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):
June 17, 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)
(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 June 17, 1998, the Company executed an Agreement and Plan of Merger (the
"Merger Agreement") between the Company and Baker Hughes Oilfield Operations,
Inc., ("BHOO"), a wholly owned subsidiary of Baker Hughes Incorporated, pursuant
to which BHOO will acquire the Company by virtue of a merger of the Company with
and into a wholly owned subsidiary of BHOO to be formed prior to the closing
(the "Merger"). In the Merger, each share of the Company's Common Stock issued
and outstanding immediately prior to the consummation of the Merger will be
converted into the right to receive $0.44 in cash.
The Merger Agreement supercedes a March 27, 1998 letter agreement regarding the
acquisition of the Company by Baker Hughes Incorporated or any of its
subsidiaries. Completion of the Merger is subject to customary conditions as
well as the approval of the Company's common shareholders. Closing is expected
in the third quarter of 1998.
The June 18, 1998 press release announcing the execution of the Merger Agreement
is filed herewith as Exhibit "A" and the Merger Agreement is filed as Exhibit
"B".
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 June 18, 1998
Exhibit B - Merger Agreement dated June 17, 1998 between the Company and
Baker Hughes Oilfield Operations, Inc.
Item 8. Inapplicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 22, 1998 SCIENTIFIC SOFTWARE-INTERCOMP, INC.
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Registrant
By: /s/ George Steel
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George Steel, President and Chief Executive
Officer
EXHIBIT A
PRESS RELEASE
CONTACT: GEORGE STEEL
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
(303) 292-1111
EMAIL: [email protected]
SSI ANNOUNCES DEFINITIVE AGREEMENT WITH BAKER HUGHES OILFIELD OPERATIONS, INC.
FOR THE ACQUISITION OF SCIENTIFIC SOFTWARE-INTERCOMP, INC.
DENVER, COLORADO, 18 JUNE 1998Scientific Software-Intercomp, Inc. (SSI: SSFT)
announced that it has entered into a definitive agreement with Baker Hughes
Oilfield Operations, Inc. 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 Production (E&P) consulting and reservoir software businesses.
Baker Hughes Oilfield Operations, Inc. is a wholly owned subsidiary of Baker
Hughes Incorporated (BHI: NYSE, PCX, EBS).
The parties had previously entered into an initial agreement which was replaced
by the definitive agreement. At the time of the announcement of the initial
agreement, the Company advised that it believed that stockholders would receive
$.49 per common share subject to possible downward adjustment based upon the
results of Baker Hughes' continuing due diligence. As a result of the due
diligence the definitive agreement now provides for a payment of $.44 per common
share.
The definitive agreement is subject to the approval of SSI's shareholders, on a
date to be announced, and to certain other conditions to be completed by
closing. Closing of the transaction is expected in the third quarter of this
year.
SSI provides reservoir solutions and software to the petroleum industry
worldwide.
Baker Hughes is a leading provider of products and services for the oil, gas and
process industries.
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
BETWEEN
BAKER HUGHES OILFIELD OPERATIONS, INC.
AND
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
DATED AS OF JUNE 17, 1998
TABLE OF CONTENTS
ARTICLE I THE MERGER 1
1.1 The Merger; Effective Time of the Merger 1
1.2 Closing 1
1.3 Effects of the Merger 1
ARTICLE II EFFECT OF MERGER ON CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 2
2.1 Merger Consideration for SSI Common Stock 2
2.2 Effect of the Merger on Other Capital Stock 2
2.4 Treatment of Stock Options and Warrants 2
2.5 Dissenting Shares 3
2.4 Exchange of Certificates 3
ARTICLE III REPRESENTATIONS AND WARRANTIES 4
3.1 Representations and Warranties of SSI 4
3.2 Representations and Warranties of BHOO 18
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS OF SSI 19
4.1 Conduct of Business by SSI Pending the Effective Time 19
4.2 No Solicitation 22
ARTICLE V ADDITIONAL AGREEMENTS 23
5.1 Preparation of the Proxy Statement 23
5.2 Access to Information 23
5.3 SSI Stockholders Meeting 23
5.4 Filings; Other Action 23
5.5 Repurchase of SSI Preferred Stock 23
5.6 Stock Options 24
5.7 Other Actions 24
5.8 SSI Debt Repayment 24
5.9 Public Announcements 25
5.10 Recording of Cancellation of Indebtedness 25
5.11 Sub Funding Option 25
5.12 Directors and Officers Indemnification 25
5.13 Incorporation of Sub 26
ARTICLE VI CONDITIONS PRECEDENT 26
6.1 Conditions to Each Party's Obligation to Effect the Merger 26
6.2 Conditions of Obligations of BHOO and Sub 26
6.3 Conditions of Obligations of SSI 29
ARTICLE VII TERMINATION AND AMENDMENT 29
7.1 Termination 29
7.2 Effect of Termination 31
7.3 Amendment 32
7.4 Extension; Waiver 32
ARTICLE VIII GENERAL PROVISIONS 32
8.1 Payment of Expenses 32
8.2 Nonsurvival of Representations, Warranties and Agreements 33
8.3 Notices 33
8.4 Interpretation 34
8.5 Counterparts 34
8.6 Entire Agreement; No Third-Party Beneficiaries 34
8.7 Governing Law 34
8.8 No Remedy in Certain Circumstances 34
8.9 Assignment 35
8.10 Schedules 35
<PAGE>
GLOSSARY OF DEFINED TERMS
Acquisition Proposal 4.2(a)
Acquisition Transaction 4.2(a)
Affiliate 3.1(d)
Agreement Preamble
Articles of Merger 1.1
Bank One Debt 5.8
BHOO Preamble
Break-up Fee 7.2(b)
CERCLA 3.1(o)(A)
CBCA 1.1
Certificates 2.6(b)
Closing 1.1
Closing Date 1.2
Code Recitals
Constituent Corporations 1.3(a)
Dissenting Shares 2.5
Effective Time 1.1
Environmental Law 3.1(o)(A)
ERISA 3.1(l)(i)
Exchange Act 3.1(c)(iii)
Exchange Agent 2.6(a)
GAAP 3.1(d)
Governmental Entity 3.1(c)(iii)
Halliburton Repurchase 5.5
Hazardous Materials 3.1(o)(B)
Indemnified Liabilities 5.7(a)
Indemnified Parties 5.7(a)
Injunction 6.1(c)
IRS 3.1(k)(ii)
Lindner 5.8
Lindner and Renaissance Loan Agreement 5.8
Lindner Debt 5.8(a)
Lindner Warrant 5.8
Material Adverse Change 3.1(a)
Material Adverse Discovery 7.1(c)
Material Adverse Effect 3.1(a)
Merger Recitals
Merger Consideration 2.1
Net Working Capital 6.2(l)
OSHA 3.1(o)(A)
PBGC 3.1(l)(iii)
Proxy Statement 3.1(c)(iii)
Release 3.1(o)(C)
Remedial Action 3.1(o)(D)
Renaissance 5.8
Renaissance Debt 5.8(b)
Renaissance Warrant 5.8
Returns 3.1(k)(i)
Revenue 2.1(e)(i)
SEC 3.1(a)
Securities Act 3.1(d)
Simmons 3.1(p)
SSI Preamble
SSI Common Stock 2.1
SSI Employee Benefit Plans 3.1(l)(iv)
SSI ERISA Affiliate 3.1(l)(i)
SSI Intangible Property 3.1(n)
SSI Litigation 3.1(j)
SSI Order 3.1(j)
SSI Pension Plans 3.1(l)(i)
SSI Permits 3.1(i)
SSI Preferred Stock 2.2
SSI Representatives 4.2(a)
SSI SEC Documents 3.1(d)
SSI Stock Options 3.1(b)
SSI Stock Plan 3.1(b)
SSI Warrants 3.1(b)
Sub Preamble
Subsidiary 3.1(a)
Surviving Corporation 1.3(a)
Taxes 3.1(k)
Termination Payment Event 7.2(b)
Voting Debt 3.1(b)
<PAGE>
SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER
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Schedule No. Description
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3.1(a) - Subsidiaries; Jurisdiction of Incorporation
3.1(b) - Capital Structure
3.1(c) - Authority; No Violations; Consents and Approvals
3.1(d) - SEC Documents
3.1(f) - Absence of Certain Changes or Events
3.1(g) - No Undisclosed Material Liabilities
3.1(h) - No Default
3.1(i) - Compliance with Applicable Laws
3.1(j) - Litigation
3.1(k)( i), (ii), (iii), (vi) - Taxes
3.1(l)(ii), (v), (vi), (ix) - Pension and Benefit Plans; ERISA
3.1(m)(i), (ii) - Labor Matters
3.1(n) - Intangible Property
3.1(o) - Environmental Matters
3.1(r) - Insurance
3.1(s) - Brokers
3.1(t) - Certain Indebtedness
3.1(u) - Foreign Compliance
3.1(v) - Real Property
3.1(w) - Owned Equipment
3.1(x) - Leased Equipment
3.1(y) - Accounts Receivable
3.1(z) - Contracts
3.1(aa) - Customers and Suppliers
3.1(ab) - Year 2000 Matters
4.1(f) - No Dispositions
4.1(c) - Issuances of Securities
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 17, 1998 (this "Agreement"),
between Baker Hughes Oilfield Operations, Inc., a California corporation
("BHOO"), and Scientific Software-Intercomp, Inc., a Colorado corporation
("SSI").
WHEREAS, the Boards of Directors of BHOO and SSI each have determined that
it is in the best interests of their respective stockholders for SSI to merge
with and into a Colorado corporation and wholly owned subsidiary of BHOO to be
formed by BHOO following the date hereof and prior to the Closing ("Sub") on the
terms and subject to the conditions of this Agreement (the "Merger");
WHEREAS, BHOO and SSI desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
ARTICLE I
THE MERGERARTICLE ITHE MERGER
1.1 The Merger; Effective Time of the Merger1.1 The Merger;
Effective Time of the Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the Colorado Business Corporation Act (the
"CBCA"), SSI will be merged with and into Sub at the Effective Time (as
hereinafter defined). The Merger shall become effective immediately when the
articles of merger (the "Articles of Merger"), prepared and executed in
accordance with the relevant provisions of the CBCA, is filed with the Secretary
of State of the State of Colorado or, if agreed to by the parties, at such time
thereafter as is provided in the Articles of Merger (the "Effective Time"). The
filing of the Articles of Merger shall be made as soon as practicable on or
after the closing of the Merger (the "Closing").
