SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 27, 1998
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
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(Exact name of registrant as specified in its charter)
Colorado 0-4882 84-0581776
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(State or other jurisdiction (Commission File No.) (IRS
Employer
of incorporation)
Identification No.)
633 17th Street, Suite 1600
Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
(303) 292-1111
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(Registrant's telephone number, including area code)
1801 California Street, Suite 295, Denver, Colorado
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(Former name or former address if changed since last report)
Items 1 - 4. Inapplicable.
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Item 5. Other Events.
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On April 1, 1998, the Company announced that it had entered into a binding
agreement with Baker Hughes Incorporated ("Baker") to acquire all of the
outstanding shares of Scientific Software-Intercomp, Inc. ("Company") which
would result in Baker acquiring the Company's ongoing Exploration and
Production (E&P) Consulting and Technology (reservoir software) businesses,
subject to certain conditions. The sale does not include the Company's
Pipeline Simulation Division assets which are being purchased separately by
LICEnergy Inc. The Company had previously entered into a non-binding Outline
of Terms agreement for the acquisition of the Company by Well Service
Technology A/S ("WST"). The Outline of Terms agreement between the Company
and WST lapsed on March 6, 1998 without the parties coming to a definitive
agreement.
The press release announcing the acquisition by Baker is included in the
Company's filed Form 8K as Exhibit "A" and the agreement with Baker is
attached as Exhibit "B".
The agreement with Baker provides that the shareholders of the Company's
common stock would receive a maximum of $.50 and a minimum of $.30 net per
share in consideration for the acquisition, with the maximum and minimum
amounts per share depending on the amount payable to Halliburton Company
("Halliburton"), the preferred shareholder of the Company. The amount payable
to Halliburton would be in exchange for the preferred stock of the Company.
The acquisition is subject to customary conditions as well as the approval of
the Company's common shareholders.
The Company's senior secured lenders, the Lindner Funds ("Lindner") and
Renaissance Capital Partners II, Ltd. ("Renaissance") have agreed to accept
discounted terms of $1.4 million and $1.3 million respectively in satisfaction
of the outstanding $6.5 million principal plus accrued interest and other
obligations owed by the Company to the lenders. The agreements with Lindner
and Renaissance are included in the filed Form 8K as Exhibit "C" and "D"
respectively. Halliburton has agreed to accept $2.5 million in cash in
exchange for its $4.0 million preferred stock holding in the Company. The
agreement with Halliburton is included in the filed Form 8K as Exhibit "E".
As a result of the agreement with Halliburton, the Company expects the
consideration payable to the Company's common shareholders to be approximately
$.49 per share, subject to possible downward adjustment based on the results
of Baker's continued due diligence.
The agreement with Baker, while binding, will be further detailed in a
subsequent customary definitive agreement between Baker and the Company,
containing the terms set forth in the agreement announced on April 1, 1998.
Closing of the acquisition is expected in the third quarter of 1998.
Item 6. Inapplicable.
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Item 7. Financial Statements and Exhibits.
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(1) Inapplicable.
(2) Inapplicable.
(3) Exhibits
Exhibit A - Press Release dated April 1, 1998
Exhibit B - Letter Agreement dated March 27, 1998 with Baker Hughes
Incorporated
Exhibit C - Letter Agreement dated March 30, 1998 with Lindner Funds
Exhibit D - Letter Agreement dated March 30, 1998 with Renaissance
Partners II, Ltd.
Exhibit E - Letters dated March 27, 1998 and March 30, 1998 regarding
agreement with Halliburton Company
Item 8. Inapplicable.
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Date: April 13, 1998 SCIENTIFIC SOFTWARE-INTERCOMP, INC.
By: /s/ George Steel George Steel,
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President and Chief Executive
Officer
2
EXHIBIT A (2 PAGES)
PRESS RELEASE
CONTACT: GEORGE STEEL CONTACT: GARY FLAHARTY
SCIENTIFIC SOFTWARE-INTERCOMP, INC. BAKER HUGHES
INCORPORATED
(303) 292-1111 (713) 439-8039
EMAIL: [email protected] [email protected]
SSI ANNOUNCES AGREEMENT WITH BAKER HUGHES INCORPORATED FOR THE ACQUISITION OF
SSI'S ONGOING CONSULTING AND SOFTWARE BUSINESSES THROUGH THE PURCHASE OF THE
STOCK OF SSI.
DENVER, COLORADO, 1 APRIL 1998Scientific Software-Intercomp, Inc. (SSI)
announced that it has entered into a binding agreement with Baker Hughes
Incorporated (BHI-NYSE,PCX,EBS) for Baker Hughes to acquire all of the
outstanding common shares of SSI, which will result in Baker Hughes acquiring
SSI's ongoing Exploration and Petroleum (E&P) consulting and reservoir
software businesses, subject to certain conditions.
The transaction is priced at $.50 net per SSI common share (or an aggregate of
approximately $4.45 million, plus an assumption of certain obligations of
approximately $7 million), with a possible downward adjustment to a minimum of
$.30 per share depending upon the amounts payable to SSI's senior secured
lenders and the holder of its preferred stock. SSI has obtained
understandings with the senior secured lenders and the holder of its preferred
stock which SSI believes will result in the payment to SSI common shareholders
of $.49 per share. The per share price of $.49 could also be subject to
downward adjustment based upon the results of Baker Hughes' continuing due
diligence. The agreement is subject to the approval of SSI's shareholders, as
well as certain other conditions. Closing is expected in the third quarter of
1998.
George Steel, President and CEO of SSI, said "SSI's reputation in E&P
consulting and reservoir software will add to the leadership position which
Baker Hughes holds in oil field services and in petroleum reservoir
management. We believe that this transaction is appropriate and in the best
interests of our stakeholders - lenders, employees, shareholders and customers
alike."
