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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
WONDERWARE CORPORATION
(NAME OF SUBJECT COMPANY)
WONDERWARE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
978179 10 9
(CUSIP NUMBER OF CLASS OF SECURITIES)
ROY H. SLAVIN
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WONDERWARE CORPORATION
100 TECHNOLOGY DRIVE
IRVINE, CALIFORNIA 92618
(714) 727-3200
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF PERSON(S) FILING STATEMENT)
COPIES TO:
D. BRADLEY PECK, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CALIFORNIA 92121
(619) 550-6000
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1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Wonderware Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 100 Technology Drive, Irvine, California 92618.
The title of the class of equity securities to which this statement relates
is Common Stock, $.001 par value, of the Company, including the associated
preferred stock purchase rights (collectively, the "Shares").
2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer (the "Offer") of WDR Acquisition
Corp., a Delaware corporation ("Offeror") and an indirect wholly owned
subsidiary of Siebe plc, a public limited company organized under the laws of
the United Kingdom ("Siebe" or "Parent"), as disclosed in the joint press
release issued by the Company and Siebe on February 24, 1998, a copy of which is
filed as Exhibit 99.1 hereto and is incorporated herein by reference (the "Press
Release"). Offeror has made the Offer to purchase all of the outstanding Shares
at a price of $24.00 per Share, net to the seller in cash, subject to certain
conditions therein. The Offer is being made by Offeror pursuant to an Agreement
and Plan of Merger (the "Merger Agreement") entered into on February 24, 1998
between the Company, Parent, the Offeror and WDR Sub Corp., a Delaware
corporation and wholly owned subsidiary of Offeror ("Merger Sub").
Parent's Schedule 14D-1 states that the address of the principal executive
offices of Parent is Saxon House, 2-4 Victoria Street, Windsor, Berkshire SL4
1EN, United Kingdom and that the principal executive offices of Offeror and
Merger Sub are located at 1013 Centre Road, Wilmington, Delaware 19805.
3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) (i) ARRANGEMENTS WITH THE COMPANY'S EXECUTIVE OFFICERS, DIRECTORS AND
AFFILIATES.
(1) Certain contracts, agreements, arrangements and understandings between
the Company and certain of its directors, executive officers and affiliates are
described in the Company's Proxy Statement in connection with the Company's 1997
Annual Meeting of Stockholders under the sections therein entitled "Executive
Compensation," "Stock Option Grants and Exercises," "Employment Agreements,"
"Compensation Committee Report," "Option Repricing Information" and "Certain
Transactions." The Proxy Statement is filed as Exhibit 99.2 hereto and is
incorporated herein by reference. A copy of relevant portions of pages 9-17 of
the Proxy Statement, which are incorporated by reference herein, are submitted
with this Schedule as part of Exhibit 99.2. In addition, a copy of the Company's
Employment Agreement with Roy H. Slavin, the Company's Chairman of the Board,
President and Chief Executive Officer (the "Slavin Employment Agreement"), is
filed as Exhibit 99.3 hereto and is incorporated herein by reference.
(2) The Company also maintains a bonus program for its executive officers
based on the achievement of annual financial performance targets and other
management objectives which are established annually, but which are subject to
adjustment by the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") as it deems appropriate. Although the
Compensation Committee has not established specific criteria for 1998 bonus
awards, it has established the following target bonus levels: 45% of salary for
the Chief Executive Officer, 30% of salary for Vice Presidents, and 15% of
salary for director-level and other key employees. In addition, the Company has
adopted a bonus program applicable to all employees that would provide a bonus
of 11% of base salary if the Company attains sales of at least $111 million and
earnings per share of at least $1.11.
(3) Under the Slavin Employment Agreement, as modified on August 15, 1996
by action of the Compensation Committee, if Mr. Slavin ultimately does not
realize a gain of $1,250,000 or more from outstanding options to purchase
100,000 shares of Common Stock with a current exercise price of $9.75 per share,
then the Company will pay him, as additional compensation, the difference
between the amount
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realized by Mr. Slavin and $1,250,000. If the Offer and the Merger are
consummated at $24.00 per share, no payment by the Company will be required.
(4) On January 2, 1997, the Compensation Committee granted to each of Sam
Auriemma, the Company's Vice President, Finance and Chief Financial Officer; Joe
Cowan, the Company's Vice President, Sales and Marketing; Jeff Kissling, the
Company's Vice President, Development; and Victoria Stowe, the Company's Vice
President, Wonderware Studios, an option to purchase 10,000 shares at an
exercise price of $8.82 per share (the fair market value of the Common Stock on
the date of grant) under the Company's 1997 Stock Option Plan (the "Option
Plan"). In addition, the Compensation Committee granted to each of the Company's
employees, including the executive officers (Messrs. Slavin, Auriemma, Cowan and
Kissling and Ms. Stowe), on January 3, 1997 an option to purchase 97 shares at
an exercise price of $9.00 per share (the fair market value of the Common Stock
on the date of grant) under the Option Plan.
(5) On March 10, 1997, the Compensation Committee granted to each of
Messrs. Auriemma, Cowan and Kissling an option to purchase 45,000 shares and to
Ms. Stowe an option to purchase 10,000 shares, at an exercise price of $9.57 per
share (the fair market value of the Common Stock on the date of grant) under the
Option Plan.
(6) On May 12, 1997, each of the directors who were not employed by the
Company (Rigdon Currie, Harvard Hill, Jay Kear, John Rehfeld and Kenneth Smith)
received an option to purchase 10,000 shares at an exercise price of $9.75 per
share (the fair market value of the Common Stock on the date of grant) under the
Company's 1994 Non-Employee Directors Stock Option Plan.
(7) On October 27, 1997, the Compensation Committee modified the Company's
severance protection arrangements with respect to the Company's executive
officers. As modified, these arrangements provide that each officer will receive
one times his or her average annual compensation (salary and bonus) over the
prior three years in the event the officer is terminated other than for cause
(except that in the case of the Chief Executive Officer the amount is two times
his average annual compensation). If there is a change in control of the Company
and the officer decides not to continue his employment with the Company, the
officer will receive two times his or her average annual compensation over the
prior three years (except in the case of the Chief Executive Officer, the amount
is 2.99 times his average annual compensation). All unvested stock options held
by the officers vest immediately upon a change in control.
(8) On January 12, 1998, the Compensation Committee granted to each of
Messrs. Auriemma, Cowan and Kissling and Ms. Stowe an option to purchase 5,000
shares, at an exercise price of $12.75 per share (the fair market value of the
Common Stock on the date of grant) under the Option Plan. On that date, the
Compensation Committee also granted to Mr. Slavin an option to purchase 100,000
shares at an exercise price of $12.75 per share under the Option Plan.
