Company.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that could affect the acquisition or public trading value of the
Comparable Companies or the business segment or company to which they are
being compared.
Smith Barney also analyzed the purchase price paid in selected technology-
related merger and acquisition transactions since 1988 to determine, among
other things, the percentage by which the price paid in each such transaction
exceeded the market value of the target company's stock one month and two
months prior to the announcement of such transaction. The mean value of the
calculation of the premium paid versus the market price of the stock in all
such transactions one month and two months prior to the announcement thereof
was 57.6% and 65.0%, respectively, and the median was 53.7% and 61.6%,
respectively.
Discounted Cash Flow Analysis. Smith Barney performed a discounted cash flow
analysis of the projected free cash flow of the Company for the fiscal years
ending September 30, 1995 through 1999, assuming, among other things, discount
rates of 15.0%, 17.5%, 20.0% and 22.5% and terminal multiples of net income of
15.0x to 19.0x. Smith Barney performed this analysis based on internal
operating projections prepared by the Company's management. This analysis
resulted in ranges of values per Share of $11.59 to $19.79.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other
comparative analyses, including, among other things, a review of the Company's
historical and projected financial results; the history of trading prices for
the Shares and the relationship between movements of such Shares, movements of
the common stock of Comparable Companies and selected companies and the stock
market in general.
On June 7, 1994, the Company entered into a letter agreement with Smith
Barney pursuant to which Smith Barney was engaged to act as exclusive
financial advisor to the Company and to furnish financial advisory and
investment banking services in connection with a variety of potential
transactions between the Company and a list of specific companies provided by
the Company. This letter agreement was amended on January 9, 1995 to include
SNI AG as one of the companies identified by the Company. Under the letter
agreement, the Company agreed to pay Smith Barney a fee based on the value of
a transaction. Assuming the Offer and the Merger are consummated, Smith Barney
will receive a total fee of approximately $2.2 million. Of such amount,
$250,000 shall be paid for the delivery by Smith Barney of the opinion
described above. In addition to the foregoing compensation, the Company has
agreed to reimburse Smith Barney for its reasonable out-of-pocket expenses and
to indemnify Smith Barney against certain liabilities arising out of or in
connection with this engagement.
Smith Barney has in the past two years provided financial advisory and
investment banking services to the Company and has received fees of
approximately $350,000 for rendering such services.
Smith Barney is a nationally recognized investment banking firm and was
selected by the Company based on Smith Barney's experience and expertise.
Smith Barney regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes.
3. POSITION OF SNI AG REGARDING THE FAIRNESS OF THE OFFER AND THE MERGER
SNI AG believes that the consideration to be received by the Company's
stockholders, other than SNI AG, pursuant to the Offer and the Merger is fair
to the Company's stockholders. SNI AG bases its belief solely on (i) the fact
that the Company's Board concluded that the Offer and the Merger are fair to
and in the best interests of the Company's stockholders, (ii) the report of
Goldman Sachs to SNI
8
<PAGE>
AG described below, (iii) the fact that, in order to avoid any possibility of
conflict of interest, Dr. Bodo, SNI AG's representative on the Board, did not
participate in any Board deliberations concerning, or act on behalf of SNI AG
in connection with, the Offer or the Merger, (iv) the fact that SNI AG did not
and does not have the ability to control the Company and that the parties
consequently negotiated the terms of the Offer and the Merger and the Merger
Agreement with the Company on an arm's-length basis, (v) the fact that the
consideration to be paid in the Offer and the Merger represents a premium of
approximately 50% over the weighted average closing price for the Shares both
for the preceding calendar quarter and calendar year 1994, and (vi) the
historical financial performance of the Company and its financial results. SNI
AG has reviewed the factors considered by the Board in support of their
decision, as described in the Schedule 14D-9 and above, and had no basis to
question their consideration of or reliance on those factors. In reaching its
conclusions, SNI AG also considered generally the current and historical
market prices for the Shares.
SNI AG did not find it practicable to assign, nor did it assign, relative
weights to the individual factors considered in reaching its conclusion as to
fairness.
4. ANALYSIS OF GOLDMAN SACHS AS FINANCIAL ADVISORS TO SNI AG
SNI AG retained Goldman Sachs as its exclusive financial advisors in
connection with the Offer and the Merger. Goldman Sachs were requested to
review data relating to the Company which was supplied by SNI AG, as well as
published financial and market information, and to advise SNI AG with respect
to certain means of valuation of the Company. Goldman Sachs were not requested
to provide any opinion as to the fairness of the Offer to SNI AG or the
stockholders of the Company or to perform any independent examination or
investigation of the Company's businesses or assets. Accordingly, Goldman
Sachs did not attempt to verify the accuracy or completeness of any of the
information supplied by SNI AG or obtained through other sources, nor did
Goldman Sachs, prior to the delivery of the Goldman Sachs Report (as defined
below), conduct any discussion with, or obtain any information from, any
officers or employees of the Company in connection with their advice to SNI
AG.
At a meeting between representatives of Goldman Sachs, SNI AG and its
counsel on January 3, 1995 (the "January 3 Meeting"), Goldman Sachs delivered
their evaluation of the Company (the "Goldman Sachs Report"), a summary of
which is set forth below. Based on such evaluation, Goldman Sachs advised SNI
AG that assuming the accuracy and completeness of the information supplied by
SNI AG and publicly available information concerning the Company, it was the
view of Goldman Sachs that the value of the Company in the acquisition market
was approximately $13.00 to $15.00 per Share. The range of value for the
Company was derived by applying methodologies and assumptions which Goldman
Sachs believed measured the value of the Company under then current market
conditions.
In arriving at their evaluation, Goldman Sachs reviewed, among other things:
Annual Reports to Shareholders and Annual Reports on Form 10-K of the Company
for the five years ended September 30, 1994; certain interim reports to
shareholders and Quarterly Reports on Form 10-Q; certain other communications
from the Company to its shareholders; and certain financial analyses and
forecasts for the Company separately prepared by the management of each of SNI
AG and the Company. SNI AG provided Goldman Sachs with information describing
the synergies that SNI AG believed to be attainable upon consummation of the
Offer and the Merger. Goldman Sachs also collected and summarized reports
published during 1994 by various analysts who followed the Company and made
recommendations with respect to holding its Shares. In addition, Goldman Sachs
reviewed the reported price and trading activity for the Shares, compared
certain financial and market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations
and performed such other studies and analyses as Goldman Sachs considered
appropriate. The financial and comparative analyses Goldman Sachs performed in
connection with their evaluation of the Company and the preparation of the
Goldman Sachs Report included: (i) analyses of selected comparable publicly-
traded companies; (ii) comparable transaction analyses; and (iii) a future
value analysis.
9
<PAGE>
Valuation Summary of Selected Publicly-Traded Companies. Goldman Sachs
reviewed certain financial and stock market information of the Company and
selected publicly traded companies engaged in the computer hardware industry.
Such companies included: Auspex Systems, Concurrent Computer, Data General and
Encore Computer (the "RISC Companies"); and Sequent Computer Systems, Stratus
Computer and Tandem Computers (the "OLTP Companies", and together with the
RISC Companies, the "Selected Companies"). Although the Selected Companies
were comparable to the Company based on certain characteristics of their
businesses, none of these companies possessed characteristics identical to
those of the Company. Goldman Sachs examined and compared various valuation
methods and calculated various financial multiples and ratios for the Company
and the Selected Companies based on publicly available information. The
multiples and ratios for the Company were calculated using a price of $13.00
per Share, which was the closing price of the Shares on December 30, 1994, the
last trading day prior to the January 3 Meeting. The multiples and ratios for
each of the Selected Companies were based on the most recent publicly
available information as of December 30, 1994.
The multiples were as follows: (i) the ratio of price to 1995 earnings
estimates (which ratio was based on analysts' estimates)--20.6x for the
Company, which compared to a median of 12.2x for the RISC Companies and a
median of 11.7x for the OLTP Companies; (ii) market capitalization as a
percentage of latest quarter annualized sales--.79x for the Company, which
compared to a median of .93x for the RISC Companies and 1.18x for the OLTP
Companies; and (iii) the ratio of market capitalization to latest quarter
annualized EBITDA--10.0x for the Company, which compared to a median of 6.5x
for the RISC Companies and 5.1x for the OLTP Companies.
Comparable Transaction Analyses. Goldman Sachs reviewed and compared the
prices paid in selected merger and acquisition transactions in the computer
hardware industry (the "Selected Transactions") and a range of possible prices
which might be paid by SNI AG. Goldman Sachs calculated the aggregate
consideration and various financial multiples from available actual and
estimated information for each such Selected Transaction. The aggregate
consideration for the Selected Transactions ranged from $92 million to $7,277
million. The financial multiples, in each case (other than the market premium
multiple) based on the sum of the consideration paid for the equity of the
acquired company plus the amount of net debt assumed in the transaction
("Aggregate Consideration"), were as follows: (i) the ratio of Aggregate
Consideration to sales for the latest twelve months prior to the announcement
of each of the Selected Transactions which ranged from a high of 2.84x to a
low of .16x, with a median of .98x; (ii) the ratio of Aggregate Consideration
to EBITDA for the latest twelve months for Selected Transactions ranged from a
high of 23.7x to a low of 3.6x with a median of 7.8x; (iii) the ratio of
Aggregate Consideration to the latest 12 months net income for the Selected
Transactions which ranged from a high of 58.2x to a low of 6.7x with a median
of 24.4x; and (iv) the market premium for the Selected Transactions ranged
from a high of 129% to a low of 5.7% with a median of 42%.