"The combined capabilities of SSI and Baker Hughes will expand our ability to
offer our customers reservoir-centered drilling and completion solutions,"
said Max L. Lukens, President, Chief Executive Officer and Chairman of Baker
Hughes. "This is an important extension of the products and services offered
by Baker Hughes Solutions which will allow BHI to offer additional life of
field solutions."
SSI previously announced a letter of intent (outline of terms) for its
acquisition by another company. The outline of terms lapsed without the
completion of a binding agreement and SSI thereafter proceeded with an
agreement with Baker Hughes.
On 2 March 1998, SSI announced that it had entered into a binding agreement to
sell its Pipeline Simulation Division to LICENERGY of Birkeroed, Denmark. The
transaction is expected to close on or before 1 May 1998.
SSI provides technically advanced, cost effective solutions and software to
the petroleum industry worldwide. The Company has offices in Beijing, Calgary,
Denver, Houston, Jakarta and London.
Baker Hughes is a leading provider of products and services for the oil, gas
and process industries.
J:Legal\BHS Files\SSI\SSI-LOI4.doc
EXHIBIT B (18 PAGES)
March 27, 1998
CONFIDENTIAL
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Scientific Software-Intercomp, Inc.
1801 California Street
Suite 295
Denver, Colorado 80202
Attention: Mr. George Steel, President and CEO
Re: Letter Agreement ("Agreement") for the acquisition
of Scientific Software-Intercomp, Inc.
Dear Mr. Steel:
Based upon our discussions and our review of certain information that you
have provided to us to date, Baker Hughes Incorporated (the "Company"),
through one or more of its direct or indirect subsidiaries, desires to acquire
all of the issued and outstanding common stock of Scientific
Software-Intercomp, Inc., a Colorado corporation (together with its
subsidiaries, "SSI") by merger, share exchange, tender offer or otherwise.
Capitalized terms used but not otherwise defined in this Agreement shall have
the meanings attributed to them in Section 6 below. Based on the mutual
benefits and obligations of the parties and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, agree as follows:
1. Acquisition.
-----------
a. Price. Subject to the negotiation and execution of a definitive
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acquisition agreement (containing the terms referred to herein) and any other
necessary documentation (collectively, the "Definitive Agreement") and the
other terms and conditions set forth herein, the Company will acquire all of
the issued and outstanding common stock of SSI for the SSI Stock Price paid in
U.S. dollars.
Scientific Software-Intercomp, Inc. Confidential
March 27, 1998
Page 17
b. Expected Closing; Termination. The Company desires to close the
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acquisition as soon as reasonably practicable, which Closing should occur
shortly after any meeting of shareholders of SSI required to approve the
transaction. Notwithstanding anything stated herein to the contrary, if the
Closing has not occurred on or before September 30, 1998, then either party
thereafter shall be entitled to terminate this Agreement by written notice to
the other; provided, that a termination shall not release or relieve any
obligations or liabilities accrued as of the effective date of termination,
including, but not limited to, any obligations under Sections 5(b) and 7(d)
hereof.
<PAGE>
c. Assumptions. The proposed consideration to be paid in the
-----------
transaction and the Company's agreement to proceed with the transaction is
based on the following assumptions:
(i) No assets of SSI have been disposed of since December 31, 1997 to
the date hereof, other than sales of inventory in the ordinary course of
business, and no assets other than sales of inventory in the ordinary course
of business and the assets comprising the Pipeline Simulation Division of SSI
shall be disposed of from the date of signing to closing. In addition, the
Company has assumed that ownership of all assets of SSI, including (without
limitation) technology, patents and intellectual property, necessary for the
operation of the SSI's business will remain with SSI following consummation of
the Definitive Agreement.
(ii) At Closing, SSI will not have any indebtedness or balances due
to or from any of its shareholders or their respective affiliates.
(iii) Neither party will owe fees or commissions to any investment
banking, brokerage or finder's firm (other than the Simmons Fee), and that if
any such fees or commissions arise out of this transaction, they will result
in an appropriate reduction of the purchase price.
(iv) The Net Working Capital of SSI reflected on an unaudited
consolidated balance sheet as of date no earlier than seven days prior to
Closing will be no less than the Net Working Capital amount reflected on SSI's
December 31, 1997 unaudited consolidated balance sheet previously furnished
(the "Unaudited Balance Sheet"), less $500,000; provided, that for purposes of
this Section 1(c)(iv), Net Working Capital (and any change therein) at
December 31, 1997 and at Closing excludes (i) the assets of SSI's Pipeline
Simulation Division to be sold to LICENERGY, Inc. but includes the proceeds to
be received by SSI from the sale of its Pipeline Simulation Division to the
extent retained, (ii) the Simmons Fee, and (iii) any part of the Lindner Debt
and the Renaissance Debt (including any accrued interest thereon).
(v) The Unaudited Balance Sheet and the related consolidated
statement of income for the fiscal year then ended, as heretofore delivered to
the Company, and the unaudited balance sheet described in Section 1(c)(iv)
above, present, and will present, fairly the financial position of SSI and its
consolidated subsidiaries as of the respective dates of those balance sheets
and the results of their operations for the period then ended and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis; provided, that, in the case of the balance sheet
described in Section 1(c)(iv), the balance sheet is subject to normal year-end
adjustments and the absence of footnotes. As of December 31, 1997, there were
no material liabilities, direct or indirect, fixed or contingent, of the
Company or any of its consolidated subsidiaries that are not reflected in the
Unaudited Balance Sheet or in the notes thereto. Other than as set forth in
filings made with the U.S. Securities and Exchange Commission (or on Schedule
I hereto), there has been since December 31, 1997 no Material Adverse Change
in (or a Material Adverse Discovery regarding) SSI and its subsidiaries on a
consolidated basis.