(9) On February 24, 1998, each of Messrs. Slavin, Auriemma, Cowan and
Kissling and Ms. Stowe entered into a consulting agreement with the Company that
becomes effective upon consummation of the Offer. These agreements were made at
the request of Parent as a condition to, and inducement for entering into the
Merger Agreement. Each consulting agreement provides that if the executive
officer resigns, from the Company, he or she agrees to perform certain
consulting services for the Company for two years for annual compensation of
$25,000. During the term of the consulting agreement, the consultant will not be
permitted, directly or indirectly, to compete with the Company or any other
Competing Enterprise (as defined in the consulting agreement). The consulting
agreement with Mr. Kissling also provides for a $60,000 initial fee upon
consummation of the Offer. The form of consulting agreement is filed as Exhibit
99.4 hereto and is incorporated herein by reference.
(10) On February 24, 1998, Mr. Kissling agreed to forfeit options to
purchase up to 4,000 shares of Common Stock, if as a result of the Offer or the
Merger, he would be deemed to have received any "excess parachute payments" in
connection with stock options that he holds. A copy of this agreement is filed
as Exhibit 99.5 hereto and incorporated herein by reference.
(11) Commencing on February 18, 1998, representatives of Parent met
separately with members of senior management to discuss Parent's desire to
ensure that such senior managers and other significant
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employees of the Company would continue with the Company following the
acquisition. These discussions continued through February 23, 1998. Although the
parties did not reach any legally binding obligation regarding employment
arrangements and benefits for senior management and significant employees of the
Company following the acquisition, the parties each acknowledged that they
currently expected that Messrs. Slavin, Auriemma, Cowan and Kissling, Ms. Stowe,
and Pankaj Mody, the Company's Chief Technology Officer (each an "executive" and
collectively, the "executives"), would be offered employment following the
acquisition on substantially the terms described below.
The parties currently expect that each of the executives will enter into
new three-year employment agreements following the acquisition, which will
provide for salary and annual bonus compensation on the same terms as are in
place for the current year, and retention bonuses which would vest and become
payable over the three-year term of the employment agreements (subject to
forfeiture if an executive's employment is terminated for cause or if the
executive resigns prior to the end of the three-year term). It is currently
anticipated that the aggregate retention pool to be allocated among the
executives will be approximately $2 million for the first fiscal year during the
employment term, approximately $3 million for the second year, and approximately
$3.4 million for the third year. It is currently anticipated that the aggregate
retention bonus pool for each year will be allocated among the six executives so
that Mr. Slavin receives approximately 50% of the total pool, Messrs. Auriemma,
Cowan, and Kissling and Ms. Stowe each receives approximately 11% and Mr. Mody
receives approximately 6%.
In addition, it is currently anticipated that each of the executives, and
approximately twenty other key employees to be designated by Mr. Slavin ("key
employees" and collectively with the executives, the "Holders"), will be
entitled to participate in two phantom stock plans pursuant to which all of the
Holders will be granted phantom units, which will vest over a three-year period
(subject to forfeiture if the Holder's employment is terminated for cause or if
the Holder resigns prior to the end of the third year). Of the total number of
units to be granted to the Holders under each plan, it is currently anticipated
that Mr. Slavin will receive approximately one-third, Messrs. Auriemma, Cowan
and Kissling and Ms. Stowe will each receive approximately 7%, Mr. Mody will
receive approximately 4%, and the key employees will receive in the aggregate
the remaining approximately one-third. The value attributed to units granted
under the plans is expected to be determined under two formulae which would be
intended to represent the notional increase in the value of the Company over the
first three years following the Effective Time. The formula that is expected to
be used under one of the plans would compare the value of the Company
immediately before the announcement of the Offer with a proposed multiple of
Company revenues. The formula expected to be used with the second plan would
compare an adjusted pre-Offer value of the Company with a proposed multiple of
the Company's earnings before interest and taxes. The ultimate value of awards
under the two plans would together represent 7.5% of the notional increase in
Company value during the three-year period as determined under the revenue- and
earnings-based formulae.
(ii) ARRANGEMENTS WITH THE BIDDER, ITS EXECUTIVE OFFICERS, DIRECTORS AND
AFFILIATES.
(1) In connection with granting Parent and its representatives access to
certain confidential information of the Company, Parent executed a
Confidentiality Agreement with the Company, dated February 17, 1998 (the
"Confidentiality Agreement"). A copy of the Confidentiality Agreement is filed
as Exhibit 99.6 hereto and is incorporated herein by reference. The
Confidentiality Agreement provides, among other things, that for a period of
eighteen months, (a) Parent will not make any public announcement with respect
to, or submit any proposal for, a transaction between the Company or any of its
security holders and Parent or any of its affiliates (other than in the ordinary
course of business), unless such proposal is directed and disclosed solely to
management of the Company or its designated representatives and the Company
shall have requested in advance in writing, the submission of such proposal and
(b) unless the Company shall have consented in advance in writing, Parent and
its successors will not directly or indirectly, by purchase or otherwise,
acquire, offer to acquire, or agree to acquire, ownership of any securities or
direct or indirect rights (including convertible securities) or options to
acquire such ownership of any securities of the Company or any of its affiliates
(or act in concert with others with respect thereto) or otherwise seek to
influence or control the management or policies of the Company or any of its
affiliates. The Company waived these provisions with
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respect to the Offer and the Merger (or Subsequent Merger), and such
restrictions shall not apply following consummation of the Offer.
(2) On February 24, 1998, the Company entered into the Merger Agreement
with Parent, Offeror and Merger Sub. The following summary of the Merger
Agreement is qualified in its entirety by reference to the Merger Agreement, a
copy of which is filed as Exhibit 99.7 hereto and incorporated herein by
reference. The Merger Agreement should be read in its entirety for a more
complete description of the matters summarized below.
The Offer. The Merger Agreement provides for the commencement of the Offer
not later than five business days after the execution of the Merger Agreement,
provided that certain of the conditions to the Offer set forth below have not
occurred. Parent, Offeror and the Company are required to take all action as may
be necessary or appropriate in order to effectuate the Offer and the Merger as
promptly as possible and to carry out the transactions provided for or
contemplated by the Merger Agreement.