Future Value Analysis. Goldman Sachs performed a future value analysis based
upon (a) estimates of financial performance provided to Goldman Sachs by SNI
AG based upon certain financial projections of the Company which, using
discount rates that ranged from 10% to 16% with terminal values of the
Company's fiscal 1997 net income that ranged from 10x to 16x, resulted in
implied per Share values ranging from $12.70 to $21.38 and (b) certain
independent research analysts' estimates of future financial performance which
were publicly available which, using discount rates that ranged from 10% to
16% with terminal values of the Company's fiscal 1997 net income that ranged
from 10x to 16x, resulted in implied per share values ranging from $8.71 to
$15.17.
Other Analyses. Goldman Sachs prepared a financial analysis of the proposed
acquisition of the Company by SNI AG and Purchaser and calculated the
aggregate consideration and various financial multiples based upon cash
consideration per Share prices ranging from $10.00 to $26.00. Goldman Sachs
reviewed the financial and operational fit between the Company and certain
other potential strategic purchasers and merger partners.
10
<PAGE>
Goldman Sachs are acting as Dealer Managers in connection with the Offer and
have provided certain financial advisory services in connection with the
acquisition of the Company. Siemens Corporation ("Siemens"), a Delaware
corporation and an indirect wholly owned subsidiary of Siemens AG, has paid
Goldman Sachs a fee of $250,000, has agreed to pay an additional fee of
$250,000 upon the signing of the Merger Agreement and has agreed to pay an
additional transaction fee of $1,250,000 when the Offer and the Merger are
consummated. Siemens has also agreed to reimburse Goldman Sachs for all
reasonable out-of-pocket expenses incurred by Goldman Sachs, including the
reasonable fees and expenses of legal counsel, and to indemnify Goldman Sachs
against certain liabilities and expenses in connection with their engagement,
including certain liabilities under the federal securities laws.
Goldman Sachs is an internationally recognized investment banking firm
engaged in the evaluation of businesses and their securities in connection
with mergers and acquisitions, negotiated primary and secondary underwritings,
private placements and valuations for corporate and other purposes. SNI AG
selected Goldman Sachs as its financial advisor based upon Goldman Sachs'
familiarity with the industry in which the Company operates and its
experience, ability and reputation with respect to mergers and acquisitions.
A copy of the Goldman Sachs Report has been filed as Exhibit (b)(3) to the
Statement on Schedule 13E-3 filed by SNI AG, Purchaser, Siemens AG and the
Company and is incorporated herein by reference. Copies of the Goldman Sachs
Report are available for inspection and copying at the principal executive
offices of SNI AG during regular business hours by any stockholder of the
Company, or a stockholder's representative who has been so designated in
writing.
5. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONSOF SNI AG FOR THE
OFFER AND THE MERGER
The purpose of the Offer and the Merger is for Siemens AG indirectly to
acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for Siemens AG indirectly to acquire all Shares not
purchased pursuant to the Offer. Upon consummation of the Merger the Company
will become an indirect wholly owned subsidiary of Siemens AG. The acquisition
of the entire equity interest in the Company has been structured as a cash
tender offer followed by a cash merger in order to provide a prompt and
orderly transfer of ownership of the Company from the public stockholders to
Purchaser and to provide stockholders with cash for all their Shares.
SNI AG and the Company believe that the businesses of the Company are
complementary to SNI AG's businesses and that a number of benefits can be
achieved by aligning or integrating certain of the Company's operations with
those of SNI AG. SNI AG and the Company considered attempting to achieve such
an alignment or integration through an expansion of the parties' commercial
relationship without increasing SNI AG's ownership of Shares and through such
an expansion of the commercial relationship coupled with some increase in SNI
AG's ownership of Shares. SNI AG and the Company concluded, however, that
these approaches would not enable SNI AG and the Company to take full
advantage of market opportunities and to achieve the desired operating
benefits. Consequently, following joint studies and discussions, SNI AG and
the Company concluded that an acquisition by SNI AG of the entire equity
interest in the Company constituted the only feasible means to achieve such
operating benefits. SNI AG and the Company chose to undertake the transaction
at this time because the businesses in which SNI AG and the Company operate
are subject to rapid change and SNI AG and the Company wished to seize
commercial opportunities that might no longer be available at a later time.
6. PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER;CERTAIN EFFECTS OF THE
OFFER AND THE MERGER
Pursuant to the Merger Agreement, upon completion of the Offer, SNI AG
intends to effect the Merger in accordance with the terms of the Merger
Agreement. See Section 10 of the Offer to Purchase.
11
<PAGE>
The management of SNI AG has begun, and intends to continue, a review of the
Company and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel to determine what changes, if
any, would be desirable in order best to organize and integrate the activities
of the Company into those of SNI AG. As more fully described in Item 3 of the
Schedule 14D-9, at the request of SNI AG, John S. Chen, President and Chief
Operating Officer of the Company, has entered into a Management Retention
Agreement (the "Chen Agreement") with the Company, commencing upon the
effectiveness of the Merger and terminating five years later. Terms of the
Chen Agreement include Mr. Chen serving as Chief Executive Officer of the
Company and as a member of the Board. In addition, as more fully described in
Item 3 of the Schedule 14D-9, discussions have taken place regarding a senior
management position for Mr. Lussier, Chief Executive Officer and Chairman of
the Board of the Company, within the Siemens group of companies. Except as
noted above, following the Offer and the Merger, SNI AG intends that the
Company's current management, under the direction of the Company's Board of
Directors as it will be constituted following the Merger, will continue to
manage the Company as an ongoing business in the same general manner as it is
now being conducted. However, SNI AG expressly reserves the right to make any
changes that it deems necessary or appropriate in light of its review or in
light of future developments or that would be desirable to permit SNI AG more
effectively to manage the Company and function more efficiently as an
integrated worldwide enterprise. Except as otherwise disclosed in this
Supplement or the Offer to Purchase, SNI AG has no present plans or proposals
that would result in an extraordinary corporate transaction involving the
Company or any of its subsidiaries, such as a merger, reorganization,
liquidation, sale or transfer of a material amount of assets, or any material
changes in the Company's present dividend policy, corporate structure or
business, the composition of its management or personnel or its indebtedness
or capitalization.
At September 30, 1994, Pyramid's book value per Share was $8.74. At December
31, 1994, Pyramid's book value per Share was $8.80. If the Merger is
consummated, the interest of SNI AG in the Company's net book value and net
income will become 100% and SNI AG and its subsidiaries will be entitled to
all benefits resulting from that interest, including all income generated by
the Company's operations and any future increase in the Company's value.
Similarly, SNI AG will also bear the risk of any decrease in the value of the
Company after the Merger. Upon consummation of the Merger, the Surviving
Corporation will become a privately held corporation. Accordingly,
stockholders will not have the opportunity to participate in the earnings and
growth of the Surviving Corporation after the Merger and will not have any
right to vote on corporate matters. Similarly, stockholders will not face the
risk of decline in the value of the Company after the Merger.
Purchaser intends, and is required under the Merger Agreement, to vote all
of its Shares, whether currently owned by SNI AG and transferred to Purchaser
immediately after consummation of the Offer or acquired pursuant to the Offer,
in favor of the Merger.
7. RIGHTS OF STOCKHOLDERS IN THE MERGER
Holders of Shares will not have appraisal rights as a result of the Offer.
If the Merger is consummated, however, holders of Shares at that time would
have the right to appraisal of their Shares in accordance with Section 262 of
Delaware Law ("Section 262"), the provisions of which are set forth in Annex A
hereto. Such appraisal rights, if the statutory procedures are complied with,
would result in a judicial determination of the "fair value" of the Shares
owned by such holders. Any such judicial determination of the fair value of
the Shares could be based upon considerations other than or in addition to the
price paid in the Offer and the Merger and the market value of the Shares,
including asset values, the investment value of the Shares and any other
valuation considerations generally accepted in the investment community. The
value so determined for Shares could be more or less than the value of the
consideration per Share to be paid pursuant to the Offer or the Merger, and
payment of such consideration would take place subsequent to payment pursuant
to the Offer.
12
<PAGE>
In addition, several recent decisions by the Delaware courts have held that
a controlling stockholder of a corporation involved in a merger has a
fiduciary duty to the other stockholders to ensure that the merger is fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, the 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
indicated in Weinberger v. UOP, Inc. that ordinarily the remedy available to
stockholders in a merger that is found not to be "fair" to minority
stockholders is the right to appraisal described above. SNI AG believes that
it does not have the ability to control the Company.
8. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendation of the Company's Board with respect to the
Offer and the Merger and the fairness of the consideration to be paid pursuant
to the Offer and the Merger, stockholders should be aware that certain
officers and directors of the Company have interests in the Offer and the
Merger which are described below and in the recommendation of the Board
contained in this Supplement and in the Schedule 14D-9 which may present them
with certain potential conflicts of interest.
Employment Arrangements. As more fully described in Item 3 of the Schedule
14D-9, at the request of SNI AG, John S. Chen, President and Chief Operating
Officer of the Company, has entered into a Management Retention Agreement (the
"Chen Agreement") with the Company, commencing upon the effectiveness of the
Merger and terminating five years later. Terms of the Chen Agreement include
Mr. Chen serving as Chief Executive Officer of the Company and as a member of
the Board. In addition, as more fully described in Item 3 of the Schedule 14D-
9, discussions have taken place regarding a senior management position for Mr.
Lussier, Chief Executive Officer and Chairman of the Board of the Company,
within the Siemens group of companies.
Stock and Stock Option Ownership. SNI AG currently owns 2,717,743 Shares,
representing approximately 17.37% of the Shares. As more fully described in
Section 8 of the Offer to Purchase, SNI AG also owns a warrant (the "Warrant")
to purchase up to 1,330,000 Shares. However, SNI AG does not currently intend
to exercise the Warrant in connection with the Offer or the Merger. Richard H.
Lussier, Chairman and Chief Executive Officer of the Company, holds currently
exercisable options to acquire 205,552 Shares. John S. Chen, President and
Chief Operating Officer and a director of the Company, holds currently
exercisable options to acquire 142,857 Shares. Paul J. Chiapparone, a director
of the Company, holds currently exercisable options to acquire 5,000 Shares.
Donald E. Guinn, a director of the Company, holds currently exercisable
options to acquire 42,750 Shares. Jack L. Hancock, a director of the Company,
holds currently exercisable options to acquire 5,000 Shares. Clarence W.
Spangle, a director of the Company, holds currently exercisable options to
acquire 23,750 Shares. George D. Wells, a director of the Company, holds
currently exercisable options to acquire 17,250 Shares. Mitchell Mandich, a
Senior Vice President of the Company, holds currently exercisable options to
acquire 40,464 Shares. Edward W. Scott, Jr., an Executive Vice President of
the Company, holds currently exercisable options to acquire 43,100 Shares.
Allan D. Smirni, Vice President and General Counsel of the Company, holds
currently exercisable options to acquire 37,033 Shares. Dr. Rudolf Bodo, a
director of the Company and SNI AG's designee on the Board, does not own any
Shares and holds no options to acquire Shares.
As of January 27, 1995, the members of the Company's Board beneficially
owned an aggregate of 634,947 Shares, representing approximately 4.06% of the
outstanding Shares, assuming the full exercise of the options held by such
persons. Mr. Lussier is the beneficial owner of 1.33% of the Shares. No other
individual director or executive officer owns more than 1% of the Shares.
13
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CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS
Pursuant to the Merger Agreement, the Company has agreed that, between the
date of the Merger Agreement and the Effective Time, unless SNI AG shall
otherwise agree in writing, neither the Company nor any subsidiary of the
Company will declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock. Moreover, pursuant to a Revolving Credit Loan
Agreement with Comerica Bank - California effective as of October 1, 1994, the
Company is not permitted to pay cash dividends. This Credit Agreement expires
on December 31, 1995.
On February 3, 1995, Purchaser was informed by the Federal Trade Commission
that early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), relating to
the purchase of Shares pursuant to the Offer had been granted. Accordingly,
the condition to the Offer requiring the expiration or termination of any
applicable waiting period under the HSR Act prior to expiration of the Offer
has been satisfied. The Offer remains subject to the other conditions set
forth in Section 14 of the Offer to Purchase.
FEES AND EXPENSES
The following is an estimate of expenses to be incurred in connection with
the Offer and the Merger. The Merger Agreement provides that all costs and
expenses incurred in connection with the Offer and the Merger will be paid by
the party incurring such costs and expenses, whether or not the Offer or the
Merger is consummated.
EXPENSES TO BE PAID BY PURCHASER AND ITS AFFILIATES:
<TABLE>
<S> <C>
Financial Advisory and Dealer Manager Fees.................... $1,750,000
Legal Fees.................................................... 350,000
Printing and Mailing.......................................... 150,000
Advertising................................................... 70,000
Filing Fee.................................................... 53,000
Depositary Fees............................................... 10,000
Information Agent Fees........................................ 10,000
----------
Total....................................................... $2,393,000
==========
</TABLE>
EXPENSES TO BE PAID BY THE COMPANY:
<TABLE>
<S> <C>
Investment Banking Fees and Expenses.......................... $2,200,000
Legal Fees and Expenses....................................... 350,000
Printing and Mailing.......................................... 85,000
Accounting Fees............................................... 10,000
Miscellaneous................................................. 55,000
----------
Total....................................................... $2,700,000
==========
</TABLE>
14
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MISCELLANEOUS
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), Siemens AG,
SNI AG and Purchaser have filed with the Commission the Schedule 14D-1 with
respect to the Offer and certain amendments thereto, and may file further
amendments thereto. Pursuant to Rule 14d-9 promulgated under the Exchange Act,
the Company has filed with the Commission the Schedule 14D-9 with respect to
the Offer, and may file amendments thereto. Siemens AG, SNI AG, Purchaser and
the Company have filed a statement on Schedule 13E-3 with respect to the Offer
(although they expressly disclaim any obligation to do so) and may file
amendments to the Schedule 13E-3. Such statements, including exhibits and any
amendments thereto, which furnish certain additional information with respect
to the Offer, may be inspected at, and copies may be obtained from, the same
places and in the same manner as set forth in Section 7 of the Offer to
Purchase (except that they will not be available at the regional offices of
the Commission).
SIEMENS NIXDORF MID-RANGE ACQUISITION CORP.
February 13, 1995
15
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ANNEX A
SUMMARY OF STOCKHOLDER APPRAISAL RIGHTS AND TEXT OF SECTION 262 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
Summary of Stockholder Appraisal Rights. No appraisal rights are available
in connection with the Offer. However, if the Merger is consummated,
stockholders will have certain rights under Delaware Law 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 were 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 relevent
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, more or less than the purchase
price per Share in the Offer or the Merger Consideration (as defined in the
Offer to Purchase).
GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
(S)262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S)228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of a stock of a corporation, which stock
is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an
A-1
<PAGE>
interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the holders of the surviving
corporation as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
A-2
<PAGE>
(2) If the merger or consolidation was approved pursuant to (S)228 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested, addressed
to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing of such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into
A-3
<PAGE>
account all relevant factors. In determining the fair rate of interest, the
Court may consider all relevant factors, including the rate of interest which
the surviving or resulting corporation would have had to pay to borrow money
during the pendency of the proceeding. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit discovery or
other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
his certificates of stock to the Register in Chancery, if such is required,
may participate fully in all proceedings until it is finally determined that
he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon the
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 262, L.
'94, effective 7-1-94.)