1.2 Closing1.2 Closing. The Closing shall take place at 10:00 a.m.
on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction (or waiver in accordance with this
Agreement) of the latest to occur of the conditions set forth in Article VI (the
"Closing Date"), at the offices of Baker & Botts, L.L.P., One Shell Plaza, 910
Louisiana, Houston, Texas 77002, unless another date or place is agreed to in
writing by the parties.
1.3 Effects of the Merger1.3 Effects of the Merger. (a) At the
Effective Time, (i) SSI will be merged with and into Sub, the separate existence
of SSI shall cease and Sub shall continue as the surviving corporation (SSI and
Sub are sometimes referred to herein as the "Constituent Corporations" and Sub
is sometimes referred to herein as the "Surviving Corporation"); the Articles of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
be the Articles of Incorporation of the Surviving Corporation, provided, that
the name of Sub will be changed to "Scientific Software-Intercomp, Inc."; and
(ii) the Bylaws of Sub as in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation.
(b) The directors of Sub immediately prior to the Effective Time will,
from and after the Effective Time and without further action, become the initial
directors of the Surviving Corporation, and the officers of Sub immediately
prior to the Effective Time will, from and after the Effective Time and without
further action, become the initial officers of the Surviving Corporation, and
such directors and officers shall serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with Articles of Incorporation and Bylaws.
ARTICLE II
EFFECT OF MERGER ON CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
ARTICLE II
EFFECT OF MERGER ON CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Merger Consideration for SSI Common Stock2.1 Merger
Consideration for SSI Common Stock. Each share of Common Stock, without par
value, of SSI ("SSI Common Stock") issued and outstanding immediately prior to
the Effective Time (other than any Dissenting Shares (as defined in Section
2.5)) shall be canceled and converted automatically into the right to receive,
$.44 in cash, without interest (the "Merger Consideration"). All such shares of
SSI Common Stock, when so converted, shall no longer be held by the holders of
certificates representing such shares prior to the Effective Time, and each such
holder shall cease to have any rights with respect thereto other than the right
to receive the Merger Consideration.
2.2 Effect of the Merger on Other Capital Stock2.2 Effect of the
Merger on Other Capital Stock. Each issued and outstanding share of Series A
Preferred Stock, par value $5.00 per share, of SSI ("SSI Preferred Stock"), will
not be converted into any consideration in the Merger but SSI will cause such
shares to be repurchased and placed in SSI's treasury prior to the Merger as
provided in Section 5.5 hereof.
2.3 Cancellation of Treasury Stock and BHOO-Owned Stock
Cancellation of Treasury Stock and BHOO-Owned Stock. Each share of SSI Common
Stock and all other shares of capital stock of SSI that are owned by SSI as
treasury stock immediately prior to the Effective Time and any shares of SSI
Common Stock and all other shares of capital stock of SSI owned by BHOO, Sub or
any other wholly owned Subsidiary (as defined in Section 3.1(a)) of BHOO or SSI
shall be canceled and retired and shall cease to exist and no Merger
Consideration or other consideration shall be delivered or deliverable in
exchange therefor.
2.4 Treatment of Stock Options and Warrants2.4 Treatment of Stock
Options and Warrants. At the Effective Time, each outstanding SSI Stock Option
(as defined in Section 3.1(b)), whether or not then exercisable or vested, shall
be canceled by SSI and each holder of a canceled option shall be entitled to
receive from the Surviving Corporation at the time of such cancellation, an
amount in cash, without interest, equal to the product of (i) the number of
shares of SSI Common Stock previously subject to such option whether or not then
exercisable or vested, and (ii) the excess, if any, of the Merger Consideration
over the exercise price per share applicable to such option reduced by any
applicable withholding. Each outstanding SSI Stock Warrant (as defined in
Section 3.1(b)) will be canceled prior to the Closing in connection with
amendments to the loan agreement as set forth in Section 5.8. SSI will obtain
agreements from option holders to receive the net cash payments contemplated by
the first sentence of this Section 2.4.
2.5 Dissenting Shares2.5 Dissenting Shares. (a) Notwithstanding
any provision of this Agreement to the contrary, shares of SSI Common Stock that
are outstanding immediately prior to the Effective Time and which are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who have made properly in writing a demand to obtain payment for
such Shares in accordance with Article 113 of the CBCA (collectively, the
"Dissenting Shares") will not be acquired for, converted into or represent the
right to receive the Merger Consideration. Such stockholders will be entitled
to receive payment from SSI of the value of such shares held by them in
accordance with the provisions of such Article 113, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
have withdrawn or lost their rights to appraisal of such shares under such
Article 113 shall thereupon be deemed to have been acquired for, converted into
and become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration, without any interest thereon, upon surrender, in the
manner provided in Section 2.6 of the certificate or certificates that formerly
evidenced such shares.
(b) SSI shall give BHOO and Sub (i) prompt notice of any demands to
obtain payment received by SSI, withdrawals of such demands, and any other
instruments served pursuant to Colorado Law in respect of Dissenting Shares and
received by SSI and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands to obtain payment under Colorado Law. SSI
shall not, except with the prior written consent of BHOO, make any payment with
respect to any demands to obtain payment or offer to settle or settle any such
demands.
2.4 Exchange of Certificates2.4 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, BHOO or Sub shall
designate a bank or trust company reasonably satisfactory to SSI to act as agent
(the "Exchange Agent") in connection with the Merger to receive the funds to
which holders of shares of SSI Common Stock shall become entitled pursuant to
Section 2.1. At or as soon as practicable after the Effective Time, Sub or the
Surviving Corporation, as applicable, will deposit in trust with the Exchange
Agent, cash in the aggregate amount equal to the product of (i) the number of
shares of SSI Common Stock outstanding immediately prior to the Effective Time
(other than Dissenting Shares) and (ii) the Merger Consideration. Such funds
shall be invested by the Exchange Agent as directed by the Surviving
Corporation; provided, however, that no loss on any investment made pursuant to
this Section 2.6(a) shall relieve the Surviving Corporation of its obligation to
pay the Merger Consideration for each share of SSI Common Stock outstanding
immediately prior to the Effective Time (other than Dissenting Shares).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each person who was, at the Effective Time, a holder of record of shares of
SSI Common Stock entitled to receive the Merger Consideration pursuant to
Section 2.1 a form of letter of transmittal (which shall specify that delivery
will be effected, and risk of loss and title to the certificates evidencing such
shares (the "Certificates") will pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates pursuant to such letter of transmittal. Upon
surrender to the Exchange Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share formerly evidenced
by such Certificate, and such Certificate shall then be canceled. No interest
shall accrue or be paid on the Merger Consideration payable upon the surrender
of any Certificate for the benefit of the holder of such Certificate. If
payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of SSI, it shall be a condition of payment that the Certificate
so surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of BHOO or the
Surviving Corporation that such taxes either have been paid or are not
applicable. BHOO or the Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
distribution of the Merger Consideration.
(c) Termination of Exchange Fund. At any time following the third
month after the Effective Time, the Surviving Corporation shall be entitled to
require the Exchange Agent to deliver to the Surviving Corporation any funds
which had been made available to the Exchange Agent and not disbursed to holders
of SSI Common Stock (including, without limitation, all interest and other
income received by the Exchange Agent in respect of all funds made available to
it) and, thereafter, such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither BHOO nor the Surviving Corporation shall be liable to any
holder of SSI Common Stock for any Merger Consideration delivered in respect of
such stock to a public official pursuant to any abandoned property, escheat or
other similar law.
(d) No Further Ownership Rights in SSI Common Stock. At the Effective
Time, the stock transfer books of SSI shall be closed and, thereafter, there
shall be no further registration of transfers by holders of shares of SSI Common
Stock immediately prior to the Effective Time on the records of SSI. From and
after the Effective Time, the holders of shares of SSI Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIESARTICLE IIIREPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of SSI3.1 Representations and
Warranties of SSI. SSI represents and warrants to BHOO and Sub as follows:
(a) Organization, Standing and Power(a) Organization, Standing and
Power. Each of SSI and its Subsidiaries (as defined below) is a corporation,
limited liability company or partnership duly organized, validly existing and in
good standing under the laws of its state or jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, other than in such jurisdictions
where the failure so to qualify would not have a Material Adverse Effect (as
defined below) on SSI. SSI has heretofore delivered to BHOO complete and
correct copies of its Articles of Incorporation and Bylaws, each as amended to
the date hereof. SSI and all Subsidiaries of SSI and their respective
jurisdictions of incorporation or organization, percentage ownership by SSI and
jurisdiction where qualified to do business are identified on Schedule 3.1(a).
As used in this Agreement, "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which: (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which are held by
such party or any Subsidiary of such party that do not have a majority of the
voting interest in such partnership); or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is, directly or
indirectly, owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries. As used
in this Agreement: a "Material Adverse Effect" or "Material Adverse Change"
shall mean, in respect of SSI or BHOO, as the case may be, any effect or change
that is or, as far as can be reasonably determined, is reasonably likely to be,
materially adverse to (i) the condition (financial or otherwise) of such party
and its Subsidiaries taken as a whole (including the results of operations,
financial condition or prospects thereof) or the assets or liabilities thereof,
taken as a whole, or (ii) the enforcement or validity of this Agreement.