(vi) SSI will not have any short- or long-term debt for borrowed
money at closing (other than the Lindner Debt (subject to Section 2(b)(vii)),
the Renaissance Debt (reduced as set forth in Section 2(b)(viii)), the
Halliburton Preferred Stock (subject to Section 2(a)(i)), and the Bank One
Debt (subject to Section 2(b)(ix)), and SSI will not incur any additional
long-term lease obligations beyond those described in the financial statements
previously provided to the Company.
(vii) SSI will consummate the sale of its Pipeline Simulation
Division to LICENERGY, Inc. and receive at least $1,500,000 in cash proceeds
from the sale pursuant to and in accordance with the terms of the Asset
Purchase Agreement dated as of March 1, 1998 among SSI, Bethany, Inc.,
Scientific Software-Intercomp UK, Ltd. and LICENERGY, Inc., without material
amendment or modification.
The Company will require further due diligence to determine a definitive
acquisition structure (i.e. whether the transaction would be a merger, share
exchange, tender offer or other transaction); however, it is our expectation
at this time that one of the Company's direct or indirect subsidiaries would
be the acquiror. The Company may elect to transaction structure in its
discretion.
2. Terms and Conditions.
----------------------
a. Significant Events. Within 15 days after execution of this
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Agreement, SSI shall approach Halliburton Company ("Halliburton") to request
one of the following from Halliburton:
(i) an agreement from Halliburton to accept not more than $2,400,000
from SSI, at or before the Closing, in full payment for and satisfaction of
the acquisition or termination of all rights, interests and benefits that
Halliburton may have under or to the Halliburton Preferred Stock and any other
SSI capital stock, and any other right or interest that Halliburton may have
in or to SSI or its assets ("Halliburton Buy-Out");
(ii) an agreement from Halliburton to accept from SSI a promissory
note due April 21, 2004 in the principal amount of $4,000,000, without
interest, at or before the Closing, in full satisfaction of the acquisition or
termination of all rights, interests and benefits that Halliburton may have
under or to the Halliburton Preferred Stock and any other SSI capital stock,
and any other right or interest that Halliburton may have in or to SSI or its
assets ("Halliburton Exchange Note"); or
(iii) a written consent or other enforceable document from
Halliburton to amend the SSI Articles of Incorporation with regard to the
rights of the Series A Preferred Stock of SSI, which would be amended to
clarify that the holder of any Series A Preferred Stock would only have one
right: the right to have the shares of Series A Preferred Stock redeemed at
any time on or after April 21, 2004, for $5.00 per share, and such amendment
would clarify that the holder of the Series A Preferred Stock would have no
other rights to require SSI to repurchase the Series A Preferred Stock or have
any other rights whatsoever to acquire or to require the repurchase by SSI of
any security of SSI or any assets of SSI. If Halliburton provides such
written consent or other enforceable document, an amendment to the SSI
Articles of Incorporation, which is satisfactory to the Company, must be filed
in the appropriate records of the Secretary of State for the State of Colorado
(in accordance with all applicable laws and regulations and in accordance with
all of SSI's corporate charter documents and bylaws, as amended) prior to the
Closing ("Halliburton Amendment").
It is acknowledged and agreed that if Halliburton fails or refuses to
enter into either of the Halliburton Buy-Out, the Halliburton Exchange Note or
the Halliburton Amendment described above, then the SSI Stock Price
automatically shall be reduced to $0.30 per share, without any further action
by or notice to any person or party. Notwithstanding the immediately
preceding sentence, if Halliburton agrees to accept between $2,400,000 and
$4,000,000 from SSI, at or before the Closing, in full payment for and
satisfaction of the acquisition or termination of all rights, interests and
benefits that Halliburton may have under or to the Halliburton Preferred Stock
and any other SSI capital stock, and any other right or interest that
Halliburton may have in or to SSI or its assets, then SSI and the Company
agree to negotiate in good faith an appropriate adjustment to the SSI Stock
Price between $.30 and $.50.
b. Additional Conditions. The procurement of Company financing would
---------------------
not be a condition of the transaction. However, the transaction and related
transactions would be subject to the following conditions (and to the extent
that the following are not completed to Company's satisfaction, then the
Company shall have the right to terminate this Agreement upon written notice
to SSI):
(i) the absence of any legal restraint, challenge or prohibition that
would prevent the consummation of the acquisition under applicable law;
(ii) the receipt of all material permits, approvals, filings and
consents required to be obtained or made, and all waiting periods required to
expire for consummation of the transaction having been obtained, made or
expired;
(iii) the receipt of all consents required for the acquisition under
any material contract, agreement or license to which SSI is a party; except
for those consents that are not obtained prior to closing that in the
aggregate would not have a Material Adverse Effect;
(iv) the absence of any material litigation or proceedings against
SSI or challenging the transaction;
(v) the compliance with covenants and continued validity of the
representations and warranties to be set forth in the Definitive Agreement;
(vi) all patents and patent applications, copyrights, trade secrets
and other intellectual property rights owned or used by SSI that have not
heretofore been assigned to SSI by the employees, consultants and agents of
SSI shall have been assigned to SSI or the Company's designee;
(vii) prior to Closing, the Lindner and Renaissance Loan Agreement
(and all corresponding promissory notes, security documents, stock warrants
and related instruments) shall have been amended to provide that (i) the
Lindner Debt has been reduced at Closing to no more than (and that Lindner has
forgiven all indebtedness, including accrued interest, of SSI above)
$1,400,000, which will be paid in full at Closing, and (ii) that Lindner shall
have no right to acquire any shares of stock (common or preferred) of SSI
(including, but not limited to, any further rights under the Lindner Warrant);
(viii) prior to Closing, the Lindner and Renaissance Loan Agreement
(and all corresponding promissory notes, security documents, stock warrants
and related instruments) shall have been amended to provide that (i) the
Renaissance Debt has been reduced at Closing to no more than (and that
Renaissance has forgiven all indebtedness, including accrued interest, of SSI
above) $1,300,000, plus simple interest following the Closing of no more than
7% per annum, (ii) the Renaissance Debt will mature and become payable on July
1, 1999 and (iii) Renaissance shall have no right to acquire any shares of
stock (common or preferred) of SSI (including, but not limited to, any further
rights under the Renaissance Warrant);
(ix) at or prior to Closing, the Bank One Debt must be fully paid and
discharged and any security interests or rights of Bank One in SSI or any of
its assets must be fully released and discharged;
(x) on and prior to Closing, there must not have been any Material
Adverse Change or Material Adverse Discovery;
(xi) to the extent required by law and SSI's Articles of
Incorporation and Bylaws, the shareholders of SSI shall have approved the
transaction;
(xii) any real property of SSI (whether owned or under lease) would
be subject to appropriate pre-closing environmental audits at the Company's
cost; and
(xiii) the assumptions in Section 1(c) above shall be true.