Offeror will not be required to commence or continue the Offer or accept
for payment, purchase or pay for any Shares tendered, or may postpone the
acceptance, purchase or payment for Shares, or may amend (to the extent
permitted by the Merger Agreement) or terminate the Offer (1) if Shares
representing less than a majority of all Shares on a fully diluted basis are
tendered and not withdrawn as of the expiration of the Offer; (2) if any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "Hart-Scott-Rodino Act") in respect of the Offer shall
not have expired or have been terminated prior to the expiration of the Offer
(provided, however, that Offeror will extend the expiration date of the Offer
from time to time until May 31, 1998, if, when and as necessary to satisfy any
request by the Federal Trade Commission or the U.S. Department of Justice under
the Hart-Scott-Rodino Act); or (3) if, at any time on or after February 24, 1998
and prior to the time of payment for any such Shares (whether or not any Shares
have been accepted for payment or paid for pursuant to the Offer), any of the
following events shall have occurred (each of paragraphs (a) through (i)
providing a separate and independent condition to Offeror's obligations pursuant
to the Offer):
(a) the Company or any subsidiary of the Company shall have
authorized, recommended or proposed, or shall have announced an intention
to authorize, recommend or propose, or shall have entered into an agreement
or agreement in principle with respect to, any merger, consolidation or
business combination (other than the Merger), any acquisition or
disposition of a material amount of assets or securities or any material
change in its capitalization, the Company's Board of Directors shall have
withdrawn or adversely modified (including by amendment to this Schedule)
its favorable recommendations with respect to the Offer and the Merger or
any corporation, entity, "group" or "person" (as defined in the Exchange
Act) other than Parent, Offeror or Merger Sub, shall have acquired
beneficial ownership of more than 50% of the outstanding Shares;
(b) the Company or any of its subsidiaries shall have authorized,
recommended or proposed, or shall have announced an intention to authorize,
recommend or propose, or shall have entered into an agreement or agreement
in principle with respect to, any release or relinquishment of any material
contract rights not in the ordinary course of business, which release or
relinquishment would have a material adverse effect on the financial
condition, properties, business, or results of operations of the Company or
the Surviving Corporation, and their respective subsidiaries, taken as a
whole (a "Company Material Adverse Effect");
(c) there shall be instituted or pending any action, litigation,
proceeding, investigation or other application before any court of
competent jurisdiction or other governmental entity by any governmental
entity that is reasonably likely to: (i) result in a restriction or
prohibition on the consummation of the transactions contemplated by the
Offer or the Merger; (ii) prohibit, or impose any material limitations on
Offeror's or Merger Sub's ownership or operation of all or a material
portion of their or the Company's business or assets, or compel Offeror or
Merger Sub to dispose of or hold separate all or a material portion of
Offeror's or Merger Sub's or the Company's business or assets; (iii) make
the acceptance for payment of, purchase of, or payment for, some or all of
the Shares illegal or rendering Offeror or Merger Sub unable to, or
restricting or prohibiting the ability of Offeror or Merger Sub to, accept
for payment,
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purchase or pay for some or all of the Shares; or (iv) impose material
limitations on the ability of Offeror or Merger Sub effectively to acquire
or hold or to exercise full rights of ownership of the Shares including,
without limitation, the right to vote the Shares purchased by them on an
equal basis with all other Shares on all matters properly presented to the
stockholders of the Company;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed to or become applicable
to the Offer or the Merger that results in any of the consequences referred
to in clauses (i) through (iv) of paragraph (c) above;
(e) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over the counter market in the United States or on the
London Stock Exchange, (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the
United Kingdom, (iii) the commencement of war, armed hostilities or other
military action, or other international or national calamity, having a
Company Material Adverse Effect, (iv) any limitation of any governmental
authority on, or any other event which might materially adversely affect,
the extension of credit by banks or other lending institutions in the
United States or the United Kingdom, (v) from the date of the Merger
Agreement through the close of business on the business day immediately
prior to the date of termination or scheduled expiration of the Offer, a
decline of at least 25% in the Standard & Poor's 500 Index, or (vi) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof;
(f) except as set forth in the Company's reports, proxy statements,
registration statements and other documents filed with the Securities and
Exchange Commission (the "Commission") prior to February 24, 1998 or the
disclosure schedule to the Merger Agreement, any change shall have occurred
which individually or in the aggregate had, is continuing to have, or is
reasonably likely to have, a Company Material Adverse Effect;
(g) the representations and warranties of the Company in the Merger
Agreement shall not have been true and correct in all material respects
when made, or the Company shall not have performed in all material respects
each material covenant and complied with each material agreement to be
performed and complied with by it under the Merger Agreement, provided that
if the breach of any such covenant or agreement is cured within five
calendar days after notice by Offeror of its intent to terminate the Offer
or if the breach shall not have a Company Material Adverse Effect or a
material adverse effect on the ability of Parent or Offeror to consummate
the Offer, the Merger, or the transactions contemplated by the Merger
Agreement, Offeror shall not terminate the Offer;
(h) the Company and Offeror shall have reached an agreement or
understanding regarding termination of the Offer or the Merger Agreement
shall have been terminated in accordance with its terms; or
(i) all governmental consents required to be obtained in connection
with the purchase of Shares pursuant to the Offer shall not have been
obtained or any governmental agency shall have announced an intention to
seek to prohibit or interfere with the purchase of Shares pursuant to the
Offer.
The Merger. The Merger Agreement provides that, as soon as practicable
after expiration of the Offer and the receipt of any required approvals and
adoption of the Merger Agreement by the stockholders of the Company, to the
extent required by the Delaware General Corporation Law (the "Delaware Law"),
and the satisfaction or waiver, if possible, of certain other conditions
contained in the Merger Agreement, Merger Sub (or another direct or indirect
Delaware subsidiary of Parent) will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation (the
"Surviving Corporation") in the Merger under the corporate name it possesses
immediately prior to the effective time of the Merger (the "Effective Time").
Notwithstanding the foregoing, the parties to the Merger Agreement have agreed
that Offeror may revise the structure of the Merger (including merging the
Company into Merger Sub or merging the Company with or into another direct or
indirect wholly owned subsidiary of Parent) provided that any such restructuring
does not adversely affect the stockholders of the Company or cause the Company
to breach its representations and warranties under the Merger Agreement.