(b) Capital Structure(b) Capital Structure. As of the date hereof,
the authorized capital stock of SSI consists of 25,000,000 shares of SSI Common
Stock and 1,200,000 shares of SSI Preferred Stock. At the close of business on
April 30, 1998: (i) 9,046,804 shares of SSI Common Stock and 800,000 shares of
SSI Preferred Stock were issued and outstanding, 1,552,124 shares of SSI Common
Stock were reserved for issuance pursuant to outstanding options ("SSI Stock
Options") under SSI's Stock Option Plan (the "SSI Stock Plan") and 1,950,000
shares of SSI Common Stock were reserved for issuance pursuant to outstanding
warrants to purchase SSI Common Stock at an exercise price of $3.00 per share
(the "SSI Warrants"), (ii) no shares of SSI Common Stock were held by SSI in its
treasury; and (iii) no bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to vote) on any
matters on which SSI stockholders may vote ("Voting Debt") were issued or
outstanding. All outstanding shares of SSI Common Stock are validly issued,
fully paid and nonassessable and are not subject to preemptive rights. Except
as set forth on Schedule 3.1(b), all outstanding shares of capital stock of the
Subsidiaries of SSI are owned by SSI, or a direct or indirect wholly owned
Subsidiary of SSI, free and clear of all liens, charges, encumbrances, claims
and options of any nature. Except as set forth in this Section 3.1(b) or on
Schedule 3.1(b) and except for changes since April 30, 1998 resulting from the
exercise of employee stock options granted pursuant to, or from issuances or
purchases under, the SSI Stock Plan or as contemplated by this Agreement, there
are outstanding: (i) no shares of capital stock, Voting Debt or other voting
securities of SSI; (ii) no securities of SSI or any Subsidiary of SSI
convertible into or exchangeable for shares of capital stock, Voting Debt or
other voting securities of SSI or any Subsidiary of SSI; and (iii) no options,
warrants, calls, rights (including preemptive rights), commitments or agreements
to which SSI or any Subsidiary of SSI is a party or by which it is bound in any
case obligating SSI or any Subsidiary of SSI to issue, deliver, sell, purchase,
redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed
or acquired, additional shares of capital stock or any Voting Debt or other
voting securities of SSI or of any Subsidiary of SSI, or obligating SSI or any
Subsidiary of SSI to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. Except as set forth on Schedule 3.1(b), there
are not as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which SSI is a party or by which it is bound relating to the voting of any
shares of the capital stock of SSI that will limit in any way the solicitation
of proxies by or on behalf of SSI from, or the casting of votes by, the
stockholders of SSI with respect to the Merger. Except as set forth on Schedule
3.1(b), there are no restrictions on SSI to vote the stock of any of its
Subsidiaries. Except as set forth on Schedule 3.1(b), there are no persons
known to beneficially or of record own over one percent of the outstanding
shares of SSI Common Stock.
(c) Authority; No Violations; Consents and Approvals(c) Authority;
No Violations; Consents and Approvals.
(i) The Board of Directors of SSI has, by unanimous vote of all
directors with no negative vote, approved the Merger and this Agreement and
declared the Merger and Agreement to be in the best interests of the
stockholders of SSI. The directors of SSI have advised SSI and BHOO that they
currently intend to vote or cause to be voted all of the shares beneficially
owned by them and their affiliates in favor of approval of the Merger and this
Agreement. SSI has all requisite corporate power and authority to enter into
this Agreement and, subject, with respect to consummation of the Merger, to
approval of this Agreement and the Merger by the stockholders of SSI in
accordance with the CBCA, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of SSI, subject, with respect to consummation of
the Merger, to approval of this Agreement and the Merger by the stockholders of
SSI in accordance with the CBCA. This Agreement has been duly executed and
delivered by SSI and, subject, with respect to consummation of the Merger, to
approval of this Agreement and the Merger by the stockholders of SSI in
accordance with the CBCA, and assuming this Agreement constitutes the valid and
binding obligation of each of BHOO and Sub, constitutes a valid and binding
obligation of SSI enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(ii) Except as set forth on Schedule 3.1(c), the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
give rise to a right of purchase under, result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
SSI or any of its Subsidiaries under, or otherwise result in a detriment to SSI
or any of its Subsidiaries under, any provision of (i) the Articles of
Incorporation or Bylaws of SSI or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to SSI or any of
its Subsidiaries, (iii) any joint venture or other ownership arrangement or (iv)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.1(c)(iii) are duly and timely obtained or
made and the approval of the Merger and this Agreement by the stockholders of
SSI has been obtained, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to SSI or any of its Subsidiaries or any of their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to SSI or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by SSI or the
consummation by SSI of the transactions contemplated hereby, except for: (A)
the filing with the SEC of (x) a proxy statement in preliminary and definitive
form relating to the meeting of SSI's stockholders to be held in connection with
the Merger (the "Proxy Statement") and (y) such reports under Section 13(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such
other compliance with the Exchange Act and the rules and regulations thereunder,
as may be required in connection with this Agreement and the transactions
contemplated hereby; (B) the filing of the Articles of Merger with the Secretary
of State of the State of Colorado; (C) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws, or
environmental laws; and (D) such filings and approvals as may be required by any
foreign premerger notification, securities, corporate or other law, rule or
regulation.
(d) SEC Documents(d) SEC Documents. SSI has made available to BHOO
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by SSI with the SEC since December 31, 1994 and
prior to the date of this Agreement (the "SSI SEC Documents") which are all the
documents that SSI was required to file with the SEC since such date. Except as
set forth on Schedule 3.1(d), as of their respective dates, the SSI SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such SSI SEC Documents, and none of the SSI SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Except as set forth on Schedule 3.1(d), the financial statements of SSI included
in the SSI SEC Documents complied in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which are material) the
consolidated financial position of SSI and its consolidated Subsidiaries as of
their respective dates and the consolidated results of operations and the
consolidated cash flows of SSI and its consolidated Subsidiaries for the periods
presented therein. Except as disclosed in the SSI SEC Documents or in Schedule
3.1(d), there are no agreements, arrangements or understandings between SSI and
any party who is at the date of this Agreement or was at any time prior to the
date hereof but after December 31, 1994 an Affiliate (as defined below) of SSI
that are required to be disclosed in the SSI SEC Documents. Except as disclosed
in Schedule 3.1(d), all SSI SEC Documents were filed timely when they were
originally due. For purposes of this Agreement "Affiliate" means with respect
to any person or entity, any other person or entity that directly or indirectly,
controls, is controlled by, or is under common control with such person or
entity.
(e) Information Supplied(e) Information Supplied. None of the
information supplied or to be supplied by SSI and included or incorporated by
reference in the Proxy Statement will, at the date mailed to stockholders of SSI
or at the time of the meeting of such stockholders to be held in connection with
the Merger or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the
Effective Time any event with respect to SSI or any of its Subsidiaries, or with
respect to other information supplied by SSI for inclusion in the Proxy
Statement, shall occur which is required to be described in an amendment of, or
a supplement to, the Proxy Statement, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the stockholders of SSI. The Proxy Statement, insofar as
it relates to SSI or its Subsidiaries or other information supplied by SSI for
inclusion therein, will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events(f) Absence of Certain
Changes or Events. Except as disclosed in, or reflected in the financial
statements included in, the SSI SEC Documents or on Schedule 3.1(f), or except
as expressly contemplated by this Agreement, since December 31, 1997, there has
not been: (i) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
SSI's capital stock; (ii) any amendment of any material term of any outstanding
equity security of SSI or any Subsidiary; (iii) any repurchase, redemption or
other acquisition by SSI or any Subsidiary of any outstanding shares of capital
stock or other equity securities of, or other ownership interests in, SSI or any
Subsidiary, except as contemplated by SSI Benefit Plans; (iv) any material
change in any method of accounting or accounting practice or any tax method,
practice or election by SSI or any Subsidiary; or (v) any other transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) that has or is
likely to have had a Material Adverse Effect on SSI.
(g) No Undisclosed Material Liabilities(g) No Undisclosed Material
Liabilities. Except as disclosed in the SSI SEC Documents or on Schedule
3.1(g), as of the date hereof, there are no liabilities of SSI or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than: (i) liabilities adequately
provided for on the balance sheet of SSI dated as of December 31, 1997
(including the notes thereto) contained in SSI's Annual Report on Form 10-K for
the year ended December 31, 1997; (ii) liabilities under this Agreement; and
(iii) liabilities incurred in the ordinary course of business after December 31,
1997, which have not had and are not likely to have a Material Adverse Effect on
SSI.
(h) No Default(h) No Default. Neither SSI nor any of its
Subsidiaries is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation) of
any term, condition or provision of (i) their respective charter and by-laws,
(ii) except as disclosed in Schedule 3.1(h), any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which SSI or
any of its Subsidiaries is now a party or by which SSI or any of its
Subsidiaries or any of their respective properties or assets may be bound or
(iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to SSI or any of its Subsidiaries.
(i) Compliance with Applicable Laws(i) Compliance with Applicable
Laws. SSI and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "SSI
Permits"). SSI and its Subsidiaries are in compliance with the terms of the SSI
Permits. Except as disclosed in the SSI SEC Documents or as set forth on
Schedule 3.1(i), the businesses of SSI and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity. Except as set forth on Schedule 3.1(i), as of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
SSI or any of its Subsidiaries is pending or, to the best knowledge of SSI as of
the date hereof, threatened. Schedule 3.1(i) sets forth each such failure to
hold or comply with the terms of SSI Permits, each such violation of law,
ordinance or regulation of any governmental entity and each such pending or
threatened investigation or review by any governmental entity existing on the
date hereof that involves amounts in excess of $10,000.
(j) Litigation(j) Litigation. Except as disclosed in the SSI SEC
Documents or on Schedule 3.1(j) hereto, there is no suit, action or proceeding
pending, or, to the best knowledge of SSI, threatened against or affecting SSI
or any Subsidiary of SSI ("SSI Litigation"), and SSI and its Subsidiaries have
no knowledge of any facts that are likely to give rise to any SSI Litigation,
nor is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against SSI or any Subsidiary of SSI ("SSI
Order"). In addition, the aggregate reasonable estimate of uninsured exposures
or losses under all claims and judgments pending, or to the best knowledge of
SSI as of the date hereof, threatened, pursuant to all SSI Litigation and SSI
Orders, existing on the date hereof, does not exceed $15,000.
(k) Taxes(k) Taxes.
(i) Except as set forth on Schedule 3.1(k)(i), each of SSI, each
of its Subsidiaries and any affiliated, consolidated, combined, unitary or
similar group of which any such corporation is or was a member has (A) duly
filed on a timely basis (taking into account any extensions) all federal and all
material state, local, foreign and other returns, declarations, reports,
estimates, information returns and statements ("Returns") required to be filed
or sent by or with respect to it in respect of any Taxes (as hereinafter
defined), (B) duly paid or deposited on a timely basis all Taxes that are due
and payable (except for audit adjustments not material in the aggregate or to
the extent that liability therefor is reserved for in SSI's most recent audited
financial statements) for which SSI or any of its Subsidiaries may be liable,
(C) established reserves that are adequate for the payment of all Taxes not yet
due and payable with respect to the results of operations of SSI and its
Subsidiaries through the date hereof, and (D) complied in all material respects
with all applicable laws, rules and regulations relating to the reporting,
payment and withholding of Taxes and has in all material respects timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over.