A-4
<PAGE>
ANNEX B
DOCUMENT: PAGE:
- --------- -----
Audited Consolidated Financial Statements (and Related Notes) for Pyramid
Technology Corporation for the Fiscal Years ended September 30, 1993 and
September 30, 1994...................................................... B-2
Unaudited Consolidated Financial Statements (and Related Notes) for
Pyramid Technology Corporation for the First Quarter of the Fiscal Year
ending September 30, 1995............................................... B-18
B-1
<PAGE>
AUDITED FINANCIAL STATEMENTS FOR PYRAMID TECHNOLOGY CORPORATION FOR THE FISCAL
YEARS ENDED SEPTEMBER 30, 1993 AND SEPTEMBER 30, 1994
PYRAMID TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues
Product revenues................ $ 152,590 $ 174,364 $ 138,916
Service revenues................ 65,925 59,334 53,310
------------- ------------- -------------
218,515 233,698 192,226
Cost of Sales:
Cost of products sold........... 87,708 86,828 78,743
Cost of services................ 50,875 45,293 44,786
------------- ------------- -------------
138,583 132,121 123,529
Gross profit...................... 79,932 101,577 68,697
Operating expenses:
Research and development........ 25,488 27,831 28,371
Sales, marketing, general and
administrative................. 73,744 64,411 64,741
Restructuring................... -- -- 41,180
Legal settlement................ -- -- 900
------------- ------------- -------------
Total operating expenses...... 99,232 92,242 135,192
------------- ------------- -------------
Operating income (loss)........... (19,300) 9,335 (66,495)
Interest income................... 655 781 826
Interest expense.................. (704) (523) (967)
Loss on investment in joint ven-
ture............................. (129) -- --
------------- ------------- -------------
Income (loss) before income taxes. (19,478) 9,593 (66,636)
Provision (benefit) for income
taxes............................ 2,935 959 (6,929)
------------- ------------- -------------
Net income (loss)................. $ (22,413) $ 8,634 $ (59,707)
============= ============= =============
Net income (loss) per share....... $ (1.66) $ 0.67 $ (4.99)
============= ============= =============
Shares used in computing net in-
come (loss) per share............ 13,467 12,890 11,962
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-2
<PAGE>
AUDITED FINANCIAL STATEMENTS FOR PYRAMID TECHNOLOGY CORPORATION FOR THE FISCAL
YEARS ENDED SEPTEMBER 30, 1993 AND SEPTEMBER 30, 1994
PYRAMID TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues
Product revenues................ $ 152,590 $ 174,364 $ 138,916
Service revenues................ 65,925 59,334 53,310
------------- ------------- -------------
218,515 233,698 192,226
Cost of Sales:
Cost of products sold........... 87,708 86,828 78,743
Cost of services................ 50,875 45,293 44,786
------------- ------------- -------------
138,583 132,121 123,529
Gross profit...................... 79,932 101,577 68,697
Operating expenses:
Research and development........ 25,488 27,831 28,371
Sales, marketing, general and
administrative................. 73,744 64,411 64,741
Restructuring................... -- -- 41,180
Legal settlement................ -- -- 900
------------- ------------- -------------
Total operating expenses...... 99,232 92,242 135,192
------------- ------------- -------------
Operating income (loss)........... (19,300) 9,335 (66,495)
Interest income................... 655 781 826
Interest expense.................. (704) (523) (967)
Loss on investment in joint ven-
ture............................. (129) -- --
------------- ------------- -------------
Income (loss) before income taxes. (19,478) 9,593 (66,636)
Provision (benefit) for income
taxes............................ 2,935 959 (6,929)
------------- ------------- -------------
Net income (loss)................. $ (22,413) $ 8,634 $ (59,707)
============= ============= =============
Net income (loss) per share....... $ (1.66) $ 0.67 $ (4.99)
============= ============= =============
Shares used in computing net in-
come (loss) per share............ 13,467 12,890 11,962
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-2
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1994 1993
------------- -------------
(IN THOUSANDS, EXCEPT PAR
VALUE AND NUMBER OF SHARES)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................... $ 21,558 $ 31,358
Short-term investments......................... 20,651 --
Accounts receivable, net of allowance for
doubtful accounts of $1,660 in 1994 and $2,020
in 1993....................................... 49,310 51,392
Inventories.................................... 25,840 35,712
Prepaid expenses and deposits.................. 15,270 11,873
------------- -------------
Total current assets......................... 132,629 130,335
Property and equipment, at cost:
Machinery and equipment........................ 85,825 79,675
Furniture and fixtures......................... 6,546 5,674
Leasehold improvements......................... 9,627 9,924
------------- -------------
101,998 95,273
Less accumulated depreciation and amortization... 74,386 60,686
------------- -------------
27,612 34,587
Capitalized software development costs........... 18,381 15,959
Service spare parts and other assets............. 12,091 10,777
------------- -------------
$ 190,713 $ 191,658
============= =============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................... $ 16,398 $ 20,312
Accrued payroll and related liabilities........ 4,493 7,043
Accrued commissions............................ 2,424 2,419
Deferred revenue............................... 8,272 7,197
Other accrued liabilities...................... 10,932 8,764
Restructuring accruals......................... 3,075 4,464
Income taxes payable........................... 3,678 1,561
Current portion of long-term debt.............. 1,440 1,795
------------- -------------
Total current liabilities.................... 50,712 53,555
Noncurrent portion of long-term debt............. 1,563 487
Deferred income taxes payable.................... 2,400 --
Commitments
SHAREHOLDERS' EQUITY:
Common stock--$.01 par value; 30,000,000 shares
authorized, 15,567,000 issued and outstanding
in 1994 and 13,177,000 in 1993................ 156 132
Additional paid-in capital..................... 174,652 155,078
Accumulated deficit............................ (37,927) (15,514)
Accumulated translation adjustment............. (843) (2,080)
------------- -------------
Total shareholders equity.................... 136,038 137,616
------------- -------------
$ 190,713 $ 191,658
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-3
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED ACCUMULATED TOTAL
------------- PAID-IN EARNINGS TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------ ------ ---------- --------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1991................... 11,807 $118 $138,149 $ 35,559 $ 993 $174,819
Stock options exercised. 119 1 972 -- -- 973
Sales under employee
stock purchase plan.... 221 2 2,051 -- -- 2,053
Compensation related to
stock option grants.... -- -- 45 -- -- 45
Net loss................ -- -- -- (59,707) -- (59,707)
Foreign currency
translation adjustment. -- -- -- -- (641) (641)
Tax benefit of stock
options exercised...... -- -- 187 -- -- 187
------ ---- -------- -------- ------- --------
Balance at September 30,
1992................... 12,147 121 141,404 (24,148) 352 117,729
Stock options exercised. 837 9 9,794 -- -- 9,803
Sales under employee
stock purchase plan.... 193 2 1,922 -- -- 1,924
Compensation related to
stock option grants.... -- -- 45 -- -- 45
Net income.............. -- -- -- 8,634 -- 8,634
Foreign currency
translation adjustment. -- -- -- -- (2,432) (2,432)
Tax benefit of stock
options exercised...... -- -- 1,913 -- -- 1,913
------ ---- -------- -------- ------- --------
Balance at September 30,
1993................... 13,177 132 155,078 (15,514) (2,080) 137,616
Stock options exercised. 90 1 745 -- -- 746
Sales under employee
stock purchase plan.... 300 3 2,079 -- -- 2,082
Issuance of common
shares to Siemens
Nixdorf, net of
issuance costs......... 2,000 20 16,735 -- -- 16,755
Compensation related to
stock option grants.... -- -- 15 -- -- 15
Net loss................ -- -- -- (22,413) -- (22,413)
Foreign currency
translation adjustment. -- -- -- -- 1,237 1,237
------ ---- -------- -------- ------- --------
Balance at September 30,
1994................... 15,567 $156 $174,652 $(37,927) $ (843) $136,038
====== ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-4
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1994 1993 1992
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $(22,413) $ 8,634 $(59,707)
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization................. 28,455 29,961 31,118
Non-cash portion of restructuring charges..... -- -- 18,826
Compensation related to option grants......... 15 45 45
Changes in:
Accounts receivable, net.................... 2,082 (14,729) 16,605
Inventories................................. 9,872 (5,143) 743
Prepaid expenses and deposits and income tax
receivable................................. (3,397) 500 (2,497)
Accounts payable, accrued liabilities, and
other...................................... 1,085 (2,839) 10,945
-------- ------- --------
Net cash provided by operating activities....... 15,699 16,429 16,078
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments.............. (20,651) -- --
Investment in property and equipment............ (11,970) 13,722) (16,848)
Increase in capitalized software development
costs.......................................... (9,223) (8,695) (6,051)
Decrease (increase) in other assets............. (3,885) 870 354
-------- ------- --------
Net cash used for investing activities.......... (45,729) (21,547) (22,545)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt............ (2,503) (1,709) (1,690)
Borrowings under loan agreement................. 3,150 -- --
Issuance of common stock........................ 19,583 11,727 3,026
-------- ------- --------
Net cash provided by financing activities....... 20,230 10,018 1,336
-------- ------- --------
Increase (decrease) in cash and cash equivalents.. (9,800) 4,900 (5,131)
Cash and cash equivalents, at beginning of year... 31,358 26,458 31,589
-------- ------- --------
Cash and cash equivalents, at end of year......... $ 21,558 $31,358 $ 26,458
======== ======= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Tax benefit from exercise of stock options...... $ -- $ 1,913 $ 187
Acquisition of equipment under capital lease ob-
ligations...................................... 73 246 1,360
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest.......................... 704 523 967
Cash paid (received) for income taxes........... $ 374 $(4,967) $ 907
-------- ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-5
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Principles of Consolidation The consolidated financial statements include
the accounts of Pyramid Technology Corporation (the "Company") and its wholly
owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated. Certain prior year information has been reclassified to
conform to the current year presentation.
Revenue Recognition The Company generally recognizes revenue at the time of
shipment and provides for the estimated cost to repair or replace products
under warranty provisions in effect at the time of sale. Deferred revenue on
maintenance contracts is recognized ratably over the contract period.
Income Taxes Effective for the fiscal year ended September 30, 1994, the
Company adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes." In accordance with this statement, deferred
income taxes are provided for temporary differences between financial
statement income and income for tax purposes using enacted tax laws and rates
for the years in which the taxes are expected to be paid. Adoption of this
statement did not have a material effect on the Company's consolidated
financial statements. During fiscal 1993 and 1992, the Company accounted for
income taxes pursuant to Statement of Financial Accounting Standard No. 96,
"Accounting for Income Taxes."
Net Income (Loss) Per Share Net income (loss) per share is computed based on
the weighted average number of common and common equivalent shares outstanding
during the period. Equivalent shares are calculated using the treasury stock
method or the modified treasury stock method (whichever applies) and consist
of outstanding stock options that have a dilutive effect on income per share.