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In the Merger Agreement, the Company has agreed, if required by the
Delaware Law, in order to consummate the Merger, to take all action necessary in
accordance with the Delaware Law to convene a meeting of its stockholders
promptly following consummation of the Offer for the purpose of considering and
approving the Merger. The Company, acting through its Board of Directors, has
further agreed that if a stockholders' meeting is convened, the Board of
Directors shall recommend that stockholders of the Company vote in favor of the
Merger and that such recommendation shall not be withdrawn or adversely modified
except by resolution of the Board of Directors adopted in the exercise of
applicable fiduciary duties upon the advice of counsel. In the event that
proxies are to be solicited from the Company's stockholders, the Company shall,
if and to the extent requested by Offeror, subject to the exercise by the
Company's Board of Directors of its fiduciary duties, use its best efforts to
solicit from stockholders of the Company proxies in favor of the Merger, and to
take all other reasonable action necessary or, in the opinion of Offeror,
helpful to secure a vote of stockholders in favor of the Merger. At any such
meeting, all of the Shares then owned by Offeror and by any of its subsidiaries
and by the Company will be voted in favor of the Merger for which proxies in the
form distributed by the Company will have been given, and with respect to which
no contrary direction by the Board of Directors will be made.
At the Effective Time, each Share issued and outstanding immediately prior
thereto shall be cancelled and extinguished and each Share (other than Shares
held in the treasury of the Company, Shares held by Parent or any subsidiary
thereof, and Shares with respect to which appraisal rights are properly
exercised ("Dissenting Shares")) shall, by virtue of the Merger and without any
action on the part of Offeror, the Company or the holders of the Shares, be
converted into the right to receive the Offer Price upon the surrender of the
certificate formerly representing such Share. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall,
at the Effective Time, by virtue of the Merger and without any action on the
part of Offeror, Merger Sub, the Company or the holders of Shares, be converted
into and shall thereafter evidence one validly issued and outstanding share of
common stock of the Surviving Corporation. In the Merger Agreement, the Company
has agreed that, on or before the Effective Time, each holder of an outstanding
option to purchase Shares (collectively the "Options") whether held under any
employee or non-employee compensation plan or arrangement of the Company or
other agreement or arrangement, whether or not then exercisable, shall become
fully exercisable and vested, and in lieu of exercising such Options, the
holders of Options shall, upon surrender for cancellation of the same to the
Company on or before the Effective Time, be entitled to receive from the Company
for each Share subject to such Option an amount in cash equal to the excess, if
any, of (a) the product of the number of Shares covered by such Options
multiplied by the Offer Price, over (b) the product of the number of Shares
covered by such Options multiplied by the per-Share exercise price payable upon
exercise, subject to any required withholding taxes, and such Options will be
cancelled. The Company has agreed in the Merger Agreement that, on or before the
Effective Time, it shall use its best efforts to obtain consents from certain
optionees to the cancellation of their Options and to make any changes in the
Company's benefit plans or rights granted thereunder that are necessary.
Conditions to the Merger. The obligations of the parties to effect the
Merger following completion of the Offer are subject to the following
conditions:
- The Merger shall have been approved and adopted by the vote of the
stockholders of the Company to the extent required by the Delaware Law;
- All waiting, review and investigation periods (and any extension thereof)
applicable to the consummation of the Merger under the Hart-Scott-Rodino
Act shall have expired or been terminated;
- There shall have been no law, statute, rule or order, domestic or
foreign, enacted or promulgated which would make consummation of the
Merger illegal; and
- No injunction or other order entered by a United States (state or
federal) court of competent jurisdiction shall have been issued and
remain in effect which would prohibit consummation of the Merger.
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Conversion to Merger. The Merger Agreement provides that, if the Offer is
terminated by Offeror as a result of a failure of the conditions of the Offer to
be satisfied, Parent and Offeror shall have the right, but not the obligation,
to notify the Company that it or they desire, subject to the prior written
approval of the Board of Directors of the Company, to seek approval of the
Company's stockholders for the Merger pursuant to the Delaware Law. Unless the
Company's Board of Directors determines, upon advice of counsel, that such
actions would have a material adverse economic effect on the Company's
stockholders, or that cooperation by the Company would constitute a breach of
fiduciary duty by the Company's Board of Directors, the Company shall take all
necessary actions to obtain stockholder approval and to accomplish the Merger
(the "Subsequent Merger"), except as otherwise required by the fiduciary duties
of the Company's Board of Directors. In such case, in addition to the conditions
to the Merger set forth above, the Subsequent Merger will also be subject to the
following conditions:
- The representations and warranties of the Company contained in the Merger
Agreement shall have been true and correct in all material respects when
made;
- There shall not have occurred, after February 24, 1998, any event,
condition or state of facts, which has resulted, or is reasonably likely
to result, in (i) a Company Material Adverse Effect or (ii) a material
adverse effect on the ability of Parent, Offeror or Merger Sub to
consummate the Merger;
- All Options shall have been exercised, cancelled or terminated prior to
or concurrently with the Effective Time; and
- There shall not be pending or threatened any action, proceeding or
investigation by any court or governmental or regulatory authority or
body (i) challenging or seeking damages in connection with the Subsequent
Merger, (ii) seeking to require the divestiture by Parent, Offeror or the
Company or any of their respective affiliates of Shares or any business,
asset or property of Parent or the Company or any of their respective
affiliates, or (iii) seeking to restrain or prohibit the consummation of
the Subsequent Merger or otherwise limit the right of Parent or its
subsidiaries to transact business with the Company or otherwise own or
operate in the current manner all or any portion of the businesses or
assets of the Company or its subsidiaries, which, in either case, is
reasonably likely to have a Company Material Adverse Effect prior to or
after the Effective Time, or to subject the Company, Parent, Offeror,
Merger Sub or any of their respective subsidiaries or any of their
respective officers or directors to substantial penalties or criminal
liability.
Schedule 14D-9. In the Merger Agreement, the Company has agreed that
simultaneously with, or as promptly as possible after, the commencement of the
Offer, it will file with the Commission and promptly mail to its stockholders, a
Solicitation/Recommendation Statement on Schedule 14D-9 containing the
recommendation of the Board of Directors that the Company's stockholders accept
the Offer, tender their Shares thereunder to Offeror and, if required by
applicable law, approve the Merger; provided, that such recommendation may be
withdrawn or modified to the extent the Board of Directors determines to do so
in the exercise of its fiduciary duties, based upon the advice of counsel.