(ii) Schedule 3.1(k)(ii) sets forth (A) the last taxable period
through which the federal income Tax Returns of SSI and any of its Subsidiaries
have been examined by the Internal Revenue Service ("IRS") or otherwise closed
and (B) any affiliated, consolidated, combined, unitary or similar group or
Return in which SSI or any of its Subsidiaries is or has been a member or is or
has joined in the filing. Except to the extent being contested in good faith,
all deficiencies asserted as a result of such examinations and any examination
by any applicable taxing authority have been paid, fully settled or adequately
provided for in SSI's most recent audited financial statements. Except as
adequately provided for in the SSI SEC Documents, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes for which SSI or any of its Subsidiaries would be liable,
and no deficiency for any Taxes has been proposed, asserted or assessed pursuant
to such examination against SSI or any of its Subsidiaries by any authority with
respect to any period other than as set forth in Schedule 3.1(k)(ii).
(iii) Except as disclosed on Schedule 3.1(k)(iii), neither SSI nor
any of its Subsidiaries has executed or entered into (or prior to the close of
business on the Closing Date will execute or enter into) with the IRS or any
taxing authority (i) any agreement or other document extending or having the
effect of extending the period for assessments or collection of any income or
franchise Taxes for which SSI or any of its Subsidiaries would be liable or (ii)
a closing agreement pursuant to Section 7121 of the Code, or any predecessor
provision thereof or any similar provision of state, local, foreign or other
income tax law that relates to the assets or operations of SSI or any of its
Subsidiaries.
(iv) Neither SSI nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would constitute an
"excess parachute payment" within the meaning of Section 280G of the Code.
(v) Neither SSI nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by SSI or any of its Subsidiaries.
(vi) Except as set forth in SSI SEC Documents or as disclosed on
Schedule 3.1(k)(vi), neither SSI nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing or allocation agreement or
similar agreement or arrangement.
For purposes of this Agreement, "Taxes" shall mean all federal, state,
county, local, foreign or other taxes, charges, fees, levies, imposts, duties,
licenses or other assessments, together with any interest, penalties, additions
to tax or additional amounts imposed by any taxing authority.
(l) Pension and Benefit Plans; ERISA; Employees(l) Pension and
Benefit Plans; ERISA; Employees.
(i) All "employee pension plans," as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by SSI or any of its Subsidiaries or any trade or business (whether
or not incorporated) which is under common control, or which is treated as a
single employer, with SSI under Section 414(b), (c), (m) or (o) of the Code
("SSI ERISA Affiliate") or to which SSI or any of its Subsidiaries or any SSI
ERISA Affiliate contributed or is obligated to contribute thereunder (the "SSI
Pension Plans") intended to qualify under Section 401 of the Code so qualify and
the trusts maintained pursuant thereto are exempt from federal income taxation
under Section 501 of the Code nothing has occurred with respect to the operation
of the SSI Pension Plans that could reasonably be expected to cause the loss of
such qualification or exemption or the imposition of any liability, penalty, or
tax under ERISA or the Code.
(ii) Except as disclosed in Schedule 3.1(l)(ii), there has been no
"reportable event" as that term is defined in Section 4043 of ERISA and the
regulations thereunder with respect to the SSI Pension Plans subject to Title IV
of ERISA that would require the giving of notice or any event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(iii) As to the SSI Pension Plans and as to the "employee pension
benefit plans" maintained or contributed to by SSI, its Subsidiaries or by any
SSI ERISA Affiliate within six years prior to the Effective Time subject to
Title IV of ERISA, there has been no event or condition which presents a
material risk of termination, no notice of intent to terminate has been given
under Section 4041 of ERISA and no proceeding has been instituted under Section
4042 of ERISA to terminate, such that would result in a material liability to
SSI, its Subsidiaries, or SSI ERISA Affiliates; no liability to the Pension
Benefit Guaranty Corporation ("PBGC") has been incurred; no accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred; and the assets of each SSI Pension
Plan equal or exceed the actuarial present value of the benefit liabilities,
within the meaning of Section 4041 of ERISA, under such SSI Pension Plan, based
upon reasonable actuarial assumptions and the asset valuation principles
established by the PBGC.
(iv) There is no violation of ERISA with respect to the filing of
applicable reports, documents, and notices regarding all the "employee benefit
plans," as defined in Section 3(3) of the ERISA and all other employee
compensation and benefit arrangements or payroll practices, including, without
limitation, severance pay, sick leave, vacation pay, salary continuation for
disability, consulting or other compensation agreements, retirement, deferred
compensation, bonus, long-term incentive, stock option, stock purchase,
hospitalization, medical insurance, life insurance and scholarship programs
maintained by SSI or any of its Subsidiaries or to which SSI or any of its
Subsidiaries contributed or is obligated to contribute thereunder (all such
plans, other than the SSI Pension Plans, being hereinafter referred to as the
"SSI Employee Benefit Plans"), or SSI Pension Plans with the Secretary of Labor
and the Secretary of the Treasury or the furnishing of such documents to the
participants or beneficiaries of the SSI Employee Benefit Plans or SSI Pension
Plans.
(v) Except as disclosed on Schedule 3.1(l)(v), the SSI Employee
Benefit Plans and SSI Pension Plans have been maintained in accordance with
their terms and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable Federal and state law, all contributions to the
SSI Employee Benefit Plans and SSI Pension Plans have been timely made pursuant
to their terms, there is no liability for breaches of fiduciary duty in
connection with the SSI Employee Benefit Plans and SSI Pension Plans, there have
been no defaults, violations, actions, suits or claims pending (except ordinary
claims for benefits), or to the knowledge of SSI, threatened respecting the SSI
Employee Benefit Plans and SSI Pension Plans, and neither SSI nor any of its
Subsidiaries has engaged in a "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA with respect to the SSI
Employee Benefit Plans and SSI Pension Plans.
(vi) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee or group of employees of SSI or any of its
Subsidiaries; (ii) increase any benefits otherwise payable under any SSI
Employee Benefit Plan or SSI Pension Plan or the profit sharing plan of SSI or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits. Except as disclosed or referenced on Schedule 3.1(l)(vi) or in the
SSI SEC Documents, there are no severance agreements or employment agreements
between SSI or any of its Subsidiaries and any employee of SSI or such
Subsidiary.
True and correct copies of all such severance agreements and employment
agreements have been provided to BHOO. Except as set forth or otherwise
referenced on Schedule 3.1(l)(vi), neither SSI nor any of its Subsidiaries has
any consulting agreement or arrangement with any person involving compensation
in excess of $5,000, except as are terminable upon one month's notice or less.
(vii) No stock or other security issued by SSI or any of its
subsidiaries forms or has formed a material part of the assets of any funded SSI
Employee Benefit Plan or SSI Pension Plan.
(viii) Neither SSI nor any of its Subsidiaries nor any SSI ERISA
Affiliate contributes to, or has an obligation to contribute to, and has not
within six years prior to the Effective Time contributed to, or had an
obligation to contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA.
(ix) Schedule 3.1(l)(ix) contains a true and complete list of all
employees of SSI and their respective job titles, base salaries, annual bonuses,
years of employment and office locations.
(m) Labor Matters(m) Labor Matters.
(i) Except as set forth in Schedule 3.1(m)(i) hereto, as of the
date of this Agreement, (1) no employees of SSI or any of its Subsidiaries are
represented by any labor organization; (2) no labor organization or group of
employees of SSI or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority; and (3) to
the knowledge of SSI, there are no organizing activities involving SSI or any of
its Subsidiaries pending with any labor organization or group of employees of
SSI or any of its Subsidiaries.
(ii) Except as set forth on Schedule 3.1(m)(ii) hereto, SSI and
each of its Subsidiaries is in compliance with all laws and orders relating to
the employment of labor, including all such laws and orders relating to wages,
hours, collective bargaining, discrimination, civil rights, safety and health,
workers' compensation and the collection and payment of withholding and/or
Social Security Taxes and similar Taxes.
(n) Intangible Property(n) Intangible Property. SSI and its
Subsidiaries possess or have adequate rights to use all trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of SSI and its Subsidiaries (collectively, the "SSI Intangible
Property"). Except as set forth on Schedule 3.1(n), all of the SSI Intangible
Property is owned by SSI or its Subsidiaries free and clear of any and all
liens, claims or encumbrances, and neither SSI nor any such Subsidiary has
forfeited or otherwise relinquished any SSI Intangible Property. The use of the
SSI Intangible Property by SSI or its Subsidiaries does not conflict with,
infringe upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark, brand
mark, brand name, computer program, database, industrial design, copyright or
any pending application therefor of any other person and there have been no
claims made and neither SSI nor any of its Subsidiaries has received any notice
of any claim or otherwise knows that any of the SSI Intangible Property is
invalid or conflicts with the asserted rights of any other person or has not
been used or enforced or has been failed to be used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of any of the
SSI Intangible Property.
(o) Environmental Matters(o) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Law" means any applicable law regulating or
prohibiting Releases into any part of the natural environment, or pertaining to
the protection of natural resources, the environment and public and employee
health and safety including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(33 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 7401 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.) ("OSHA") and the regulations promulgated pursuant
thereto, and any such applicable state or local statutes, and the regulations
promulgated pursuant thereto, as such laws have been and may be amended or
supplemented through the Closing Date.
(B) "Hazardous Material" means any substance, material or waste which
is regulated pursuant to any Environmental Law by any public or governmental
authority in the jurisdictions in which the applicable party or its Subsidiaries
conducts business, or the United States, including, without limitation, any
material or substance which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste" or "restricted
hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any
provision of Environmental Law;
(C) "Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, or into or out of any property
owned, operated or leased by the applicable party or its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without limitation,
any capital expenditures, required by a governmental entity or required under
any Environmental Law, or voluntarily undertaken to (I) clean up, remove, treat,
or in any other way ameliorate or address any Hazardous Materials or other
substance in the indoor or outdoor environment; (II) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material so
it does not endanger or threaten to endanger the public health or welfare of the
indoor or outdoor environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or relating to a
Release; or (IV) bring the applicable party into compliance with any
Environmental Law.