3. Documentation.
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a. Definitive Agreement. The acquisition by the Company of SSI would
--------------------
be subject to the negotiation of the Definitive Agreement (containing the
terms referred to herein), executed and agreed to by the Company's designated
subsidiary(ies) and SSI. As SSI might expect, the Company will seek to have
the Definitive Agreement contain provisions that it considers to be customary
for transactions of this type.
b. Definitive Agreement Terms. Although the Company reserves the
--------------------------
right to introduce other provisions, the Company believes the draft agreements
proposed by the Company will include (without limitation) the following:
(i) Representations and warranties that the Company considers
customary and usual, in particular representations regarding ownership of
property and share capital, authority to enter into and consummate the
transactions, tax matters, more current financial statements, the existence of
contracts and absence of loss of rights as a result of the transaction,
absence of adverse changes, compliance with laws and no defaults, litigation,
environmental matters, intellectual property, labor and employee benefit
matters and contingent liabilities.
(ii) Affirmative and negative covenants to assure that no material
transaction occurs between signing and closing that is outside the ordinary
course of business or that would limit or impair the Company's ability to
operate SSI after the Closing.
(iii) The Definitive Agreement would provide that each party would
use reasonable efforts to obtain any necessary or desirable governmental
approvals, but would not require any party to take any action to obtain such
governmental approvals other than required filings and applications and
responding to appropriate information requests.
(iv) The Definitive Agreement would also otherwise reflect the terms
and provisions set forth herein, unless the parties mutually agree otherwise.
4. Due Diligence.
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a. Continued Due Diligence. Although the Company has reviewed some
-----------------------
of the information that you have provided to the Company to date regarding
SSI's business, the Company will require the opportunity to engage in a more
complete review of SSI's business and its assets, liabilities and operations
before Closing. Changes in documentation could be required as a result of the
due diligence process. In addition, if there is a Material Adverse Discovery,
the Company will have the right to negotiate a reduced purchase price or to
terminate this Agreement.
b. Supplying of Information. Between the date hereof and the
--------------------------
Closing, SSI shall provide the Company and its representatives with full
access at all reasonable times to the assets and employees of SSI and complete
and accurate information as the Company may reasonably request in cooperation
with any review, investigation or examination of the books and records,
accounts, contracts, properties, assets, operations and facilities of or
relating to records, accounts, contracts, properties, assets, operations and
facilities of or relating to SSI for purposes of consummating the transactions
contemplated by this Agreement. In connection therewith, SSI shall direct and
authorize SSI's independent public accountants to make available to the
Company and to the independent public accountants representing the Company all
working papers pertaining to the examination and audit by such accountants for
SSI. In connection therewith, SSI shall, with reasonable notice and under its
supervision, permit the Company to contact and meet with the employees of SSI,
such are involved in SSI at such place or places and at such times as
reasonably designated by the Company. SSI shall permit the Company to make
copies of the information relating to SSI contained in the books, file and
records of SSI. Any data and information obtained by the Company from SSI
shall be kept confidential and shall be returned to SSI upon its written
request if for any reason the sale of SSI to the Company does not close on the
Closing Date.
5. Other Agreements.
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a. No-Shop.
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(i) Each party agrees to negotiate in good faith to conclude a
transaction as outlined in this Agreement. Either party may terminate this
Agreement on or after September 30, 1998, for any reason whatsoever (subject
to Section 1(b) above). Additionally, SSI agrees that (A) prior to
termination, neither it nor any of its direct or indirect subsidiaries shall,
and each of them shall not permit any of its officers, directors, employees,
agents or representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its subsidiaries) to,
solicit or encourage (including by way of furnishing confidential or
non-public information), directly or indirectly, any inquiry, proposal or
offer with respect to a merger, consolidation or similar transaction
involving, or any purchase of all or a material part of the assets on a
consolidated basis or the capital stock of, SSI (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning an Acquisition Proposal; and (B) each of them will
immediately cease and cause to be terminated any existing negotiations with
any parties conducted heretofore with respect to any of the foregoing;
provided that nothing contained in this Section 5 shall prevent SSI or its
Board of Directors providing information (pursuant to a confidentiality
agreement in reasonably customary form) to, or engaging in any negotiations or
discussions with, any person or entity who has made an unsolicited bona fide
Acquisition Proposal that is superior to the proposal described in this
Agreement, and is reasonably capable of being financed, if the Board of
Directors of SSI, after consultation with its outside legal counsel,
determines that the failure to do so would be inconsistent with its fiduciary
or other legal obligations to its stockholders or creditors.