During fiscal 1994 and 1992, no common stock equivalents were included in the
computation of loss per share as their effect would have been antidilutive.
Cash and Cash Equivalents The Company classifies certain investments as cash
equivalents if the original maturity from the date of acquisition of such
investments is three months or less. These investments are carried in the
balance sheet at cost, which approximates fair value. The effect of foreign
currency exchange rate fluctuations on cash flows has not been material.
Short-Term Investments Short-term investments consist of commercial paper
with original maturities from the date of acquisition greater than three
months and less than twelve months. These investments are carried at cost
which approximates fair value due to the short period of time to maturity.
Accounting for Certain Investments in Debt and Equity Securities Effective
September 30, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." This statement addresses the accounting and reporting for
investments in marketable equity securities that have readily determinable
fair values and for all investments in debt securities. These securities are
required to be classified at the time of purchase and re-evaluated at each
reporting date as either (1) held-to-maturity, (2) trading, or (3) available-
for-sale.
The Company classifies its investment in commercial paper and money market
funds ($15,889,000 in cash equivalents and $20,651,000 in short-term
investments) as held-to-maturity given the Company's positive intent and
ability to hold the securities to maturity. In accordance with the statement,
held-to-maturity securities are carried at amortized cost, therefore, there
was no impact of adopting the statement on current period operations or
shareholders equity.
B-6
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Inventories Inventories are stated at the lower of cost (first-in, first-
out) or market and consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................. $10,617 $12,236
Work in process........................................... 8,320 14,517
Finished goods............................................ 6,903 8,959
------- -------
$25,840 $35,712
======= =======
</TABLE>
Property and Equipment Property and equipment, including assets held under
capital leases, are stated at cost. Depreciation and amortization are computed
using the straight-line method. Useful lives of three to five years are used
for machinery and equipment and furniture and fixtures; leasehold improvements
are amortized over the shorter of their useful lives or the term of the lease.
Maintenance and repairs are expensed as incurred.
Capitalized Software Development Costs The Company capitalizes software
development costs as the resulting products become "technologically feasible."
Amortization of capitalized software development costs begins when the
products are available for general release to customers, and is computed on a
product-by-product basis as the greater of: (a) the ratio of current gross
revenues for a product to the total of current and anticipated future gross
revenues for the product; or (b) the straight-line method over a period not to
exceed three years. Amortization expense for fiscal 1994, 1993, and 1992 was
$6,802,000, $7,323,000, and $6,069,000, respectively.
Service Spare Parts and Other Assets Net service spare parts at September
30, 1994 and 1993 were $10,677,000 and $8,821,000, respectively (with related
accumulated amortization of $11,032,000 and $10,122,000, respectively).
Amortization for service spare parts is provided using the straight-line
method over five years. Purchased technology and the excess of the cost over
the fair value of the net assets of acquired businesses, which are included in
other assets, are amortized on a straight-line basis over a period of seven
years. Amortization expense of $635,000, $635,000, and $724,000 was recorded
in fiscal 1994, 1993, and 1992, respectively.
Prepaid Royalties The Company has entered into several agreements for the
purpose of further enhancing the Company's competitive position in offering
relational database management and other applications software. Under these
agreements, the Company has made commitments, some of which were prepaid, to
provide minimum amounts of license royalties to the licensor. As software
packages are sold with the Company's systems or into the Company's existing
customer base, the Company will receive credit towards the minimum license
royalty commitments. Amortization of prepaid royalties is computed as the
greater of (a) the royalty per unit as the products are shipped; or (b) on a
straight-line basis over the lesser of the term of the agreement or three
years starting when the products are available for general release to
customers. Net prepaid royalties at September 30, 1994 and 1993 were
$1,915,000 and $1,377,000, respectively. As of September 30, 1994, the
remaining minimum license royalty payment commitments amounted to $150,000.
Joint Venture During the third quarter of fiscal 1994, a partnership
agreement between Pyramid Technology Australia PTY, Ltd., a wholly owned
subsidiary of the Company, and Fujitsu Australia Limited was signed. Pyramid
Data Centre Systems, the new joint venture created by the agreement, began
operations on July 2, 1994. The new venture will market Pyramid's Nile Series
of scalable
B-7
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
enterprise servers along with complementary Fujitsu and ICL hardware and
mainframe connectivity software. Pyramid Data Centre Systems' focus will be
the high-end commercial data center computing market, with emphasis on major
Australian corporations that are downsizing their mainframe operations.
Pyramid's share of the joint venture is 49% and is being accounted for using
the equity method.
Restructuring During fiscal 1992, the Company recorded restructuring costs
totaling $41,180,000 in connection with two restructuring programs designed to
reduce costs and improve operating efficiencies. These restructuring plans
reflect a realignment of corporate infrastructure, downsizing or discounting
less profitable business units, and a more focused research and development
effort. The cost reductions included a consolidation of facilities, a write-
off of nonproductive assets, and a reduction in workforce. At September 30,
1994, $3,075,000 remained accrued for excess facilities in Mountain View,
California and the United Kingdom which will be used to offset excess facility
costs over the next two to four years.
Concentration of Credit Risk Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash
investments and trade receivables. The Company sells its products to customers
in diversified industries primarily in North America, Europe, and Asia-
Pacific. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains reserves for
potential credit losses and such losses were not material during the three
years reported.
The Company invests its excess cash in deposits with major banks, in money
market funds, and in commercial paper of companies with strong credit ratings
and in diversified industries. Generally, the investments mature within 120
days and, therefore, are subject to little risk. The Company has not
experienced losses related to these investments.
Foreign Exchange Contracts In order to reduce the impact of currency
fluctuations on intercompany balances, the Company enters into foreign
currency forward exchange contracts, which require the Company to exchange
foreign currencies for U.S. dollars at rates agreed to at the inception of the
contracts. The contracts generally have maturities that do not exceed one
month. The objective of these contracts is to neutralize the impact of foreign
currency exchange rate movements on the Company's operating results. These
contracts do not subject the Company to significant market risk from exchange
rate movements because the contracts offset gains and losses on the balances
being hedged. At September 30, 1994, the Company had foreign exchange
contracts outstanding to sell the equivalent of $1,779,000, which approximates
fair value, in Japanese and Swedish currencies, and to buy the equivalent of
$6,883,000, which approximates fair value, in Australian, British, and German
currencies.
Foreign Currency Translation Substantially all assets and liabilities of the
Companys foreign operations are translated into United States dollars at
exchange rates prevailing at the fiscal year-end. The resulting translation
adjustments are recorded as cumulative translation adjustments to shareholders
equity. Revenues and expenses for the year are translated at the average
exchange rates in effect during the year. Foreign currency exchange gains or
losses were not material during the three years reported.
Related Party Transactions During the second quarter of fiscal 1994, a
senior executive of a major customer and vendor of the Company was elected to
the Company's Board of Directors. The related party accounted for
approximately 4%, 2%, and 1% of the Company's revenue during fiscal 1994,
1993,
B-8
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and 1992, respectively. Additionally, the Company has contracted with the
related party to perform consulting services ranging from a minimum of
$6,000,000 to $7,000,000 per year over the next eight years.
During the third quarter of fiscal 1994, the Company made a sale to a
customer which accounted for less than 1% of the Company's fiscal 1994
revenues, and also purchased $900,000 of prepaid software licenses from the
customer. The Company's chairman of the board is a member of the customers
board of directors.
During the fourth quarter of fiscal 1994, Pyramid and Siemens Nixdorf
announced an expansion of their cooperative agreement for high-end UNIX
systems by entering into a new software and hardware licensing agreement and
amending its existing OEM agreement. Siemens Nixdorf licensed Pyramid's
enhancement of the UNIX operating system for massively parallel processing
(MPP) and received the right to purchase the related MPP hardware product,
internally known as MESHine, under the OEM agreement. In addition, Siemens
Nixdorf paid $17,250,000 for 2,000,000 shares of Common Stock and a warrant to
purchase an additional 1,330,000 shares at $10.00 per share. The warrant
expires on September 30, 1995. Siemens Nixdorf's ownership in Pyramid
increased to approximately 18% with the initial purchase of shares and would
increase to approximately 24% if the warrant is exercised. A senior executive
of Siemens Nixdorf was also elected to the Company's Board of Directors.
Siemens Nixdorf accounted for approximately 5%, 6%, and 8% of the Company's
revenue during fiscal 1994, 1993, and 1992, respectively. At September 30,
1994, Siemens Nixdorf owed the Company approximately $6,000,000 for the
purchase of products.
COMMITMENTS
Leasing Arrangements The Company leases its corporate headquarters,
manufacturing facilities, and sales offices under noncancelable operating
lease agreements which expire at various dates through 2014. Rental expense
under operating leases, including month to month facilities and equipment
rentals was approximately $11,763,000, $12,501,000, and $12,112,000 in 1994,
1993, and 1992, respectively. In connection with the fiscal 1992
restructurings, which included a consolidation of facilities, the Company
subleases certain of its facilities under noncancelable subleases. The minimum
future rentals to be received under these subleases are $951,000, $949,000,
and $647,000 in fiscal 1995, 1996, and 1997, respectively.