Directors. The Merger Agreement provides that promptly upon the payment by
Offeror or any of Parent's direct or indirect subsidiaries pursuant to the Offer
for such number of Shares which represents at least a majority of the
outstanding Shares, and from time to time thereafter, Offeror shall be entitled
to designate members of the Board of Directors such that Offeror, subject to the
provisions of Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), will have a number of representatives on the Board of
Directors, rounded up to the next whole number, equal to the product obtained by
multiplying nine by the percentage of Shares beneficially owned by Parent and
any of its subsidiaries. The Company has agreed, upon the request of Offeror, to
promptly increase the size of the Board of Directors as permitted in accordance
with the Certificate of Incorporation of the Company and/or use its best efforts
to secure the resignations of such number of directors as is necessary to enable
Offeror's designees to be elected to the Board of Directors and has agreed to
use its best efforts to cause Offeror's designees to be so elected. The Company
has agreed, at the request of Offeror and at its expense, to take all actions
necessary to effect any such election, including the mailing to its stockholders
of the information required by Section 14(f) of the
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Exchange Act and Rule 14f-1 promulgated thereunder, in form and substance
reasonably satisfactory to Offeror and its counsel.
Rights Agreement. In the Merger Agreement, the Company agreed to take, by
March 1, 1998, all action necessary to render the Rights Agreement dated
February 15, 1996 between the Company and The First National Bank of Boston (the
"Rights Agreement") inapplicable to the Offer, the Merger, the Merger Agreement
and the transactions contemplated thereby or therein.
Representations and Warranties of the Company. In the Merger Agreement, the
Company has made customary representations and warranties to Parent, Offeror and
Merger Sub, including, but not limited to, representations and warranties
relating to the Company's organization and qualification, the Company's
subsidiaries, the Company's capitalization and authority to enter into the
Merger Agreement and carry out the related transactions, the Company's
Commission filings and financial statements, the absence of certain material
adverse changes or events since December 31, 1997, required consents and
approvals, litigation, the material liabilities of the Company and its
subsidiaries, environmental matters relating to the Company and its
subsidiaries, the Company's employee benefit plans, labor matters, the documents
to be supplied by the Company relating to the Offer, trademarks, patents and
other intellectual property, taxes, arrangements with financial advisors, the
absence of product liability claims, related party transactions, and the Rights
Agreement.
Representations and Warranties of Parent, Offeror and Merger Sub. Parent,
Offeror and Merger Sub have also made customary representations and warranties
to the Company, including, but not limited to, representations and warranties
relating to Parent's, Offeror's and Merger Sub's organization and qualification,
their authority to enter into the Merger Agreement and carry out the related
transactions, the documents to be supplied by them related to the Offer, the
availability of sufficient funds to consummate the Offer and the applicability
of certain margin rules.
Conduct of the Business by the Company. Pursuant to the Merger Agreement,
the Company has agreed that, prior to the Effective Time, unless Offeror shall
otherwise have agreed in writing or as otherwise contemplated by the Merger
Agreement, the Company will, (i) carry on the business of the Company and its
subsidiaries only in, and will maintain their facilities in, the ordinary course
of business and consistent with past practice, (ii) use its reasonable efforts,
and shall cause its subsidiaries to use reasonable efforts, to preserve intact
their respective business organizations and goodwill, keep available the
services of their current officers and employees as a group and maintain
satisfactory relationships with customers, suppliers, distributors and others
having business dealings with them, (iii) confer on a regular and frequent basis
with representatives of Offeror and Merger Sub to report operational matters and
the general status of ongoing operations, (iv) not take any action which would
render, or which reasonably may be expected to render, any representation or
warranty made by the Company in the Merger Agreement untrue at any time prior to
the Effective Time, and (v) notify Offeror and Merger Sub of any emergency or
other change in the normal course of the Company's or any of its subsidiaries'
business or in the operation of the Company's or the subsidiaries' properties
and of any governmental or third party complaints, investigations or hearings
(or communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would have a Company
Material Adverse Effect or would materially adversely affect any party's ability
to consummate the transactions contemplated by the Merger Agreement.
The Company has also agreed pursuant to the Merger Agreement that, prior to
the Effective Time, it will not directly or indirectly do or permit to occur any
of the following: (i) issue, sell, pledge, dispose of or encumber (or permit any
of its subsidiaries to issue, sell, pledge, dispose of or encumber) any shares
of, or any options, warrants, conversion privileges or rights of any kind to
acquire any shares of any capital stock of the Company or any of its
subsidiaries (other than shares issuable upon exercise of the outstanding (as of
the date of the Merger Agreement) Options or rights to purchase Shares pursuant
to the Company's Employee Stock Purchase Plan, in each case in accordance with
their terms in effect on the date of the Merger Agreement); (ii) amend or
propose to amend the Certificate or Articles of Incorporation or Bylaws of the
Company or any of its subsidiaries; (iii) split, combine or reclassify any
outstanding Shares, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect to the
Shares;
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(iv) redeem, purchase or acquire or offer to acquire (or permit any of its
subsidiaries to redeem, purchase or acquire or offer to acquire) any Shares or
other securities of the Company or any of its subsidiaries other than as
contemplated by the Merger Agreement and other than the repurchase by the
Company, pursuant to existing agreements, of any outstanding Shares upon
termination of any employment, director or consulting relationship with the
Company; or (v) enter into or modify any agreement, commitment or arrangement
with respect to any of the foregoing.
Pursuant to the Merger Agreement, the Company has agreed that neither the
Company nor any of its subsidiaries shall: (i) sell, pledge, lease, dispose of
or encumber any material assets other than in the ordinary course of business
consistent with past practice; (ii) acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership or
other business organization or enterprise or material assets thereof; (iii)
incur any indebtedness for borrowed money or issue any debt securities except
for borrowings in the ordinary course of business and consistent with past
practice; (iv) guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person (other than a subsidiary of the Company or the Company) except in the
ordinary course of business consistent with past practice and in amounts
immaterial to the Company; or (v) enter into or modify any contract, agreement,
commitment or arrangement with respect to any of the foregoing.
In addition, pursuant to the Merger Agreement, the Company has agreed that
neither the Company nor any of its subsidiaries shall: (i) enter into or modify
any employment, severance or similar agreements or arrangements with, or grant
any bonuses, salary increases, severance or termination pay to, any officers or
directors; (ii) in the case of employees who are not officers or directors, take
any action other than in the ordinary course of business consistent with past
practice (none of which actions shall be unreasonable or unusual) with respect
to the grant of any bonuses, salary increases, severance or termination pay or
with respect to any increase of benefits in effect on the date of the Merger
Agreement; or (iii) adopt or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust fund or arrangement for the benefit or
welfare of any employee.