(ii) Prior to taking any action referred to in Section 5(a)(i), if
SSI intends to participate in any such discussions or negotiations or provide
any such information to any such third party, SSI shall give the Company
reasonable prior notice in writing of such action. SSI shall promptly notify
the Company in writing of any such requests for such information or the
receipt of any Acquisition Proposal, including the identity of the person or
group engaging in such discussions or negotiations, requesting such
information or making such Acquisition Proposal, and the material terms and
conditions of any Acquisition Proposal.
(iii) Nothing in this Section 5 shall permit SSI to enter into any
agreement with respect to an Acquisition Proposal prior to termination of this
Agreement, it being agreed that prior to that date, SSI will not enter into
any agreement with any person or entity that provides for, or in any way
facilitates, an Acquisition Proposal, other than a confidentiality agreement
in reasonably customary form.
b. BREAK-UP FEE. SSI ACKNOWLEDGES THAT THE COMPANY HAS INVESTED, AND
------------
CONTINUES TO INVEST, TIME, ENERGY, AND RESOURCES INVESTIGATING AND NEGOTIATING
AN ACQUISITION OF SSI. FOR THIS REASON, IF (1) A MAJORITY OF THE BUSINESS OR
EQUITY OF SSI IS SOLD OR TRANSFERRED (THROUGH A SALE OF STOCK OF SSI, A SALE
OF ASSETS, A MERGER, A SHARE EXCHANGE OR OTHER FORM OF TRANSACTION) TO ANY
PERSON, ENTITY, GROUP, ASSOCIATION OR PARTY WITHIN 12 MONTHS AFTER TERMINATION
OF THIS AGREEMENT OR THE DEFINITIVE AGREEMENT, AS THE CASE MAY BE, OR (2) THE
COMPANY'S ACQUISITION OF SSI IS NOT COMPLETED ON OR BEFORE SEPTEMBER 30, 1998
BECAUSE OF (a) ANY BREACH BY SSI OF ITS OBLIGATIONS PURSUANT TO THIS
AGREEMENT, (b) THE FAILURE OF ANY CONDITION HEREOF IN SSI'S CONTROL, (C) ANY
ACTION TAKEN BY SSI AS CONTEMPLATED BY SECTION 5(A) AND(D) ANY ACQUISITION
PROPOSAL, THEN SSI SHALL PAY TO THE COMPANY A ONE-TIME PAYMENT OF $500,000
("BREAK-UP FEE"), AS FULL AND COMPLETE LIQUIDATED DAMAGES IN SATISFACTION OF
ALL RIGHTS AND CLAIMS OF THE COMPANY, REGARDLESS OF THE NEGLIGENCE, STRICT
LIABILITY, BREACH OF WARRANTY, BREACH OF CONTRACT OR OTHER FAULT OR
RESPONSIBILITY OF ANY PARTY OR PERSON. NOTWITHSTANDING THE IMMEDIATELY
PRECEDING SENTENCE, IF THIS AGREEMENT OR THE DEFINITIVE AGREEMENT, AS THE CASE
MAY BE, IS TERMINATED BY THE COMPANY BECAUSE OF A FAILURE OF A CONDITION NOT
IN SSI'S CONTROL, THEN THE BREAK-UP FEE WILL BE REDUCED TO (X) $250,000 IF
SSI IS ACQUIRED BY A THIRD PARTY (OTHER THAN HALLIBURTON) FOR EQUIVALENT
CONSIDERATION BETWEEN $1 AND $1,000,000 LESS THAN THE CONSIDERATION OFFERED BY
THE COMPANY PURSUANT TO THIS AGREEMENT OR THE DEFINITIVE AGREEMENT, AS THE
CASE MAY BE, OR (Y) $0 IF SSI IS ACQUIRED BY A THIRD PARTY (OTHER THAN
HALLIBURTON) FOR EQUIVALENT CONSIDERATION MORE THAN $1,000,000 LESS THAN THE
CONSIDERATION OFFERED BY THE COMPANY PURSUANT TO THIS AGREEMENT OR THE
DEFINITIVE AGREEMENT, AS THE CASE MAY BE. EACH OF THE PARTIES FURTHER
STIPULATE AND AGREE THAT THE BREAK-UP FEE IS REASONABLE IN LIGHT OF THE
ANTICIPATED OR ACTUAL HARM THAT WOULD BE CAUSED BY SUCH A BREACH OF SECTION
5(A) ABOVE OR BY SUCH AN ALTERNATIVE SALE, THE DIFFICULTIES OF PROOF OF LOSS
AND THE INCONVENIENCE OR NON-FEASIBILITY OF OTHERWISE OBTAINING AN ADEQUATE
REMEDY. THE PARTIES ALSO AGREE THAT THE BREAK-UP FEE SET FORTH IN THIS
SECTION 5(B) CONSTITUTES LIQUIDATED DAMAGES FOR LOSS OF A BARGAIN, AND NOT A
PENALTY. SSI FURTHER AGREES THAT FOR THE PURPOSES OF THIS SECTION 5(B), THE
TAKING BY SSI OF ANY OF THE ACTIONS PROHIBITED IN SECTION 5(A) SHALL BE A
DEEMED BREACH OF SECTION 5(A) BY SSI. IF A COURT DETERMINES THAT THE PAYMENT
OF ANY FEE SET FORTH IN THIS SECTION 5 IS UNENFORCEABLE FOR ANY REASON, IN
LIEU OF SUCH BREAK-UP FEE, SSI SHALL PAY TO THE COMPANY SUCH PAYMENTS UNDER
THIS SECTION 5(B) THE COMPANY'S ACTUAL DAMAGES (INCLUDING, WITHOUT LIMITATION,
ITS OUT-OF-POCKET EXPENSES, INDIRECT AND CONSEQUENTIAL DAMAGES AND LOST
OPPORTUNITIES), AS DETERMINED BY THE COURT.