(i) Except as disclosed on Schedule 3.1(o), the operations of SSI
and its Subsidiaries have been and, as of the Closing Date, will be, in
compliance with all Environmental Laws;
(ii) Except as disclosed on Schedule 3.1(o), SSI and its
Subsidiaries have obtained and will, as of the Closing Date, maintain all
permits required under applicable Environmental Laws for the continued
operations of their respective businesses;
(iii) Except as disclosed on Schedule 3.1(o), as of the date
hereof SSI and its Subsidiaries are not subject to any outstanding orders or
material contracts with any Governmental Entity or other person respecting (A)
Environmental Laws, (B) Remedial Action or (C) any Release or threatened Release
of a Hazardous Material;
(iv) Except as disclosed on Schedule 3.1(o), SSI and its
Subsidiaries have not received any communication alleging, with respect to any
such party, the violation of or liability under any Environmental Law;
(v) Except as disclosed on Schedule 3.1(o), neither SSI nor any of
its Subsidiaries has any contingent liability in connection with the Release of
any Hazardous Material into the indoor or outdoor environment (whether on-site
or off-site);
(vi) Except as disclosed on Schedule 3.1(o), the operations of SSI
or its Subsidiaries involving the generation, transportation, treatment, storage
or disposal of hazardous waste, as defined and regulated under 40 C.F.R. Parts
260-270 (in effect as of the date of this Agreement) or any state equivalent,
are in compliance with applicable Environmental Laws; and
(vii) Except as disclosed on Schedule 3.1(o), to the knowledge of
SSI as of the date hereof, there is not now on or in any property of SSI or its
Subsidiaries any of the following: (A) any underground storage tanks or surface
impoundments, (B) any asbestos-containing materials, or (C) any polychlorinated
biphenyls.
(p) Opinion of Financial Advisor(p) Opinion of Financial Advisor.
SSI has received the opinion of Simmons & Company International ("Simmons") to
the effect that, as of the date hereof, the consideration to be received by the
holders of SSI Common Stock pursuant to this Agreement is fair from a financial
point of view to such holders. SSI has provided BHOO with a true and complete
copy of SSI's engagement letter with Simmons.
(q) Vote Required(q) Vote Required. The affirmative vote of the
holders of two-thirds of the outstanding shares of SSI Common Stock is the only
vote of the holders of any class or series of SSI capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
(r) Insurance(r) Insurance.
(i) Schedule 3.1(r) sets forth a list of all policies of fire,
casualty, liability, burglary, fidelity, worker's compensation directors and
officers and other forms of insurance held by SSI or its Subsidiaries that are
material to SSI and material details regarding each, including limits of
liability, deductibles, self insurance retentions and reinsurance requirements.
(ii) All premiums due and payable for the insurance in Schedule
3.1(r) have been duly paid, and such policies or extensions or renewals thereof
in such amounts will be outstanding and duly in full force without interruption
until the Closing Date.
(iii) SSI maintains insurance coverage reasonably adequate for the
operation of the business of SSI and each of its Subsidiaries (taking into
account the cost and availability of such insurance), and the transactions
contemplated hereby will not adversely affect such coverage.
(s) Brokers(s) Brokers. Except as disclosed on Schedule 3.1(s)
hereof, no broker, investment banker, or other person is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of SSI.
(t) Certain Indebtedness. Schedule 3.1(t) sets forth an accurate and
complete list of all SSI accounts payable as of April 30, 1998 including the
amount, due date and name of creditor. Schedule 3.1(t) also sets forth an
accurate and complete list of all outstanding notes payable and other
indebtedness as of the date hereof including the principal balance, accrued
interest, payment terms and the name of creditor. Except as set forth on
Schedule 3(t), since April 30, 1998, SSI has not incurred any accounts payable
outside of the ordinary course of its business (consistent with past practices)
in amount or type.
(u) Foreign Compliance. Except as set forth on Schedule 3.1(u) hereof,
SSI has furnished to BHOO the documents required to assess the regulatory
compliance of sales or other transfers by SSI or any of its Subsidiaries of
goods, technology or software to Libya. SSI has received no notice of any
investigation or review of any Governmental Entity (other than as expressly set
forth in the foregoing documents) involving a possible violation of applicable
laws, regulations or orders (including the U.S. Export Administration
Regulations, 15 C.F.R. 730-774, the Office of Foreign Assets Control's
sanctions regulations, 31 C.F.R. 500-596) and no such investigation or review
is pending or, to the best of its knowledge, threatened. Further, SSI is not
aware of any conduct by it in Libya or on behalf of Libya or any designated
national of Libya wherever located during the five years prior to the date of
this Agreement that could reasonably be expected to give rise to a violation of
applicable laws, regulations or orders. Since January 1996, SSI and its
Subsidiaries have not contracted to carry out any work in Libya or on behalf of
Libya or any designated national of Libya wherever located. SSI and its
Subsidiaries currently are not engaged in work in Libya (except for one dormant
project on which the customer expects the work to be completed) or on behalf of
Libya or any designated national of Libya wherever located and will not commence
any such work (including not recommencing the foregoing dormant project) without
the prior consent of BHOO.
(v) Real Property. Schedule 3.1(v) contains an accurate and complete
list of all real property owned or leased by SSI or any of its Subsidiaries
(with the real property being leased identified as such) including the location,
description and any outstanding mortgage or lien on any such real property.
Neither SSI nor any of its Subsidiaries is in material default under any such
lease, and there is not, under any such lease, any event that, with notice or
lapse of time, would constitute a material default by any party to any such
lease.
(w) Equipment. Schedule 3.1(w) contains a list of all equipment owned
by SSI or its Subsidiaries that has a per item book value in excess of $5,000
(including trade fixtures) and the location of that equipment.
(x) Equipment Leased. Schedule 3.1(x) contains a list of all equipment
leases used by SSI or its Subsidiaries involving an annual expense per lease in
excess of $5,000 to which SSI or any of its Subsidiaries is a lessee. None of
SSI or any of its Subsidiaries is in default under any such lease; and to SSI's
knowledge, there is not, under any such lease, any event that, with notice or
lapse of time, would constitute a material default by any party to any such
lease.
(y) Accounts Receivable. Schedule 3.1(y) contains a list of all SSI
accounts receivable as of April 30, 1998, including the aging of each account.
Except as set forth on Schedule 3.1(y), each such account receivable represents
a valid obligation due to SSI, is collectible in the ordinary and usual course
of business and is and will not be subject to any offset or other defenses to
the payment thereof. Since April 30, 1998, there has not been any material
write-off of the accounts receivable set forth on Schedule 3.1(y).
(z) Contracts. Schedule 3.1(z) lists the following contracts,
understandings, commitments and agreements (written or oral) of SSI or its
Subsidiaries as of the date hereof:
(i) All contracts, understandings or commitments (other than
leases), whether in the ordinary course of business or not, involving a present
or future obligation to purchase or deliver property, goods or services of an
amount or value in excess of $5,000 each, or for a term in excess of one year;
(ii) All collective bargaining agreements or other contracts or
commitments to or with any labor union, employee representative or group of
employees;
(iii) All employment contracts, and all other contracts,
agreements or commitments to or with individual directors, officers, employees,
agents, representatives or consultants, for a period in excess of 30 days, or
for a remuneration that exceeds or will exceed in accordance with present
commitments, $5,000 per annum;
(iv) All sales representative or sales agency agreements;
(v) All guarantees or other agreements exceeding $5,000
individually or $5,000 in the aggregate that are intended to provide credit
support with respect to the obligations of any third party, including any
partnership or joint venture;
(vi) All contracts, understanding or commitments that purport to
restrict the right of SSI or any of its Subsidiaries to engage in any line of
business in any geographical location or that conditions such right on the
participation or approval of any third party;
(vii) All open purchase orders or other contracts or commitments
relating to the purchase or sale of goods or equipment with an invoice value of
$5,000 or more; and
(viii) All (i) customer contracts and licenses entered into or
amended on or after January 1, 1997 and (ii) to the best of SSI's knowledge, all
other contracts in which SSI's or any of its Subsidiary's liability for
consequential damages or lost profits is not expressly waived.
There has not been any material default in any obligation to be
performed by SSI or any of its Subsidiaries under any material contract,
commitment or agreement and neither SSI nor any of its Subsidiaries has waived
any material right under any such contract, commitment or agreement.
(aa) Customers and Suppliers. Except as set forth in Schedule 3.1(aa),
to SSI's knowledge, the relationships of SSI and its Subsidiaries with their
respective material customers, distributors and suppliers are satisfactory, and
no material customer, distributor or supplier has terminated, threatened to
terminate or provided SSI or any of its Subsidiaries with notice of its intent
to terminate all or any material portion of its relationship with SSI or any of
its Subsidiaries during the preceding 12-month period.
(ab) Year 2000 Matters. Except as set forth in Schedule 3.1(ab), the
computer software produced or operated by the Company is capable of providing or
is being adapted to provide uninterrupted millennium functionality to record,
store, process and present calendar dates falling on or after January 1, 2000 in
substantially the same manner and with the same functionality as such software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999. The costs of the adaptations referred to in the prior
sentence will not have a Company Material Adverse Effect.
3.2 Representations and Warranties of BHOO3.2 Representations and
Warranties of BHOO. BHOO represents and warrants to SSI as follows:
(a) Organization, Standing and Power(a) Organization, Standing and
Power. BHOO is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing to
do business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on BHOO.
(b) Authority; No Violations, Consents and Approvals(b) Authority;
No Violations, Consents and Approvals.
(i) BHOO has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of BHOO. This Agreement has been duly executed and
delivered by BHOO and, assuming this Agreement constitutes the valid and binding
obligation of SSI, constitutes a valid and binding obligation of BHOO
enforceable in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
(ii) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or give rise to a right of purchase under,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of BHOO under, or otherwise result in a
detriment to BHOO under, any provision of (i) the Articles of Incorporation or
Bylaws of BHOO, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to BHOO, (iii) any joint venture or other ownership
arrangement or (iv) assuming the consents, approvals, authorizations or permits
and filings or notifications referred to in Section 3.2(c)(iii) are duly and
timely obtained or made, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to BHOO or any of their respective properties or
assets, other than, in the case of clause (ii), (iii) or (iv), any such
conflicts, violations, defaults, rights, liens, security interests, charges,
encumbrances or detriments that, individually or in the aggregate, would not
have a Material Adverse Effect on BHOO, materially impair the ability of BHOO to
perform its obligations hereunder or thereunder or prevent the consummation of
any of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental Entity
is required by or with respect to BHOO in connection with the execution and
delivery of this Agreement by BHOO or the consummation by BHOO of the
transactions contemplated hereby, except for: (A) the filing of the Articles of
Merger with the Secretary of State of the State of Colorado; (B) such filings
and approvals as may be required by any applicable state securities, "blue sky"
or takeover laws or environmental laws; and (C) such filings and approvals as
may be required by any foreign premerger notification, securities, corporate or
other law, rule or regulation.