In addition, the Company has agreed that it will not, (i) except to the
extent required by fiduciary duties under applicable law and as advised by
counsel, call any meeting (other than as contemplated by the Merger Agreement)
of its stockholders or waive or modify any provision of, or terminate any,
confidentiality or standstill agreement entered into by the Company with any
person; or (ii) except as expressly contemplated in the Merger Agreement, modify
or accelerate the exercisability of any options, rights or warrants presently
outstanding, and shall not amend, change or waive (or exempt any person from the
effect of) the Rights Agreement, except in the exercise of the fiduciary duties
of the Company's Board of Directors.
The Company has also agreed that neither it nor any of its subsidiaries
will (i) adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; or (ii) make any material tax
election or settle or compromise any material federal, state, local or foreign
tax liability, except in the ordinary course of business consistent with past
practice. In addition, the Merger Agreement also requires the Company to use its
best efforts to cause its current insurance (or reinsurance) policies not to be
cancelled or terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums are
in full force and effect.
Acquisition Proposals. The Company has agreed in the Merger Agreement that
from the date of the Merger Agreement until the Effective Time or the
termination of the Merger Agreement, the Company will not, directly or
indirectly, through any of its affiliates, officers, directors or agents, or
otherwise, solicit, initiate or encourage any proposals or offers from any other
person other than Parent or its affiliates relating to any possible acquisition
of the Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets, or otherwise), or engage in any sale of any
equity interest in or substantial assets of the Company or any of its
subsidiaries (other than pursuant to the exercise of options or warrants
outstanding on the date of the Merger Agreement) to a third party (an
"Alternative Acquisition"), nor will the Company participate in any negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate with, facilitate or encourage any effort or attempt by any
person to do or seek, an Alternative
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Acquisition. However, the Company may participate in negotiations with or
furnish information to a third party in response to a written proposal if the
Company notifies Parent in writing of the receipt of such proposal and if the
Board of Directors reasonably believes, upon the advice of independent counsel,
that the failure to do so would constitute a breach of its fiduciary duties. In
the event such a proposal is determined by the Board of Directors based on the
advice of the Company's outside financial advisors to be on terms financially
superior to its stockholders as compared with the Offer and the Merger (a "Bona
Fide Offer"), the Company may terminate the Merger Agreement upon payment of the
Termination Fee (as hereinafter defined).
Indemnification. Parent has agreed in the Merger Agreement to cause the
Surviving Corporation to maintain, for six years from the date Parent, Offeror
and Merger Sub together acquire a majority of the Shares, all rights to
indemnification existing in favor of the directors, officers, employees and
agents of the Company pursuant to the Company's Bylaws at or prior to the
Effective Time, unless required by law. Parent has also agreed in the Merger
Agreement to cause the Surviving Corporation, to use its reasonable best efforts
to maintain in full force and effect for a period of six years from the
Effective Time, if available, directors' and officers' liability insurance,
containing terms and provisions comparable to the terms and provisions of the
current policy maintained by the Company, for the benefit of existing and former
officers, directors, employees and agents of the Company, but only to the extent
obtainable at a cost not more than 20% greater than that incurred by the Company
on the date of the Merger Agreement (the "Insurance Cap"). If such premiums for
insurance would at any time exceed the Insurance Cap, then the Surviving
Corporation shall cause to be maintained policies of insurance which, in the
Surviving Corporation's good faith determination, provide the maximum coverage
available at a premium equal to the Insurance Cap.
Employee Stock Purchase Plan. Pursuant to the Merger Agreement, the Company
has agreed to take such actions, on or before the Effective Time, as are
necessary to terminate the Company's Employee Stock Purchase Plan. After such
termination, any employee who is a participant in the Company's Employee Stock
Purchase Plan will not be permitted to continue to have the Company withhold any
monies for investment in such plan and each such employee will be permitted to
elect to receive withheld cash or purchase Shares in accordance with the terms
of such plan.
Employment Agreements. In addition, Parent has agreed that it will cause
the Company to honor without modification (except to the extent modified by the
mutual agreement of the parties) all employment agreements and severance
agreements in effect prior to the date of the Merger Agreement between the
Company and any employee of the Company, all of which the Company has
represented to have been disclosed in writing to Parent prior to the date of the
Merger Agreement.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the consummation of the Offer or, if the Offer has been terminated
and converted to a Subsequent Merger, the effectiveness of such Subsequent
Merger, (a) by mutual consent of the Boards of Directors of Parent and the
Company, (b) by either Offeror or the Company if the Offer shall not have been
consummated on or before May 31, 1998 or a Subsequent Merger shall not have
occurred by September 30, 1998; provided, however, that a party shall not be
entitled to terminate the Merger Agreement pursuant to such provision if such
party is in material breach of its obligations under the Merger Agreement, (c)
by Offeror if the Board of Directors of the Company shall have withdrawn or
adversely modified either its recommendation of the Offer or the Merger,
provided that a finding by the Company's Board of Directors that an Alternative
Acquisition may be superior from a financial point of view shall not be deemed a
withdrawal or adverse modification of its recommendation unless such finding is
publicly stated or otherwise disseminated, (d) by Offeror prior to the purchase
of Shares pursuant to the Offer in the event that the conditions to the Offer
set forth in the Merger Agreement shall not have been satisfied, or (e) by the
Company if (i) the Offer shall not have commenced substantially in accordance
with the terms of the Merger Agreement; (ii) the Offer shall have expired or
been terminated without any Shares having been purchased thereunder, or (iii) a
tender offer for Shares is commenced by a person or entity, or the Company
receives an offer for an Alternative Acquisition, in the case of any of which
the Company's Board of Directors determines, in the exercise of its fiduciary
duties and subject to compliance with the Merger Agreement, makes necessary or
advisable the termination of the Merger Agreement; provided that the provisions
of the Merger Agreement relating to the reimbursement of expenses and allowing
Parent to make proposals in response to third-party offers shall survive
termination of
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the Merger Agreement pursuant to such provision. If the Merger Agreement is
terminated (a) the Merger Agreement will become void and there will be no
liability or further obligation on the part of Parent, Offeror, Merger Sub or
the Company (except as described below) or their respective stockholders,
officers or directors, except for expense reimbursement, the Termination Fee,
confidentiality and standstill obligations of the parties and (b) Offeror and
Merger Sub shall terminate the Offer, if still pending, without purchasing any
Shares thereunder.