c. Prior to the Closing, except as may be approved by the Company in
writing, SSI shall, and shall cause each of its subsidiaries to:
(i) continue to operate its business in ordinary course and
consistent with past practices;
(ii) utilize its good faith best efforts to preserve the value of its
business including its relationships with its customers and its employees;
(iii) permit the Company to inspect all of its records and to consult
with its officers, employees, attorneys and agents for the purpose of
determining the accuracy of the representations and warranties herein and in
the definitive Agreement;
(iv) give prompt notice to the Company of what it, in good faith,
believes to be any material occurrence in its business;
(v) except for distributions by SSI subsidiaries to SSI, not make any
distribution to its shareholders or acquire any of its capital stock; except
for loans among SSI and its subsidiaries, not make any loan (except the normal
advancement of employee expenses); and not issue any securities or any rights
to acquire any securities;
(vi) not enter into any employment contract, change employer
compensation, otherwise pay additional amounts to employees or adopt or amend
employee benefit plans and not make any capital expenditure or incur any other
form of debt or liability in excess of $10,000;
(vii) not enter into any agreement which is not terminable without
penalty upon 30 days (or less) notice to the other party(ies) thereto;
(viii) not dispose of any of its assets, except with respect to the
sale of inventory sold in the ordinary course of it business and except for
the sale of the SSI Pipeline Simulation Division pursuant to Section
1(c)(vii);
(ix) promptly notify the Company of any lawsuits, claims, proceedings
or investigations that are threatened or commenced against SSI (or any
subsidiary of SSI); and
(x) maintain all of its policies of insurance in full force and
effect.
d. SSI shall use its best efforts to secure the approvals described
in Section 2(b)(xi) as soon as possible. SSI shall utilize its good faith
best efforts to call a meeting of its shareholders within 120 days after the
date hereof and file a proxy statement with the Securities and Exchange
Commission as soon as practicable for the purpose of the approval of the
acquisition by the shareholders of SSI, and SSI shall indemnify the Company
with respect to any liability arising under such proxy statement except with
respect to any liability relating to any information provided therefor by the
Company.
6. Definitions.
-----------
As used in this Agreement, the following capitalized terms shall have the
meanings given to them in this Section 6:
"Bank One Debt" means the amounts owed under the Bank One Loan Documents,
-------------
which shall not be more than $400,000 for borrowed money and $230,000 under
letters of credit as of the Closing Date.
"Bank One Loan Documents" means that certain Borrower Agreement dated
--------------------------
December 17, 1997, between Bank One, Colorado, N.A., as Lender, and Scientific
Software-Intercomp, Inc., as Borrower, relating to a loan for pre-export
working capital, together with a promissory note dated November 30, 1997,
executed by SSI, as payor, and made payable to the order of Bank One,
Colorado, N.A., in the current principal sum of $650,000.
"Closing" means the closing and consummation of the transactions
-------
contemplated herein and the Definitive Agreement, pursuant to which all of the
--
issued and outstanding common stock of SSI shall be acquired by the Company
(or its designated subsidiary) pursuant to the terms and provisions hereof and
of the Definitive Agreement.
"Closing Date" means the date on which the Closing occurs.
-------------
"Halliburton Preferred Stock" means the 800,000 shares of Series A
-----------------------------
Preferred Stock of SSI, which SSI represents to the Company assumes for
purposes of this Agreement are (i) owned and held by Halliburton Company, free
of any claims or encumbrances, and (ii) constitute all of the issued and
outstanding shares of Series A Preferred Stock of SSI.
"Lindner Debt" means the amounts owed to Lindner Dividend Fund, a series
-------------
of Lindner Investments ("Lindner") under the Lindner and Renaissance Loan
Documents, which, as a condition to Company obligations under this Agreement,
shall be no more than $1,400,000 as of the Closing Date.
"Lindner Renaissance Loan Documents" means that certain Loan Agreement
-------------------------------------
dated April 26, 1996, between SSI, Lindner Dividend Fund, a series of Lindner
Investments ("Lindner"), and Renaissance Capital Partners II Ltd.
("Renaissance"), providing for (i) a loan by Lindner to SSI in the original
principal amount of $5,000,000, bearing interest at 7% per annum payable
semi-annually on the last days of October and April, evidenced by that certain
Promissory Note dated April 26, 1996, in the original principal amount of
$5,000,000, payable to the order of Lindner, and (ii) a loan by Renaissance to
SSI in the original principal amount of $1,500,000, bearing 7% interest per
annum payable semi-annually on the last days of October and April, as
evidenced by that certain Promissory Note dated April 26, 1996, payable to the
order of Renaissance, in the original principal sum of $1,500,000.
"Lindner Warrant" means that certain Warrant to Purchase Common Stock of
---------------
SSI dated April 26, 1996, from SSI to Lindner, granting Lindner the right to
purchase 1,500,000 shares of common stock of SSI at a purchase price of $3.00
per share.
"Material Adverse Change" means an event, occurrence or change in facts
-------------------------
or circumstances, or any combination of events, occurrences or changes in
facts or circumstances, that, individually or in the aggregate, have or could
reasonably be expected to have a Material Adverse Effect, except for the items
excluded from the definition of Material Adverse Discovery.