The Company has entered into capital lease agreements for certain machinery
and equipment which are accounted for as the acquisition of an asset and
incurrence of a liability. Assets held under capital leases included in
property and equipment are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment.................................. $ 3,252 $ 2,972
Furniture and fixtures................................... 4,880 4,359
------- -------
8,132 7,331
Less accumulated amortization............................ 4,418 4,091
------- -------
$ 3,714 $ 3,240
======= =======
</TABLE>
B-9
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Minimum future payments under all capital and operating lease agreements as
of September 30, 1994 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING SEPTEMBER 30, LEASES LEASES
------------------------- --------- -------
(IN THOUSANDS)
<S> <C> <C>
1995................................................. $ 9,510 $ 446
1996................................................... 8,654 131
1997................................................... 7,183 14
1998................................................... 6,281 --
1999................................................... 6,072 --
Thereafter............................................. 26,319 --
------- -----
Total minimum lease payments........................... $64,019 591
======= =====
Amount representing interest........................... (37)
-----
Present value of minimum lease payments................ 554
Current obligations under capital leases............... (415)
-----
Noncurrent obligations under capital leases............ $ 139
=====
</TABLE>
Dismissal of Shareholder Class Action Complaints During the first quarter of
fiscal 1994, two shareholder class action complaints were filed naming as
defendants the Company and certain of its officers and directors, and alleging
violations of federal securities laws as well as a state law fraud claim. The
complaints alleged that the Company made false and misleading statements in
press releases and other public statements and that some of the individual
defendants traded the Company's Common Stock on inside information. The
complaints sought an award of an unspecified amount of damages. The cases were
consolidated by order of the District Court on July 14, 1994. After review of
initial disclosures made by the Company and discussions with the Company's
attorneys, counsel for the plaintiffs agreed to dismiss the actions. On July
26, 1994, pursuant to a stipulation of the parties, the District Court entered
an order for dismissal without prejudice of the consolidated actions.
COMMON STOCK
Common Shares Rights Agreement The Company has a plan to protect
shareholders rights in the event of a proposed takeover of the Company. Under
the plan, the Board of Directors declared a dividend of one common share
purchase right (a right) for each share of the Company's Common Stock. Each
right entitles the shareholder to purchase one share of the Company's Common
Stock at an exercise price of $64. The rights become exercisable following the
tenth day after a person or group (a) acquires beneficial ownership of 20% or
more of the Company's Common Stock or (b) announces a tender or exchange offer
which would result in ownership by a person or group of 30% or more of the
Company's Common Stock.
If any person or group acquires 20% of the Company's Common Stock, each
right not held by the acquiring person will entitle the holder to purchase
$128 worth of the Company's Common Stock for $64. If the Company is acquired
in a merger or other business combination transaction, each right not held by
the acquiring person will entitle its holder to purchase $128 worth of the
common stock of the acquiring company for $64.
The rights are redeemable at the Company's option for $0.01 per right.
Additionally, the exercise price and number and kind of shares covered by each
right are subject to adjustment for stock splits, stock dividends, and certain
other events. The rights expire on December 12, 1998.
B-10
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the fourth quarter of fiscal 1994, all necessary corporate action
required under the Rights Agreement to amend the Rights Agreement was
authorized and taken so that the potential exercise of a warrant to purchase
1,330,000 shares of Common Stock or any other purchase of Common Stock by
Siemens Nixdorf would not make Siemens Nixdorf an acquiring person.
Incentive Stock Option Plan The Company has an Incentive Stock Option Plan
(the "Plan") under which officers, consultants and key employees may be
granted options to purchase the Company's Common Stock. Options are granted at
a price not less than fair market value on the date of grant, as determined by
the Board of Directors.
At September 30, 1994, 6,116,666 shares of Common Stock had been reserved
for issuance under the Plan. The options are generally exercisable at the rate
of 25% commencing one year after the date of grant and in monthly increments
of 1/36 of the remaining balance thereafter. Expiration dates are determined
by the Board of Directors, but in no event will they exceed ten years from the
date of grant. Unexercised options are cancelable three months after the date
of termination of employment.
Plan transactions for the years ended September 30, 1993 and 1994 were as
follows:
<TABLE>
<CAPTION>
PRICE
----------------------------------
NUMBER OF SHARES PER SHARE TOTAL
----------------------------------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Options outstanding at
September 30, 1992..... 2,528,042 $1.31-$29.00 $37,089
Grants.................. 1,192,500 $7.75-$20.25 12,854
Exercises............... (834,314) $1.31-$18.50 (9,773)
Cancellations........... (432,326) $6.50-$29.00 (6,243)
---------- ------------ -------
Options outstanding at
September 30, 1993..... 2,453,902 $1.31-$29.00 33,927
Grants.................. 1,117,500 $6.63-$20.50 14,358
Exercises............... (89,927) $1.31-$18.00 (738)
Cancellations........... (526,823) $1.31-$29.00 (7,653)
----------- ------------ -------
Options outstanding at
September 30, 1994..... 2,954,652 $1.31-$29.00 $39,894
========== ============ =======
</TABLE>
At September 30, 1994, there w ere 1,722,581 shares exercisable under this
Plan at $1.31 to $29.00 per shar-----e, and options for 781,043 shares of Common
Stock were available for grant. At September 30, 1993, there were 1,178,800
shares exercisable under this plan at $1.31 to $29.00 per share.
Executive Officers' Nonstatutory Stock Option Plan The Company has an
Executive Officer's Nonstatutory Stock Option Plan (the "Plan") under which
400,000 shares of Common Stock were reserved for issuance to executive
officers of the Company. Under the Plan, the Board of Directors determines the
number of shares, option price, and exercisability of options. Options expire
ten years after the date of grant. There were no option grants, exercises, or
cancellations under the Plan during fiscal 1994 and 1993. At September 30,
1994, there were 20,313 shares outstanding and exercisable under this Plan at
$17.00 per share and options for 7,000 shares of Common Stock were available
for grant. At September 30, 1993, there were 20,313 shares outstanding and
12,500 shares exercisable under the Plan at $17.00 per share.
Directors' Option Plan The Company has a Directors' Option Plan (the "Plan")
under which 160,000 shares of Common Stock were reserved for issuance to
nonemployee directors as of September 30, 1994. The Plan provides for the
automatic grant of an option to purchase 12,000 shares
B-11
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of Common Stock to nonemployee directors on the date on which such person
first becomes a director, and the annual grant of an option to purchase 6,000
shares on each January 31 thereafter. The per share exercise price of the
Common Stock subject to an option shall be 100% of the fair market value per
share on the date of the option grant. As of September 30, 1994, options for
58,000 shares were available for grant. At September 30, 1994, there were
61,500 shares exercisable under this plan at $13.50 to $18.25 per share. At
September 30, 1993, there were 30,000 shares exercisable under this plan.
<TABLE>
<CAPTION>
PRICE
------------------------------------
NUMBER OF SHARES PER SHARE TOTAL
------------------------------------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Options outstanding at
September 30, 1992..... 42,000 $ 14.75-$18.25 $ 693
Grants.................. 18,000 $14.75 266
Exercises............... (2,500) $14.75 (37)
-------------- --------------------- --------------
Options outstanding at
September 30, 1993..... 57,500 $ 14.75-$18.25 922
Grants.................. 42,000 $ 13.50-$14.50 585
-------------- --------------------- --------------
Options outstanding at
September 30, 1994..... 99,500 $ 13.50-$18.25 $ 1,507
============== ===================== ==============
</TABLE>
EMPLOYEE BENEFIT PROGRAMS
Employee Stock Purchase Plan In September 1987, the Company adopted the 1987
Employee Stock Purchase Plan (the "Plan"). As of September 30, 1994, 1,150,000
shares of Common Stock have been reserved for issuance under the Plan. The
Plan permits eligible employees to purchase Common Stock through payroll
deductions of up to a maximum of 10% of their eligible compensation at 85% of
the fair market value. During fiscal 1994, 300,074 shares were purchased at
prices of $6.69 to $7.23 per share. At September 30, 1994, 31,626 shares were
available for future issuance.
410(K) Plan The Company has adopted a tax deferred savings plan ("401(k)
Plan" or the "Plan") in which virtually all domestic employees are eligible to
participate. Participating employees may contribute up to 15% of qualified
earnings. The Company matches employee contributions at a 50% rate up to the
first 5% of each employees salary deferral contribution. Employee
contributions are fully vested, whereas vesting in matching Company
contributions occurs at a rate of 33 1/3% per year of employment. All
contributions to the Plan are transferred to a trustee and are invested at the
employee's discretion in six separate funds. During fiscal 1994, 1993, and
1992, the Company's contribution amounted to approximately $1,122,000,
$887,000, and $946,000, respectively.