(c) Brokers(c) Brokers. No broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of BHOO.
(d) Financing. Sub will have available to it at the Effective Time,
sufficient funds to acquire all the outstanding shares of SSI Common Stock in
the Merger for the Merger Consideration.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS OF SSI
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS OF SSI
4.1 Conduct of Business by SSI Pending the Effective Time4.1
Conduct of Business by SSI Pending the Effective Time. During the period from
the date of this Agreement and continuing until the Effective Time, SSI agrees
as to itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, or to the extent that BHOO shall otherwise consent
in writing):
(a) Ordinary Course(a) Ordinary Course. Each of SSI and its
Subsidiaries will carry on its businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and shall use
all reasonable efforts to preserve intact its present business organizations,
keep available the services of its current officers and employees, and endeavor
to preserve its relationships with customers, suppliers and others having
business dealings with it.
(b) Dividends; Changes in Stock(b) Dividends; Changes in Stock.
SSI will not and it will not permit any of its Subsidiaries to: (i) declare or
pay any dividends on or make other distributions in respect of any of its
capital stock or partnership interests, except for the declaration and payment
of dividends from a Subsidiary of SSI to SSI or another Subsidiary of SSI and
except for cash dividends or distributions paid on or with respect to the
capital stock or partnership interests of a Subsidiary of SSI; (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of SSI capital stock; or (iii) except for the repurchase
by SSI of 800,000 shares of SSI Preferred Stock from Halliburton Company for an
aggregate purchase price not to exceed $2,500,000, repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries to purchase, redeem or
otherwise acquire, any shares of its capital stock, except as required by the
terms of its securities outstanding on the date hereof or as contemplated by any
existing employee benefit plan.
(c) Issuance of Securities; Loans(c) Issuance of Securities; Loans.
Except as provided on Schedule 4.1(c), SSI will not and it will not permit any
of its Subsidiaries to, issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock of any class, any Voting
Debt or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, Voting Debt or convertible securities, other than:
(i) the issuance of SSI Common Stock upon the exercise of stock options granted
under the SSI Stock Plan that are outstanding on the date hereof, or in
satisfaction of stock grants or stock based awards made prior to the date hereof
pursuant to the SSI Stock Plan or upon exercise of the SSI Warrants; and (ii)
issuances by a wholly owned Subsidiary of its capital stock to its parent.
Except for loans among SSI and its Subsidiaries, neither SSI nor any of its
Subsidiaries shall make any loan to any person other than the advancement of
routine employee expenses on terms consistent with past practice.
(d) Governing Documents(d) Governing Documents. Except as
expressly contemplated hereby or in connection herewith, SSI will not amend or
propose to amend its Articles of Incorporation or Bylaws.
(e) No Acquisitions(e) No Acquisitions. SSI will not and it will
not permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof.
(f) No Dispositions(f) No Dispositions. Other than: (i)
dispositions or proposed dispositions listed on Schedule 4.1(f), (ii) the
disposition (the "PSD Disposition") of SSI's Pipeline Simulation Division to
LICENERGY, Inc. for cash proceeds of at least $1,500,000 pursuant to the Asset
Purchase Agreement dated as of March 1, 1998 among SSI, Bethany, Inc.,
Scientific Software-Intercomp UK, Ltd. and LICENERGY, Inc. (the "PSD
Agreement"), (iii) dispositions in the ordinary course of business consistent
with past practice that are not material, individually or in the aggregate, to
SSI and its Subsidiaries taken as a whole, and (iv) product sales in the
ordinary course of business consistent with past practice, SSI will not and it
will not permit any of its Subsidiaries to sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of its assets. SSI will
not amend or waive any provision of the PSD Agreement, as amended by Letter
Agreement dated May 1, 1998 between SSI and LICENERGY, Inc.
(g) No Dissolution, Etc(g) No Dissolution, Etc. Except as
otherwise permitted or contemplated by this Agreement, SSI will not authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of SSI or any of its Subsidiaries.
(h) Certain Employee Matters(h) Certain Employee Matters. SSI will
not and it will not permit any of its Subsidiaries to: (i) grant any increases
in the compensation of any of its directors, officers or employees; (ii) pay or
agree to pay any pension, retirement allowance or other employee benefit not
required or contemplated by any of the existing SSI Employee Benefit Plans or
SSI Pension Plans as in effect on the date hereof to any director, officer or
employee, whether past or present; (iii) enter into any new, or amend any
existing, employment or severance or termination agreement with any director,
officer or key employee; (iv) become obligated under any new SSI Employee
Benefit Plan or SSI Pension Plan, which was not in existence or approved by the
Board of Directors of SSI prior to or on the date hereof, or amend any such plan
or arrangement in existence on the date hereof if such amendment would have the
effect of enhancing any benefits thereunder; or (v) terminate the employment of
any executive or employee of SSI or any of its Subsidiaries without cause.
(i) Indebtedness; Leases; Capital Expenditures(i) Indebtedness;
Leases; Capital Expenditures. SSI will not, nor will SSI permit any of its
Subsidiaries to, (i) incur any indebtedness for borrowed money (except for
working capital under SSI's existing credit facilities) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of such party or any of its Subsidiaries or
guarantee any debt securities of others, (ii) enter into any lease (whether such
lease is an operating or capital lease) or create any mortgages, liens, security
interests or other encumbrances on the property of SSI or any of its
Subsidiaries in connection with any indebtedness thereof, or (iii) commit to
aggregate capital expenditures in excess of $10,000.
(j) Notification of Certain Occurrences. SSI will provide prompt
notice to BHOO of what it in good faith believes to be any material occurrence
in its business.
(k) Notification of Litigation. SSI will promptly notify BHOO of any
lawsuits, claims, proceedings or investigations that are threatened or commenced
against SSI or any of its Subsidiaries.
(l) Insurance Maintenance. SSI will maintain all its and cause its
Subsidiaries to maintain all their respective policies of insurance in full
force and effect. SSI may obtain a tail policy for the current directors and
officers insurance policy held by SSI with Mt. Hawley Insurance Company,
provided that the premium for such tail policy shall not exceed $55,750.
(m) Agreements. SSI will not enter any agreement which is not
terminable by SSI without penalty on 30 day's (or less) prior notice to the
other party thereto.
(n) Taxes. SSI will not make any tax election or settle or compromise
any material federal, state, local or foreign income tax liability.
4.2 No Solicitation4.2 No Solicitation.
(a) SSI agrees that (i) prior to the Effective Time, neither it
nor any of its Subsidiaries will, and each of them will 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 (including, without limitation, any proposal or offer to its
stockholders) with respect to a tender offer, merger, consolidation, share
exchange 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 transaction being hereinafter referred to as an "Acquisition Transaction"
and any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning an Acquisition Proposal; and
(ii) 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 Agreement shall prevent SSI
or its Board of Directors from (A) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal or (B) prior to the
stockholders' meeting referred to in Section 5.3, (x) 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 to acquire all outstanding
SSI Common Stock that is superior to the Merger and is reasonably capable of
being financed and reasonably likely to be consummated (a "Superior Proposal")
and (y) terminating this Agreement to concurrently enter into a definitive
acquisition agreement with respect to a Superior Proposal, 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.
(b) Prior to taking any action referred to in Section 4.2(a), if SSI
intends to participate in any such discussions or negotiations or provide any
such information to any such third party, SSI shall give reasonable prior notice
to BHOO of each such action. SSI will promptly notify BHOO 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.
(c) Nothing in this Section 4.2 shall permit SSI to enter into any agreement
with respect to an Acquisition Proposal during the term of this Agreement, it
being agreed that during the term of this Agreement, SSI shall not enter into
any agreement with any person that provides for, or in any way facilitates, an
Acquisition Proposal, other than a confidentiality agreement in reasonably
customary form.
ARTICLE V
ADDITIONAL AGREEMENTSARTICLE VADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement5.1 Preparation of the Proxy
Statement. SSI will promptly prepare and file with the SEC the Proxy Statement.
SSI will use its best efforts to cause the Proxy Statement to be mailed to
stockholders of SSI at the earliest practicable date.
5.2 Access to Information5.2 Access to Information. Upon
reasonable notice, SSI will (and will cause each of its Subsidiaries to) afford
to the officers, employees, accountants, counsel and other representatives of
BHOO, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, SSI will (and shall cause each of its Subsidiaries to)
furnish promptly to BHOO (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to SEC requirements and (b) all other information concerning its business,
properties and personnel as such other party may reasonably request.
5.3 SSI Stockholders Meeting5.3 SSI Stockholders Meeting. SSI will
call a meeting of its stockholders to be held as promptly as practicable after
the date hereof for the purpose of voting upon this Agreement and the Merger.
Subject only to the proviso of Section 4.2, SSI will, through its Board of
Directors, recommend to its stockholders approval of such matters and not
rescind such recommendation and shall use its best efforts to obtain approval
and adoption of this Agreement and the Merger by its stockholders. SSI shall
use all reasonable efforts to hold such meeting as soon as practicable after the
date hereof.
5.4 Filings; Other Action5.4 Filings; Other Action. Subject to the
terms and conditions herein provided, BHOO and SSI shall: (a) use their best
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the transactions contemplated hereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; (c)
furnish the others with copies of all correspondence, filings and communications
(and memoranda setting forth the substance thereof) between them and their
affiliates and their respective representatives, on the one hand, and any
governmental or regulatory authority or members or their respective staffs, on
the other hand, with respect to this Agreement and the transactions contemplated
hereby; and (d) furnish the others with such necessary information and
reasonable assistance as such other parties and their respective affiliates may
reasonably request in connection with their preparation of necessary filings,
registrations or submissions of information to any governmental or regulatory
authorities.
5.5 Repurchase of SSI Preferred Stock5.5 Repurchase of SSI
Preferred Stock. At or prior to the Closing, SSI will cause to be repurchased
and placed in SSI's treasury the 800,000 shares of outstanding SSI Preferred
Stock held by Halliburton Company for an aggregate purchase price not to exceed
$2,500,000 in full satisfaction of the acquisition or termination of all rights,
interests and benefits that Halliburton Company may have under or to SSI
Preferred Stock and any other SSI capital stock, and any other right or interest
Halliburton Company may have in or to SSI or its assets (the "Halliburton
Repurchase").