"Material Adverse Discovery" means a discovery of an event, occurrence,
----------------------------
fact or circumstance or combination of events, occurrences, facts or
circumstances, in any case existing on the date hereof or at any time prior to
the Closing relating to SSI or the business of SSI that the Company learns of,
or discovers, prior to the Closing, that, individually or in the aggregate,
adversely affect or could reasonably be expected to adversely affect SSI or
its business (including the results of operations, financial condition or
prospects of its business) or the assets of SSI, in an amount of US$500,000 or
greater except (a) for matters described with reasonable specificity (i)
herein, (ii) in SSI's Annual Report on Form 10-K for the year ended December
31, 1996 as filed with the Securities and Exchange Commission or (iii) in
SSI's 1997 unaudited consolidated financial statements previously furnished to
the Company and (b) for the effects disclosed by SSI to the Company of
accounting for the Pipeline Simulation Division as a discontinued operation.
Operating losses in the ordinary course of business will not constitute a
Material Adverse Change, or Material Adverse Discovery or Material Adverse
Effect unless the losses result in Net Working Capital not satisfying the
provisions of Section 1(c)(iv).
"Material Adverse Effect" means a material adverse effect on the (i)
-------------------------
condition, financial or otherwise, of SSI or its business (including the
results of operations, financial condition or prospects of its business) and
the assets and liabilities of SSI, taken as a whole, or (ii) the enforcement
or validity of this Agreement.
"Net Working Capital" means an amount equal to the sum of all current
---------------------
assets of SSI (including, but not limited to, all inventory, accounts,
receivables, prepaid expenses, work in progress and prepaid contracts) less
the sum of all current liabilities of SSI (including, but not limited to, any
accounts payable, allowances for doubtful accounts, warranty reserves and such
reserves or accruals relating to SSI's business required by generally accepted
accounting principles).
"Renaissance Debt" means the amounts owed to Renaissance Capital Partners
----------------
II Ltd. ("Renaissance") under the Lindner and Renaissance Loan Documents,
which, as a condition to Company's obligations under this Agreement, shall be
no more than $1,300,000 as of the Closing Date.
"Renaissance Warrant" means that certain Warrant to Purchase Common Stock
-------------------
of SSI dated April 26, 1996, from SSI to Renaissance, granting Renaissance the
right to purchase 450,000 shares of common stock of SSI at a purchase price of
$3.00 per share.
"Simmons Fee" means the $350,000 to be owed to Simmons & Company
------------
International as a result of the Closing, which is the aggregate consideration
--
that will be owed to Simmons & Company International in connection with the
transactions contemplated under this Agreement, pursuant to the terms of that
Letter Agreement between SSI and Simmons & Company International dated August
5, 1997.
"SSI Stock Price" means, subject to the adjustments described in Section
----------------
2(a) hereof or otherwise mutually agreed on by the parties, $0.50 per share
for the 8,878,000 shares of common stock of SSI and, to the extent available,
not more than 15,000 additional shares of stock which may be exercised before
closing at an exercise price of less than $0.50.
7. Miscellaneous.
-------------
a. Binding Agreements. Although this Agreement contemplates a
-------------------
further definitive agreement of the parties, this Agreement is intended to be
a legally binding agreement for the acquisition of SSI, subject to the
conditions set forth herein.
b. Entireties. This Agreement constitutes the entire agreement and
----------
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter thereof.
c. Notices. All notices, requests, demands and other communications
-------
made in connection with this Agreement shall be in writing and shall be deemed
to have been duly given on the date delivered, if delivered personally, by
overnight delivery service or sent by facsimile machine (with written
confirmation of receipt given in the same manner as notices in this Section
7(b)) to the persons identified below, addressed as follows:
If to the Company, to:
Baker Hughes Incorporated
3900 Essex Lane
Houston, Texas 77027
Attention: Eric L. Mattson
Telecopy: (713) 439-8966
<PAGE>
with a copy to:
Baker Hughes Solutions
17015 Aldine Westfield
Houston, Texas 77073
Attention: Division Legal Counsel
Telecopy: (713) 625-6895
and a copy to:
J. David Kirkland, Jr.
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Telecopy: (713) 229-1522
If to SSI, to:
Scientific Software-Intercomp, Inc.
633 17th
Suite 1600
Denver, Colorado 80202
Attention: George Steel
Telecopy: (303) 293-0361
with a copy to:
Roger C. Cohen
Cohen Bram & Smith, P.C.
1700 Lincoln Street, Suite 1800
Denver, Colorado 80203
Telecopy: (303) 894-0475
d. Expenses. Each party to this Agreement shall pay its own costs
--------
and expenses (including all legal, accounting, broker, finder and investment
banker fees) relating to this Agreement, the negotiations leading up to this
Agreement and, except as otherwise provided herein, the transactions
contemplated by this Agreement.
e. Publicity. Until the business day after the Closing Date and
---------
except for any public disclosure that the Company or SSI in good faith believe
is required by law or applicable stock exchange rules (in which case the
disclosing party will use reasonable efforts to consult with the
non-disclosing party prior to such disclosure), neither party shall issue any
press release or make any public statement regarding the transactions
contemplated hereby, without the prior written approval of the other party
which will not be unreasonably withheld or delayed.
f. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of Texas as to all matters, including matters of
validity, construction, effect, performance and remedies, without regard to
the law of conflicts of laws.
g. Waivers. Waiver of any term or condition of this Agreement by any
-------
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
h. Counterparts. This Agreement may be executed in one or more
------------
counterparts (including execution and delivery by facsimile transmission), and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which shall constitute
one and the same agreement.
<PAGE>
If the foregoing sets forth your understanding of the agreement of the
parties hereto, please evidence your acceptance of and agreement to all of the
foregoing terms and provisions of this Agreement by executing a copy of this
Agreement in the space provided below.