Termination Fees. The Company has agreed in the Merger Agreement that if
the Merger Agreement is terminated (a) by the Company pursuant to the provision
described in clause (e)(iii) of the preceding paragraph or because it has
received a Bona Fide Offer, (b) by Offeror because the Company's Board of
Directors has withdrawn or adversely modified its recommendation in favor of the
Offer and the Merger, or (c) pursuant to the Merger Agreement's terms for any
reason other than a material breach of the Merger Agreement by Parent or Merger
Sub and, in case of a termination described in the foregoing clause (c) within
six months thereafter either (x) a definitive agreement is entered into between
the Company and any person other than Offeror or any affiliate of Offeror for
the acquisition of all or substantially all of the assets or a majority of the
capital stock of the Company, or for a merger, consolidation or other
reorganization of the Company at a price equivalent to a price per Share in
excess of $24.00, or (y) any person or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) other than Offeror or any affiliate of Offeror
acquires by way of a public tender offer beneficial ownership of 50% or more of
the outstanding Shares at a price per Share in excess of $24.00, then the
Company shall pay to Parent upon demand the amount of $12.6 million (the
"Termination Fee") to compensate Parent, Offeror and Merger Sub for taking
actions to consummate the Merger Agreement, to reimburse them for the time and
expense relating thereto and for other direct or indirect costs in connection
with the transactions contemplated by the Merger Agreement. In the event that
the Company fails to pay the Termination Fee promptly when due, the Company has
agreed to pay to Parent all costs and expenses (including attorneys' fees and
expenses) incurred by Parent in connection with the collection of the
Termination Fee, together with interest from the date the Termination Fee was
due until such time as payment is received by the Parent at the lesser of 10%
per annum or the maximum rate permitted by law.
Limitation on Liability. The Merger Agreement further provides that in the
event of a material breach of the representations and warranties contained in
the Merger Agreement by either Parent, Offeror or Merger Sub, on the one hand,
and the Company, on the other hand, the breaching party's liability for any
damages incurred by the nonbreaching party shall not exceed $12.6 million.
(2) As a condition and inducement to entering into the Merger Agreement,
the Parent requested that the Company enter into the consulting agreements
described in Item 3(b)(i)(9) above with the Company's executive officers. The
consulting agreements become effective upon consummation of the Offer. The form
of consulting agreement is filed as Exhibit 99.4 hereto and incorporated herein
by reference.
(3) See Item 3(b)(i)(11) above for a description of certain proposed
arrangements between the Surviving Corporation and the executive officers of the
Company following the acquisition.
4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION. On February 22, 1998, the Board voted to recommend
acceptance of the Offer by the holders of Shares and of the Merger Agreement and
authorization of the Merger by the stockholders of the Company. The Board (i)
approved the Offer, the purchase of Shares pursuant to the Offer and the Merger
in accordance with Section 203 of the Delaware Law and (ii) approved an
amendment to the Rights Agreement to provide that any person that acquires
Shares pursuant to the Merger Agreement will not be deemed to be an "Acquiring
Person" as that term is defined in the Rights Agreement. The Board determined
that the Offer and the Merger Agreement are in the best interests of the Company
and its stockholders.
The press release announcing the Board's recommendation is filed as Exhibit
99.1 hereto, and is incorporated herein by reference.
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(b) BACKGROUND. The Company is engaged in lines of business similar or
complimentary to those of Parent and its affiliates. Accordingly, the Company
has followed the business activities of Parent and its subsidiaries for some
time. In addition, from time to time, the Company has sold products to Parent
and its subsidiaries in the ordinary course of business.
On January 9, 1998, representatives of Parent met with representatives of
the Company in Atlanta, Georgia to discuss a possible technology joint venture
relationship. Parent and the Company concluded that they were interested in
pursuing a joint technology program. The parties did not discuss a possible
acquisition of the Company by Parent at that time.
On January 13, 1998, Dr. George W. Sarney, President and Chief Operating
Officer of the Siebe Control Systems division of Parent, contacted Roy H.
Slavin, Chairman of the Board, Chief Executive Officer and President of the
Company, to schedule a meeting between Dr. Sarney, Mr. Slavin and Allen M.
Yurko, Managing Director and Chief Executive Officer of Parent, in San
Francisco, California on January 20, 1998, a date on which all of them would be
in San Francisco attending a trade seminar. Dr. Sarney did not inform Mr. Slavin
that the purpose of the meeting was to discuss a possible acquisition of the
Company by Parent.
On January 20, 1998, Mr. Yurko, Dr. Sarney and Mr. Slavin met in San
Francisco. At this meeting, Mr. Yurko expressed his view that there could be
significant benefits associated with a business combination between Parent and
the Company. Mr. Yurko indicated that Parent was willing to consider a possible
acquisition of the Company at a purchase price as high as a 50% premium to the
then current market price for the Shares (the closing sale price for the Shares
on January 16, 1998, the last full day of trading prior to the January 20, 1998
meeting, was $13.75). Mr. Slavin then discussed in general terms the current
status of the Company's business affairs, future prospects and opportunities for
growth. Mr. Slavin stated that the Company's financial results for the fiscal
year ended December 31, 1997 would be released shortly and the parties concluded
that any further discussions regarding a possible acquisition should not be
pursued until those year-end financial results of the Company were released. The
Company released its 1997 fiscal year-end financial results to the public on
January 26, 1998.
On February 3, 1998, Dr. Sarney contacted Mr. Slavin and informed him that
Parent continued to be interested in pursuing a business combination with the
Company and that Parent was willing to consider a purchase price with respect to
a possible acquisition of the entire Company at $22.00 per Share, subject to
increase should the Company demonstrate additional value. Mr. Slavin advised Dr.
Sarney that the Company would consider the merits of an acquisition of the
Company at such a price level in due course.
On February 11, 1998, Mr. Slavin contacted Dr. Sarney to schedule in-person
meetings between representatives of Parent and the Company so that Parent could
conduct preliminary due diligence and the parties could further discuss the
possibility and terms of a business combination transaction. A meeting was
scheduled for February 18, 1998 in Irvine, California. During the telephone
conversation on February 11, 1998, Dr. Sarney reiterated Parent's willingness to
consider a possible acquisition of the Company at a purchase price of $22.00 and
up to $24.00 per share, depending on the results of Parent's due diligence
review of the Company. Shortly thereafter, the Company provided Parent with
certain public financial and other information concerning the Company and, in
response to a request by Dr. Sarney, representatives of senior management of the
Company (Messrs. Slavin and Auriemma) delivered to Parent preliminary views on
possible post-combination compensation for senior management of the Company.