5.6 Stock Options5.6 Stock Options. Prior to the Closing, SSI
shall enter into an agreement with each holder of an SSI Stock Option with an
exercise price per share less than the Merger Consideration that provides that,
immediately prior to the Effective Time, each SSI Stock Option that is then
outstanding, whether or not then exercisable or vested, shall be canceled by
SSI, and each holder of a canceled SSI Stock Option shall be entitled to receive
from BHOO at the time of such cancellation an amount in cash equal to the
product of (i) the number of shares of SSI Common Stock previously subject to
such option, whether or not then exercisable or vested, and (ii) the excess, if
any, of the Merger Consideration over the exercise price per share applicable to
such option, reduced by any applicable withholding. Also, prior to the Closing,
SSI shall have provided proper notice to the holders of SSI Stock Options so
that, unless exercised prior to the Closing (or a holder has entered into the
agreement described in the immediately preceding sentence), all SSI Stock
Options will expire prior to the Effective Time.
5.7 Other Actions5.7 Other Actions. Except as contemplated by this
Agreement, neither BHOO nor SSI shall, and shall not permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Merger set forth in Article VI not being satisfied.
5.8 SSI Debt Repayment5.8 SSI Debt Repayment. (a) As soon as
reasonably practicable following the date hereof and prior to Closing, SSI will
use all reasonable efforts to cause the Lindner and Renaissance Loan Agreement
(and all corresponding promissory notes, security documents, stock warrants and
related instruments) to be amended to provide that (i) the amount owed by SSI to
Lindner (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).
(b) As soon as reasonably practicable following the date hereof and
prior to Closing, SSI will use all reasonable efforts to cause the Lindner and
Renaissance Loan Agreement (and all corresponding promissory notes, security
documents, stock warrants and related instruments) to be amended to provide that
(i) the amount owed by SSI to Renaissance (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).
(c) As soon as reasonably practicable following the date hereof and
prior to Closing, SSI will cause the Bank One Debt to be fully paid and
discharged and any security interests or rights of Bank One in SSI or any of its
assets to be fully released and discharged.
For purposes of this Agreement, "Lindner and Renaissance Loan Agreement"
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 25, 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.
For purposes of this Agreement, "Lindner Warrant" means that certain
Warrant to Purchase Common Stock of SSI dated April 26, 1996 issued by SSI to
Lindner, granting Lindner the right to purchase from SSI 1,500,000 shares of SSI
Common Stock at a price of $3.00 per share.
For purposes of this Agreement, "Renaissance Warrant" means that certain
Warrant to Purchase Common Stock of SSI dated April 26, 1996 issued by SSI to
Renaissance, granting Renaissance the right to purchase from SSI 450,000 shares
of SSI Common Stock at a price of $3.00 per share.
For purposes of this Agreement, "Bank One Debt" means the amount owed under
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.
5.9 Public Announcements5.9 Public Announcements. BHOO and its
Affiliates, on the one hand, and SSI and its Affiliates, on the other hand, will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange or transaction reporting system.
5.10 Recording of Cancellation of Indebtedness5.10 Recording of
Cancellation of Indebtedness. SSI, Sub and BHOO agree that any cancellation of
indebtedness resulting from the reduction of the Lindner Debt and Renaissance
Debt (as contemplated by Sections 6.2(g) and (h)) will be recorded prior to the
Closing.
5.11 Sub Funding Option5.11 Sub Funding Option. If Sub elects to
lend funds to SSI to satisfy SSI's obligations to complete the Halliburton
Repurchase and pay the Lindner Debt prior to Closing, then SSI hereby agrees to
issue a promissory note to Sub in the full amount of the funds loaned to SSI by
Sub (the "Sub Promissory Note").
5.12 Directors and Officers Indemnification5.12 Directors and
Officers Indemnification. The directors and officers of SSI shall be entitled
to continuing indemnification by the Surviving Corporation following the Closing
to the same extent and subject to the same terms and conditions as provided
therefore by the Articles of Incorporation and Bylaws of SSI in effect on the
date of this Agreement.
5.13 Incorporation of Sub5.13 Incorporation of Sub. BHOO will
cause the incorporation of Sub as soon as reasonably practicable following the
date hereof and will cause Sub to perform the obligations of Sub provided for in
this Agreement.
ARTICLE VI
CONDITIONS PRECEDENTARTICLE VI CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger6.1
Conditions to Each Party's Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) SSI Stockholder Approval(a) SSI Stockholder Approval. This
Agreement and the Merger shall have been approved and adopted by the affirmative
vote of the holders of two-thirds of the outstanding shares of SSI Common Stock
entitled to vote thereon.
(b) Other Approvals(b) Other Approvals. All consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from any Governmental Entity in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
BHOO, Sub and SSI shall have been made or obtained (as the case may be), except
where the failure to obtain such consents, approvals, permits, and
authorizations would not be reasonably likely to result in a Material Adverse
Effect on BHOO or SSI (assuming the Merger has taken place) or to materially
adversely affect the consummation of the Merger, and no such consent, approval,
permit or authorization shall impose terms or conditions that would have, or
would be reasonably likely to have, a Material Adverse Effect on BHOO or SSI
(assuming the Merger has taken place). Unless otherwise agreed to by BHOO and
Sub, no such consent, approval, permit or authorization shall then be subject to
appeal.
(c) No Injunctions or Restraints(c) No Injunctions or Restraints.
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") preventing the consummation of the Merger shall be
in effect; provided, however, that prior to invoking this condition, each party
shall have complied fully with its obligations under Section 5.4 hereof.
6.2 Conditions of Obligations of BHOO and Sub6.2 Conditions of
Obligations of BHOO and Sub. The obligations of BHOO and Sub to effect the
Merger are subject to the satisfaction of the following conditions, any or all
of which may be waived in whole or in part by BHOO and Sub:
(a) Representations and Warranties(a) Representations and
Warranties. The representations and warranties of SSI set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 3.1 hereof) (i) would not in the aggregate
constitute a Material Adverse Discovery or (ii) could not reasonably be expected
to have a Material Adverse Effect on SSI or as otherwise contemplated by this
Agreement.
(b) Performance of Obligations of SSI(b) Performance of Obligations
of SSI. SSI shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date.
(c) Absence of Certain Action(c) Absence of Certain Action. No
Injunction shall be in effect (i) imposing any limitation upon the ability of
BHOO or any of its Subsidiaries effectively to control the business or
operations of BHOO, SSI or any of their respective Subsidiaries or (ii)
prohibiting or imposing any limitation upon BHOO's or SSI's or any of their
Subsidiaries' ownership or operation of all or any portion of the business or
assets or properties of BHOO or SSI or any of their respective Subsidiaries or
compelling BHOO or SSI or any of their respective Subsidiaries to divest or hold
separate all or any portion of the business or assets or properties of BHOO or
SSI or any of their respective Subsidiaries, or imposing any other limitation
upon any of them in the conduct of their businesses, and no suit or proceeding
by a governmental authority seeking such an Injunction or an Injunction
preventing or making illegal the consummation of any of the Mergers shall be
pending.
(d) Third-Party Consents. SSI shall have obtained all consents,
waivers, approvals and authorizations of third parties with respect to credit
agreements and other material contracts, leases, licenses and other agreements
to which SSI or any of its Subsidiaries is a party, which consents, waiver,
approvals and authorizations are required of such third parties by such
documents, in form and substance reasonably satisfactory to BHOO, except where
the failure to obtain such consent, waiver, approval or authorization could not
reasonably be expected to have a Material Adverse Effect on BHOO or the
Surviving Corporation (assuming of the Merger has taken place).
(e) Absence of Litigation. There shall not be pending any material
litigation or proceeding against SSI.
(f) Intellectual Property Assignment. 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
BHOO's designee.
(g) Lindner Debt. 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).
(h) Renaissance Debt. 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).
(i) Bank One Debt. 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.
(j) No Material Adverse Discovery. At and prior to Closing, there
shall not have been any Material Adverse Discovery (as defined in Section
7.1(c)) or any effect or change that is or, as far as can be reasonably
determined, is reasonably likely to be, materially adverse to the enforcement or
validity of this Agreement.
(k) Repurchase of SSI Preferred Stock. SSI shall have completed the
Halliburton Repurchase.
(l) Net Working Capital. 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 6.2(l), 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, (iii) any part of the Lindner Debt and
the Renaissance Debt (including any accrued interest thereon) and (iv) the
adjustment amounts set forth in items 2, 3 and 5 of the SSI Acquisition
Purchase Price Adjustment schedule which relates to the SSI Due Diligence Items
attachment to the letter dated May 21, 1998 from BHOO to SSI.
(m) PSD Disposition(m) PSD Disposition. The PSD Disposition shall
have been consummated for cash proceeds to SSI of at least $1,500,000.
(n) No Affiliate Indebtedness(n) No Affiliate Indebtedness.
Immediately prior to Closing SSI shall not have any indebtedness or balances due
to or from any of its stockholders or their respective Affiliates.
(o) Cancellation of Indebtedness. SSI shall have recorded any
cancellation of indebtedness resulting from the reduction of the Lindner Debt
and Renaissance Debt (as contemplated by Sections 6.2(g) and (h)).
(p) Sub Promissory Note. SSI shall have issued and delivered to Sub
the Sub Promissory Note if Sub elects to lend funds to SSI as contemplated by
Section 5.11.
BHOO, Sub and SSI acknowledge that the satisfaction of the conditions in
Sections 6.2(g) and (k) and of the provisions of Section 2.2 may require funding
from Sub, however neither BHOO nor Sub is obligated to provide any such funding.
It shall not constitute a failure of the conditions in Section 6.2(g) or Section
6.2(k), as applicable, if SSI requests Sub to fund up to $1,400,000 for payment
of the Lindner Debt referred to in Section 6.2(g) or up to $2,500,000 for the
Halliburton Repurchase referred to in Section 6.2(k) and (i) Sub elects not to
provide such funding and (ii) the funding of such amounts would, without further
action, result in the conditions in Section 6.2(g) or Section 6.2(k), as
applicable, being completely satisfied.
6.3 Conditions of Obligations of SSI6.3 Conditions of Obligations
of SSI. The obligation of SSI to effect the Merger is subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by SSI:
(a) Representations and Warranties(a) Representations and
Warranties. Each of the representations and warranties of BHOO set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 3.2 hereof) could not reasonably be expected to
have a Material Adverse Effect on BHOO or as otherwise contemplated by this
Agreement.