BORROWING ARRANGEMENTS
For the purposes of hedging its foreign currency exposures, the Company had
available a bank facility which provides for up to $70,000,000 of foreign
exchange contracts. At September 30, 1994, $61,338,000 was available under the
foreign exchange line of credit as $8,662,000 was utilized for foreign
currency hedging contract positions. This credit facility expired on October
31, 1994. During October 1994, the Company entered into a new revolving line
of credit agreement with a bank which provides it with the ability to borrow
up to $10,000,000. Amounts borrowed under the line of credit are secured by
the Company's accounts receivable and inventory. The interest rate on
borrowings under the line of credit is at the bank's prime rate. The agreement
also provides for up to $50,000,000 of foreign exchange contract availability
in addition to the $10,000,000 revolving line of credit. This line of credit
expires on December 31, 1995. The above facilities do not permit the Company
to pay cash dividends and they set limitations on the Company in regard to
other indebtedness, pledging assets,
B-12
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
guarantees, mergers and acquisitions, and annual capital expenditure levels as
well as requiring the Company to maintain certain financial requirements.
During fiscal 1994, the Company financed $3,150,000 of equipment under a
capital equipment financing agreement with a lending company. The loans, which
have an average interest rate of approximately 8%, are repaid on a monthly
basis over a three-year period.
INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1994 1993 1992
-------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT:
Federal....................................... $ (1,039) $ 912 $ (4,046)
State......................................... 144 298 --
Foreign....................................... 1,307 231 21
-------- ------ --------
412 1,441 (4,025)
-------- ------ --------
DEFERRED:
Federal....................................... 2,523 (482) (2,596)
State......................................... -- -- (308)
-------- ------ --------
2,523 (482) (2,904)
-------- ------ --------
$ 2,935 $ 959 $ (6,929)
======== ====== ========
</TABLE>
Pretax income (loss) from foreign operations amounted to $3,214,000,
$1,262,000, and $(10,098,000) for fiscal 1994, 1993, and 1992, respectively.
The total provision (benefit) for income taxes differs from the amount
computed by applying the statutory federal rate of 34% to income (loss) before
taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1994 1993 1992
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed expected tax provision (benefit).......... $(6,623) $ 3,262 $(22,656)
State tax, net of federal benefit.................. 144 197 (203)
Losses not benefited and income taxed at other than
U.S. rates........................................ 10,084 -- 14,200
Utilization of operating loss carryforward......... (670) (1,185) --
Utilization of general business credits............ -- (923) 1,947
Other.............................................. -- (392) (217)
------- ------- --------
$ 2,935 $ 959 $ (6,929)
======= ======= ========
</TABLE>
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." As permitted by
SFAS 109, the Company has elected not to restate the financial statements of
any prior years. The effect of adoption of this standard was not material to
the Company's financial position or results of operations for the year ended
September 30, 1994.
B-13
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect tax credit and loss carryforwards and the tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax liabilities
and assets as of September 30, 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1994
------------------
(IN THOUSANDS)
<S> <C>
Deferred tax liabilities:
Capitalized software development costs and other........ $ (7,181)
--------
Total deferred tax liabilities........................ (7,181)
--------
Deferred tax assets:
Tax credits............................................. 4,274
Depreciation............................................ 1,998
Special charge and other reserves....................... 13,193
Loss carryforwards and other............................ 10,034
--------
Total deferred tax assets............................. 29,499
--------
Valuation allowance for deferred tax assets............... (22,318)
--------
Net deferred taxes........................................ $ 0
========
</TABLE>
The valuation allowance increased $9,426,000 in the year ended September 30,
1994. Approximately $3,279,000 of the valuation reserve is related to benefits
of stock option deductions which will be allocated directly to additional
paid-in capital when realized.
For federal income tax purposes at September 30, 1994, the Company had
$29,100,000 of net operating loss carryforwards which expire in the year 2009.
The Company had research and development credit carryforwards of approximately
$3,500,000 which expire through the year 2006. The Company had alternative
minimum tax credit carryforwards of approximately $800,000 which do not
expire. The Company had foreign net operating losses of approximately
$2,900,000.
Significant components of the deferred income tax in the provision for
income taxes for the years ended September 30, 1993 and September 30, 1992 are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------
1993 1992
------ -------
(IN THOUSANDS)
<S> <C> <C>
Depreciation............................................... $ (754) $ (10)
Inventory valuation differences............................ (241) (589)
Capitalized software development........................... 309 (383)
Allowance for doubtful accounts............................ (4) (62)
Unrealized profits on intercompany transactions............ (90) 28
Restructuring costs........................................ 1,061 (1,704)
Deferred revenue........................................... (645) 12
Other, net................................................. (118) (196)
------ -------
Total deferred taxes....................................... $ (482) $(2,904)
====== =======
</TABLE>
B-14
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INDUSTRY SEGMENT, SIGNIFICANT CUSTOMER, AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the design,
manufacture, marketing, and service of high-performance open system servers
and related software that combine the advantages of the UNIX multi-user
operating system with a system architecture based on the principles of reduced
instruction set computing (RISC).
During fiscal 1994, 1993, and 1992, the Company had export sales of
approximately 15%, 18%, and 19% of total revenues, respectively. Export sales
by geographic areas were 11%, 14%, and 17% to Europe and 4%, 4%, and 2%
primarily to Asia and the Far East as a percentage of total revenues for
fiscal 1994, 1993, and 1992, respectively. During fiscal 1994, AT&T accounted
for 18% ($38,372,000) of the Company's total revenues. Sales to AT&T in fiscal
1993 and 1992 were 17% ($40,676,000) and 20% ($39,297,000), respectively.
The Company's operations by geographic area are as follows:
<TABLE>
<CAPTION>
UNITED UNITED ASIA-
STATES KINGDOM PACIFIC ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1994
Revenues:
Sales to unaffiliated
customers............... $169,535 $25,411 $23,569 $ -- $218,515
Intercompany sales....... 10,986 -- -- (10,986) --
-------- ------- ------- -------- --------
Total revenues........... 180,521 25,411 23,569 (10,986) 218,515
-------- ------- ------- -------- --------
Operating income (loss).. (27,742) 1,261 1,602 5,579 (19,300)
-------- ------- ------- -------- --------
Identifiable assets...... 210,492 14,823 7,026 (41,628) 190,713
-------- ------- ------- -------- --------
1993
Revenues:
Sales to unaffiliated
customers............... 186,883 26,328 20,487 -- 233,698
Intercompany sales....... 31,691 -- -- (31,691) --
-------- ------- ------- -------- --------
Total revenues........... 218,574 26,328 20,487 (31,691) 233,698
-------- ------- ------- -------- --------
Operating income (loss).. 9,481 1,197 (130) (1,213) 9,335
-------- ------- ------- -------- --------
Identifiable assets...... 216,694 16,928 12,837 (54,801) 191,658
-------- ------- ------- -------- --------
1992
Revenues:
Sales to unaffiliated
customers............... 146,302 24,263 21,661 -- 192,226
Intercompany sales....... 25,808 -- -- (25,808) --
-------- ------- ------- -------- --------
Total revenues........... 172,110 24,263 21,661 (25,808) 192,226
-------- ------- ------- -------- --------
Operating income (loss).. (55,010) (4,233) (5,987) (1,265) (66,495)
-------- ------- ------- -------- --------
Identifiable assets...... $193,751 $15,739 $12,631 $(45,930) $176,191
======== ======= ======= ======== ========
</TABLE>
Intercompany sales are accounted for at prices which approximate arm's
length transactions and include systems and spare parts.