Very truly yours,
BAKER HUGHES INCORPORATED
/s/ Andrew J. Szescila
Andrew J. Szescila
Senior Vice President
AGREED TO AND
ACCEPTED AS OF THE
27TH DAY OF MARCH, 1998, BY:
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
BY: /S/ GEORGE STEEL
------------------
NAME: GEORGE STEEL
-------------
TITLE: PRESIDENT & C.E.O.
--------------------
<PAGE>
SCHEDULE 1
----------
NONE
EXHIBIT C (2 PAGES)
March 30, 1998
via FACSIMILE
---------
Eric Ryback, President
Ryback Management Corporation
7711 Carondelet, Suite 7000
St. Louis, MO 63105
Dear Mr. Ryback:
Scientific Software-Intercomp, Inc. on March 27, 1998 signed an agreement for
its acquisition by Baker Hughes Incorporated. That agreement is conditioned
upon the acceptance by the Lindner Funds (Lindner) at the closing of the
acquisition of $1.4 million cash in satisfaction of the $5 million of
principal plus accrued interest (and any other charges) which will be owed to
Lindner at closing and in satisfaction of warrants held by Lindner to purchase
up to 1,500,000 shares of common stock of SSI.
The transaction will be as I described to you previously. Depending on the
agreement with Halliburton, the proceeds to common shareholders will be
between $.30 and $.50 per common share. We believe that we have an agreement
with Halliburton which could result in common shareholders receiving $.49 per
share, but in any event no less than $.30 per share. A copy of the agreement
of SSI with Baker Hughes is attached.
Mr. Eric Ryback
March 30, 1998
Page 2
We understand that the foregoing payments are acceptable to Lindner and that
Ryback Management Corporation is authorized on behalf of Lindner to agree to
the foregoing. Accordingly, please sign and return by facsimile to
303/894-0475 a copy of this letter to indicate such agreement. In connection
with completing the formal documentation for the acquisition of SSI by Baker
Hughes, it will of course be necessary for SSI and Lindner to enter into a
fuller agreement containing the terms set forth above.
Very truly yours,
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
By /s/ George Steel
------------------
George Steel, President and Chief Executive Officer
Agreed to this 31 day of March, 1998
------ -----
RYBACK MANAGEMENT CORPORATION
By /s/ Eric Ryback
-----------------
Eric Ryback, President
EXHIBIT D (2 PAGES)
March 30, 1998
via FACSIMILE
---------
Vance M. Arnold
Executive Vice President
Renaissance Capital Group, Inc.
8080 N. Central Expressway
Suite 210-LB 59
Dallas, TX 75206-1857
Dear Mr. Arnold:
Scientific Software-Intercomp, Inc. on March 27, 1998 signed an agreement for
its acquisition by Baker Hughes Incorporated. That agreement is conditioned
upon the acceptance by Renaissance Partners II Ltd. (Renaissance) at the
closing of the acquisition of a promissory note for $1.3 million in
satisfaction of the $1.5 million of principal plus accrued interest (and any
other charges) which will be owed to Renaissance at closing and in
satisfaction of warrants held by Renaissance to purchase up to 450,000 shares
of common stock of SSI. The promissory note will bear simple interest of
seven percent per annum and the note will become payable on July 1, 1999.
The transaction will be as I described to you previously. Depending on the
agreement with Halliburton, the proceeds to common shareholders will be
between $.30 and $.50 per common share. We believe that we have an agreement
with Halliburton which could result in common shareholders receiving $.49 per
share, but in any event no less than $.30 per share. A copy of the agreement
of SSI with Baker Hughes is attached.
Vance M. Arnold
March 30, 1998
Page 2
We understand that the foregoing payments are acceptable to Renaissance and
that Renaissance Capital Group, Inc. is authorized on behalf of Renaissance to
agree to the foregoing. Accordingly, please sign and return by facsimile to
303/894-0475 a copy of this letter to indicate such agreement. It should
finally be understood that in connection with completing the formal
documentation for the acquisition of SSI by Baker Hughes, it will of course be
necessary for SSI and Renaissance to enter into a fuller agreement containing
the terms set forth above.
Very truly yours,
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
By /s/ George Steel
------------------
George Steel, President and Chief Executive Officer
Agreed to this 31st day of March, 1998
---- -----
RENAISSANCE CAPITAL GROUP, INC.
By /s/ Vance Arnold
------------------
Vance M. Arnold, Executive Vice President
EXHIBIT E (2 PAGES)
March 27, 1998
Mr. Fred Charlton
Simmons & Company
700 Louisiana Street
Suite 5000
Houston, TX 77002
Dear Fred:
In order to facilitate a transaction whereby SSI is acquired by a third party
(in the event that the Well Service Technology acquisition of SSI does not go
forward) we commit to you that Halliburton is prepared to accept $2,500,000
cash in exchange for its $4,000,000 of SSI preferred stock. Such commitment
is conditioned upon completion of the transaction prior to August 31, 1998.
Regards,
/s/ Scott R. Willis
- ----------------------
Scott R. Willis
EXHIBIT E
March 30, 1998
via FACSIMILE
---------
Mr. Scott R. Willis
Controller
Halliburton Energy Services
2000 Halliburton Center
5151 San Felipe
Houston, TX 77056-3610
Dear Scott:
Pursuant to our telephone conversation of March 27, 1998 and your letter of
March 27 to Fred Charlton of Simmons & Company, this letter will acknowledge
our acceptance of the commitment of Halliburton to accept $2.5 million cash in
exchange for its $4.0 million of SSI preferred stock at the closing of an
acquisition of SSI by a party other than Well Service Technology provided that
the acquisition is completed prior to August 31, 1998.
We are proceeding on the above basis.
Thank you very much.
Very truly yours,
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
By /s/ George Steel
------------------
George Steel, President and Chief Executive Officer
cc: Mr. Frederick W. Charlton (via Facsimile)