(b) Performance of Obligations of BHOO and Sub(b) Performance of
Obligations of BHOO and Sub. BHOO and Sub shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing Date.
ARTICLE VII
TERMINATION AND AMENDMENTARTICLE VIITERMINATION AND AMENDMENT
7.1 Termination7.1 Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of SSI:
(a) by mutual written consent of SSI and BHOO;
(b) by SSI, Sub or BHOO if (i) the Merger shall not have been
consummated by September 30, 1998 (provided that the right to terminate this
Agreement under this clause (i) shall not be available to any party whose
failure to fulfill any covenant or agreement under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date); (ii) any court of competent jurisdiction, or some other governmental body
or regulatory authority shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable; or (iii) any required approval of the SSI stockholders shall
not have been obtained by reason of the failure to obtain the required vote upon
a vote held at a duly held meeting of stockholders or at any adjournment
thereof;
(c) by BHOO or Sub if (i) for any reason SSI fails to use its good
faith best efforts to call and hold a stockholders meeting for the purpose of
voting upon this Agreement and the Merger by July 27, 1998; (ii) SSI shall have
failed to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by SSI at or prior
to such date of termination (provided such breach has not been cured within 30
days following receipt by SSI of notice of such breach and is existing at the
time of termination of this Agreement); (iii) any representation or warranty of
SSI contained in this Agreement shall not be true in all material respects when
made (provided such breach has not been cured within 30 days following receipt
by SSI of notice of such breach and is existing at the time of termination of
this Agreement) or on and as of the time of such termination as if made on and
as of such time (except to the extent it relates to a particular date), except
where the failure to be so true and correct (without giving effect to the
individual materiality qualifications and thresholds otherwise contained in
Section 3.1 hereof) could not reasonably be expected to have a Material Adverse
Effect on SSI; or (iv) after the date hereof there has been any Material Adverse
Change or Material Adverse Discovery with respect to SSI, except for general
economic changes or changes that may affect the industries of SSI or any of its
Subsidiaries generally. For purposes of this Agreement "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 BHOO 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 $500,000 or greater except (a) for matters described in
reasonable specificity in this Agreement or in SSI's Annual Report on Form 10-K
for the year ended December 31, 1997 as filed with the Securities and Exchange
Commission and (b) for the effects disclosed by SSI to BHOO of accounting of
SSI's 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
6.2(l).
(d) by SSI if (i) BHOO and Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by them at or prior to such date of
termination (provided such breach has not been cured within 30 days following
receipt by BHOO of notice of such breach and is existing at the time of
termination of this Agreement); or (ii) any representation or warranty of BHOO
or Sub contained in this Agreement shall not be true in all material respects
when made (provided such breach has not been cured within 30 days following
receipt by BHOO of notice of such breach and is existing at the time of
termination of this Agreement) or on and as of the time of such termination as
if made on and as of such time (except to the extent it relates to a particular
date), except where the failure to be so true and correct (without giving effect
to the individual materiality qualifications and thresholds otherwise contained
in Section 3.2 hereof) could not reasonably be expected to have a Material
Adverse Effect;
(e) by BHOO or Sub if (i) the Board of Directors of SSI shall have
withdrawn or modified, in any manner which is adverse to BHOO or Sub, its
recommendation or approval of the Merger or this Agreement and the transactions
contemplated hereby or shall have resolved to do so, or (ii) the Board of
Directors of SSI shall have recommended to the stockholders of SSI any
Acquisition Proposal or any transaction described in the definition of
Acquisition Proposal, or shall have resolved to do so;
(f) by SSI if SSI shall exercise the right specified in clause (B) of
Section 4.2(a); provided that SSI may not effect such termination pursuant to
this Section 7.1(f) unless and until (i) BHOO receives at least seven business
days' prior written notice from SSI of its intention to effect such termination
pursuant to this Section 7.1(f); (ii) during such period, SSI shall, and shall
cause its respective financial and legal advisors to, consider any adjustment in
the terms and conditions of this Agreement that BHOO and Sub may propose; and
(iii) SSI pays the amounts required by Section 7.2 concurrently with such
termination; or
(g) by BHOO or Sub if any Governmental Entity shall have issued any
Injunction or taken any other action permanently imposing, prohibiting or
compelling any of the limitations, prohibitions or compulsions set forth in
Section 6.2(c) and such Injunction or other action shall have become final and
nonappealable.
7.2 Effect of Termination7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any party hereto
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto except (i)
with respect to this Section 7.2 -and Section 8.1 and (ii) to the extent that
such termination results from the willful breach (except as provided in Section
8.8) by a party hereto of any of its representations or warranties or of any of
its covenants or agreements contained in this Agreement.
(b) If BHOO, Sub or SSI terminates this Agreement pursuant to Section
7.1(b) because of the failure of any condition contained in Article VI that is
or was within the reasonable control of SSI or pursuant to Section 7.1(c)(i),
7.1(e) or 7.1(f) (a "Termination Payment Event"), SSI shall, on the day of such
termination, pay to BHOO a fee of $500,000 in cash (the "Break-up Fee") by wire
transfer of immediately available funds to an account designated by BHOO. The
Break-up Fee will constitute full and complete liquidated damages in
satisfaction of all rights and claims of BHOO, regardless of the negligence,
strict liability, breach of warranty, breach of contract or other fault or
responsibility of any party or person.
(c) If BHOO, Sub or SSI terminates this Agreement for any reason other
than a Termination Payment Event and SSI consummates an Acquisition Transaction
on or before the first anniversary of the date of this Agreement, SSI shall, at
or prior to the closing of such Acquisition Transaction, pay the Break-up Fee to
BHOO by wire transfer of immediately available funds to an account designated by
BHOO. Notwithstanding the immediately preceding sentence, if this Agreement is
terminated by BHOO because of a failure of a condition not in SSI's reasonable
control and SSI consummates an Acquisition Transaction (other than with
Halliburton Company), then the Break-Up Fee will be reduced to (x) $250,000 if
such Acquisition Transaction was for equivalent consideration between $1 and
$1,000,000 less than the consideration offered by Sub pursuant to this Agreement
or (y) $0 if such Acquisition Transaction was for equivalent consideration more
than $1,000,000 less than the consideration offered by Sub pursuant to this
Agreement.
7.3 Amendment7.3 Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of SSI, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 Extension; Waiver7.4 Extension; Waiver. At any time prior to
the Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed: (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
ARTICLE VIII
GENERAL PROVISIONSARTICLE VIIIGENERAL PROVISIONS
8.1 Payment of Expenses8.1 Payment of Expenses. Each party hereto
shall pay its own expenses incident to preparing for entering into and carrying
out this Agreement and the consummation of the transactions contemplated hereby,
whether or not the Merger shall be consummated. If the Merger is consummated,
the Surviving Corporation, and not the stockholders of SSI immediately prior to
the Effective Time, shall be responsible for expenses incurred by SSI in
connection with this Agreement and the transaction contemplated hereby.
8.2 Nonsurvival of Representations, Warranties and Agreements8.2
Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
and any liability for breach or violation thereof shall terminate absolutely and
be of no further force and effect at and as of the Effective Time, except for
the agreements contained in Sections 2.1, 2.2, 5.6 and 7.2 and Article VIII.
8.3 Notices8.3 Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied or, if mailed, five business days after
the date of mailing to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder:
(a) if to BHOO or Sub, to:
Baker Hughes Incorporated
3900 Essex Lane
Houston, Texas 77027
Attention: Eric L. Mattson
Telecopy: (713) 439-8966
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.
3000 One Shell Plaza
Houston, Texas 77002
Telecopy: (713) 229-1522
(b) 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 Brame & Smith Professional Corporation
1700 Lincoln Street, Suite 1800
Denver, Colorado 80203
Telecopy: (303) 894-0475
8.4 Interpretation8.4 Interpretation. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." Unless the context otherwise requires, "or" is disjunctive but not
necessarily exclusive, and words in the singular include the plural and in the
plural include the singular. Any representations and warranties of SSI that are
qualified by the phrase "to the best knowledge" of a party or phrases with
similar wording shall be interpreted to refer to the knowledge, after reasonable
investigation, of the directors and officers of SSI.
8.5 Counterparts8.5 Counterparts. This Agreement may be executed
in counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
8.6 Entire Agreement; No Third-Party Beneficiaries8.6 Entire
Agreement; No Third-Party Beneficiaries. This Agreement (together with any
other documents and instruments referred to herein and the confidentiality
agreement dated March 27, 1998 between the parties) (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereto and (b)
except as provided in Section 5.6, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
8.7 Governing Law8.7 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Texas,
without giving effect to the principles of conflicts of law thereof, except to
the extent the provisions of the CBCA are required to be applicable to the
Merger.
8.8 No Remedy in Certain Circumstances8.8 No Remedy in Certain
Circumstances. Each party agrees that, should any court or other competent
authority hold any provision of this Agreement or part hereof to be null, void
or unenforceable, or order any party to take any action inconsistent herewith or
not to take an action consistent herewith or required hereby, the validity,
legality and enforceability of the remaining provisions and obligations
contained or set forth herein shall not in any way be affected or impaired
thereby, unless the foregoing inconsistent action or the failure to take an
action constitutes a material breach of this Agreement or makes the Agreement
impossible to perform in which case this Agreement shall terminate pursuant to
Article VII hereof. Except as otherwise contemplated by this Agreement, to the
extent that a party hereto took an action inconsistent herewith or failed to
take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent authority, such party shall not incur any
liability or obligation unless such party breached its obligations under Section
5.4 hereof or did not in good faith seek to resist or object to the imposition
or entering of such order or judgment.
8.9 Assignment8.9 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Baker Hughes Incorporated or any direct or indirect Subsidiary of Baker Hughes
Incorporated. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.10 Schedules8.10 Schedules. For purposes of this Agreement,
Schedules shall mean the Schedules contained in the Confidential Disclosure
Schedule, dated the date hereof, delivered in connection with this Agreement and
initialed by the parties hereto.
<PAGE>
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IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
BAKER HUGHES OILFIELD OPERATIONS, INC.
By: /s/ Joseph F. Donovan
--- ------------------------
Name: Joseph F. Donovan
Title: Vice President
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
By: /s/ George Steel
--- ------------------
George Steel
President and Chief Executive Officer