B-15
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
FINANCIAL INFORMATION BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------------------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1994
Revenues............................ $ 60,018 $ 46,548 $ 53,812 $ 58,137
Gross profit........................ 24,969 12,599 18,838 23,526
Net income (loss)................... 635 (15,973) (5,940) (1,135)
Net income (loss) per share......... 0.05 (1.19) (0.44) (0.08)
1993
Revenues............................ $ 55,103 $ 58,024 $ 60,022 $ 60,549
Gross profit........................ 22,700 24,842 27,175 26,860
Net income.......................... 468 1,440 3,334 3,392
Net income per share................ 0.04 0.12 0.25 0.25
</TABLE>
B-16
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Pyramid Technology Corporation
We have audited the accompanying consolidated balance sheet of Pyramid
Technology Corporation as of September 30, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended September 30, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pyramid
Technology Corporation at September 30, 1994 and 1993 and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended September 30, 1994 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
October 25, 1994
B-17
<PAGE>
UNAUDITED FINANCIAL STATEMENTS FOR PYRAMID TECHNOLOGY CORPORATION FOR THE FIRST
QUARTER OF THE FISCAL YEAR ENDING SEPTEMBER 30, 1995
PYRAMID TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
DEC. 30 DEC. 31
1994 1993
--------- ---------
<S> <C> <C>
Revenues:
Product revenues....................................... $ 44,223 $ 43,978
Service revenues....................................... 17,896 16,040
--------- ---------
62,119 60,018
Cost of sales:
Cost of products sold.................................. 21,765 23,167
Cost of services....................................... 13,126 11,882
--------- ---------
34,891 35,049
Gross profit............................................. 27,228 24,969
Operating expenses:
Research and development............................... 6,007 6,643
Sales, marketing, general and administrative........... 20,001 17,441
--------- ---------
Total operating expenses............................... 26,008 24,084
--------- ---------
Operating income......................................... 1,220 885
Interest income.......................................... 518 121
Interest expense......................................... (97) (159)
Loss on investment in joint venture...................... (112) --
--------- ---------
Income before income taxes............................... 1,529 847
Provision for income taxes............................... 229 212
--------- ---------
Net income............................................... $ 1,300 $ 635
========= =========
Net income per common and common equivalent share........ $ 0.08 $ 0.05
========= =========
Shares used in computing net income per common and common
equivalent share........................................ 15,644 13,584
========= =========
</TABLE>
See accompanying notes
B-18
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DEC. 30 SEPT. 30
1994 1994
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 17,747 $ 21,558
Short-term investments.................................... 36,334 20,651
Accounts receivable, net.................................. 46,982 49,310
Inventories............................................... 30,432 25,840
Prepaid expenses and deposits............................. 13,868 15,270
-------- --------
Total current assets.................................... 145,363 132,629
Property and equipment, at cost............................. 105,110 101,998
Less accumulated depreciation and amortization.............. 77,961 74,386
-------- --------
27,149 27,612
Capitalized software development costs...................... 18,016 18,381
Service spare parts and other assets........................ 12,468 12,091
-------- --------
$202,996 $190,713
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable.......................................... $ 22,468 $ 16,398
Accrued payroll and related liabilities................... 6,309 4,493
Accrued commissions....................................... 2,823 2,424
Deferred revenue.......................................... 11,517 8,272
Other accrued liabilities................................. 10,478 10,932
Restructuring accruals.................................... 2,882 3,075
Income taxes payable...................................... 3,891 3,678
Current portion of long-term debt......................... 1,320 1,440
-------- --------
Total current liabilities............................... 61,688 50,712
Noncurrent portion of long-term debt........................ 1,233 1,563
Deferred income taxes payable............................... 2,400 2,400
Shareholders' equity:
Common stock.............................................. 156 156
Additional paid-in capital................................ 174,899 174,652
Accumulated deficit....................................... (36,628) (37,927)
Accumulated translation adjustment........................ (752) (843)
-------- --------
Total shareholders' equity.............................. 137,675 136,038
-------- --------
$202,996 $190,713
======== ========
</TABLE>
See accompanying notes
B-19
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
DEC. 30 DEC. 31
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 1,300 $ 635
Adjustments to reconcile net income to net cash from op-
erating activities:
Depreciation and amortization......................... 6,947 7,597
Changes in:
Accounts receivable, net............................ 2,328 (6,011)
Inventories......................................... (4,592) (1,788)
Prepaid expenses and deposits and income tax receiv-
able............................................... 1,402 855
Accounts payable, accrued liabilities, and other.... 11,212 (1,943)
--------- --------
Net cash provided by (used for) operating activities.... 18,597 (655)
--------- --------
Cash flows from investing activities:
Purchase of short-term investments...................... (15,683) --
Investment in property and equipment.................... (3,535) (3,337)
Increase in capitalized software development costs...... (1,596) (2,403)
Increase in other assets................................ (1,391) (1,169)
--------- --------
Net cash used for investing activities.................. (22,205) (6,909)
Cash flows from financing activities:
Principal payments on capital lease obligations......... (450) (546)
Net borrowings under loan agreement..................... -- 2,364
Issuance of common stock, net of repurchases............ 247 262
--------- --------
Net cash provided by (used for) financing activities.... (203) 2,080
--------- --------
Decrease in cash and cash equivalents..................... (3,811) (5,484)
Cash and cash equivalents, at the beginning of the period. 21,558 31,358
--------- --------
Cash and cash equivalents, at the end of the period....... $ 17,747 $ 25,874
========= ========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................. $ 97 $ 159
Cash paid (received) for income taxes................... $ (2,199) $ 531
</TABLE>
See accompanying notes
B-20
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries after elimination of all significant
intercompany transactions.
While the financial information furnished is unaudited, the statements in
this report reflect all adjustments, consisting of normal recurring accruals,
which, in the opinion of management, are necessary for a fair statement of the
results of operations for the interim periods covered and of the financial
condition of the Company at the dates of the balance sheets. The operating
results for the interim periods presented are not necessarily indicative of
the results to be expected for the entire year.
Certain footnotes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with the Company's
audited financial statements and notes thereto for the fiscal year ended
September 30, 1994.
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
Effective September 30, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". This statement addresses the accounting and reporting for
investments in marketable equity securities that have readily determinable
fair values and for all investments in debt securities. These securities are
required to be classified at the time of purchase and re-evaluated at each
reporting date as either (1) held-to-maturity, (2) trading, or (3) available-
for-sale. The Company classifies its investment in commercial paper and money
market funds ($7,819,000 in cash equivalents and $36,334,000 in short-term
investments) as held-to-maturity given the Company's positive intent and
ability to hold the securities to maturity. In accordance with the statement,
held-to-maturity securities are carried at amortized cost which approximates
fair value.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following (in thousands):
<TABLE>
<CAPTION>
DEC. 30 SEPT. 30
1994 1994
------- --------
<S> <C> <C>
Raw materials............................................ $11,582 $10,617
Work-in-process.......................................... 11,589 8,320
Finished goods........................................... 7,261 6,903
------- -------
$30,432 $25,840
======= =======
</TABLE>
RELATED PARTY TRANSACTIONS
Siemens Nixdorf Informationssyteme AG (Siemens Nixdorf), which owns
approximately 17% of the Company's Common Stock, accounted for $6,587,000, or
11% of the Company's revenue during the first quarter of fiscal 1995 and
$1,707,000, or 3% of the Company's revenue during the first quarter of fiscal
1994. Siemens Nixdorf also holds a warrant to purchase 1,330,000 shares of the
Company's Common Stock at $10.00 per share. The warrant expires on September
30, 1995.
B-21
<PAGE>
PYRAMID TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
A senior executive of a major customer and vendor of the Company is a member
of the Company's board of directors. The related party accounted for
$1,136,000, or 2% of the Company's revenue during the first quarter of fiscal
1995 and $2,539,000, or 4% of the Company's revenue during the first quarter
of fiscal 1994. The Company purchased services from the vendor totaling
$2,323,000 during the first quarter of fiscal 1995 and $1,532,000 during the
first quarter of fiscal 1994.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the
dilutive shares issuable upon the exercise of stock options using the treasury
stock or modified treasury stock method (whichever applies). For the three
month period ended December 30, 1994, no common equivalent shares were
included in the computation as the modified treasury stock method applied and
the effect would be anti-dilutive. For the three month period ended December
31, 1993, common equivalent shares were computed using the treasury stock
method.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
DEC. 30 DEC. 31
1994 1993
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Average shares outstanding............................... 15,644 13,240
Net effect of dilutive stock options..................... -- 344
---------- ----------
Shares used in computing net income per common and common
equivalent share........................................ 15,644 13,584
Net income............................................... $ 1,300 $ 635
Net income per common and common equivalent share........ $ 0.08 $ 0.05
</TABLE>
SUBSEQUENT EVENT
On January 23, 1995, Pyramid and Siemens Nixdorf jointly announced that they
had entered into an agreement pursuant to which a wholly-owned subsidiary of
Siemens Nixdorf will acquire all of the outstanding Common Stock of Pyramid
not currently owned by Siemens Nixdorf for an aggregate purchase price of
approximately $207 million. Under the agreement, Siemens Nixdorf's subsidiary
will commence a tender offer for all outstanding Common Stock of Pyramid for
$16.00 per share in cash. The tender offer will be followed by a merger in
which any shares not acquired by Siemens Nixdorf's subsidiary in the tender
offer will be acquired for the same amount of cash. Siemens Nixdorf currently
owns over 17% of the outstanding Common Stock of Pyramid. The tender offer,
which was approved by Pyramid's board of directors, commenced January 27, 1995
and is conditioned on a majority of the outstanding shares of Pyramid being
tendered as well as other customary conditions, including regulatory
approvals.
B-22
<PAGE>
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required
documents should be sent or delivered by each stockholder or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at
one of its addresses set forth below.
The Depositary for the Offer is:
CHEMICAL BANK
By Mail: By Facsimile: By Hand: or Overnight
(for Eligible Institutions only) Courier:
Chemical Bank
Reorganization Dept. (212) 629-8015 or Chemical Bank
P.O. Box 3085 (212) 629-8016 55 Water Street
G.P.O. Station Second Floor-Room 234
New York, NY 10116-3085 New York, NY 10041
Attention: Reorganization
Department
Confirm by Telephone:
(212) 946-7137
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below or to the Dealer
Managers at their address listed below. Additional copies of this Supplement,
the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (COLLECT)
BANKS AND BROKERS CALL COLLECT (212) 440-9800
CALL TOLL FREE: 1-800-223-2064
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