Parent and the Company executed the Confidentiality Agreement effective as
of February 17, 1998. See Item 3(b)(ii)(1) above for a description of the
Confidentiality Agreement. The Confidentiality Agreement is filed as Exhibit
99.6 hereto and incorporated herein by reference.
On February 18, 1998, representatives of the parties met to discuss a
potential business combination transaction and Parent commenced a limited
business review of the Company. Following that review of the Company, Parent
proposed a purchase price of $23.00 per share. Mr. Slavin informed Parent that
he believed $23.00 was not likely to be acceptable to the Company's Board of
Directors but that he would discuss the offer with the Company's Board of
Directors and the Company's advisors.
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On February 20, 1998, the Company's Board of Directors met with the
Company's management and financial and legal advisors to review and consider the
proposal from Parent. The Board of Directors determined during the meeting that
it was in the best interests of the Company and its stockholders to seek to
negotiate further the terms of a potential transaction. At the meeting, the
Board of Directors also authorized management to engage Hambrecht & Quist LLC
("H&Q") as the Company's financial advisor with respect to a potential
transaction.
Representatives of the Company met with representatives of Parent on
February 21, 1998 to negotiate the terms of a prospective merger agreement. The
Company's Board of Directors met later that day to receive reports from
management and the Company's legal advisors regarding the status of negotiations
and reports from the Company's financial advisor on its preliminary analysis of
the proposal from a financial point of view. At the meeting, the Board of
Directors authorized management to continue negotiations with Parent. The
representatives of the Company and of Parent continued negotiations after the
meeting of the Board of Directors.
On February 22, 1998, representatives of the Company met again with
representatives of Parent to continue negotiations on the terms of a prospective
merger agreement. The Company's Board of Directors met later that day to receive
reports from management and the Company's legal advisors regarding the status of
negotiations and the oral opinion of the Company's financial advisor that if the
holders of Shares received $24.00 per Share in the Offer and the Merger, such
consideration would be fair to such holders from a financial point of view. At
the meeting, the Board of Directors voted unanimously to approve the Offer and
the Merger and to recommend acceptance of the Offer by the holders of the Shares
and authorization of the Merger by the stockholders of the Company provided that
the Offer was at a price per Share of not less than $24.00. Thereafter, after a
period of intense negotiations, Parent agreed to increase its offer to $24.00
per Share, subject to the execution and delivery of a mutually satisfactory
Merger Agreement, including, among other things, provisions regarding payment of
a Termination Fee.
The Merger Agreement and the consulting agreements described in Item
3(b)(i)(9) above were executed and delivered in the early morning on February
24, 1998.
(c) REASONS FOR RECOMMENDATION. Prior to reaching its conclusions, the
Board received presentations from, and reviewed the Offer with, the financial
and legal advisors to the Company. In reaching its conclusions with respect to
the Offer, the Board principally considered the following factors:
(i) The per Share price of $24.00 represents a significant premium
over recent and historical market prices for the Shares. On February 23,
1998, the last trading day before announcement of the Merger Agreement and
the Offer, the closing price of the Common Stock on the Nasdaq National
Market was $16.00 per Share.
(ii) Based upon the directors' familiarity with the Company's
business, short-term and long-term prospects, financial condition, results
of operation, current business strategy, and the nature of its industry
position, as well as current economic and market conditions, the directors'
recognition that the near-term trading price for the Shares, if neither the
Merger Agreement with the Offeror nor any similar transaction were
consummated, might be significantly lower than $24.00, and the advice of
the Company's management and financial advisor, the Board believes that the
Offer and the Merger reflect the best alternative currently available to
the Company. In this connection, the Board took into account the
speculative nature of any effort to predict the Company's operating
performance over the next several years.
(iii) The Offer is not contingent on obtaining financing and contains
no other terms or conditions that, in the view of the Board, could
materially impair the consummation of the Offer or the Merger.
(iv) The fact that, to the extent the Board receives an unsolicited
written offer with respect to a merger, consolidation or sale of all or
substantially all of the Company's assets or an unsolicited tender or
exchange offer for the Shares is commenced, which the Board determines,
based upon the written opinion of its financial advisors, to be on terms
financially superior to the Company's stockholders as compared with the
Offer and the Merger, the Board may amend or withdraw its recommendation or
pursue a
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transaction with respect to such an unsolicited offer (subject to payment
of the Termination Fee to the Offeror) without breaching the Merger
Agreement.
(v) The presentation of H&Q to the Board at the February 22, 1998
meeting and the oral opinion of H&Q to the effect that, as of February 22,
1998, the $24.00 in cash per Share to be received by the holders of Shares
in the Offer and the Merger is fair to such holders from a financial point
of view. H&Q delivered a written opinion to the Board confirming its oral
opinion, which set forth the respective assumptions made, matters
considered and limits of its review. A copy of the H&Q opinion is filed as
Exhibit 99.8 hereto and is incorporated herein by reference. Stockholders
are urged to read the H&Q opinion in its entirety. H&Q will receive certain
fees in connection with its engagement by the Company. See Item 5.
(d) OPINION OF THE FINANCIAL ADVISOR. As noted above, on February 22, 1998,
H&Q presented its fairness opinion to the Company's Board of Directors. H&Q's
opinion was based upon various analyses performed by H&Q, which included: a
review of the Company's historical and projected income statements, balance
sheets and cash flow statements; a review of the Company's common stock price
performance relative to certain equity indices; an analysis of the Company's
historical trading volume at various price levels; an analysis of implied value
based on comparable publicly traded software companies; an analysis of implied
value based on merger and acquisition transactions involving public software
companies; and an analysis of potential future share prices for the Company.
In its analysis of the implied value of the Company based on comparable
publicly traded software companies, H&Q derived per share implied values in a
range from $11.01 to $16.07. The implied values were calculated by applying
relevant comparable company multiples to the Company's latest twelve months
("LTM") revenues, LTM earnings before interest and taxes ("EBIT"), LTM earnings
before interest, taxes, depreciation and amortization ("EBITDA"), LTM net income
and 1998 estimated net income.
In its analysis of the implied value of the Company based on merger and
acquisition transactions involving public software companies, H&Q derived per
share implied values in a range from $14.92 to $29.27. The implied values were
calculated by applying relevant comparable transaction multiples to the
Company's LTM revenues, LTM EBIT, LTM EBITDA and LTM net income. H&Q also
compared the premiums paid in comparable transactions to the premiums offered
over the Company's closing share prices one day and twenty-eight days prior to
the expected announcement date.
In its analysis of the implied value of the Company based on potential
future share prices, H&Q derived per share implied values in a range from $18.72
to $24.30 per share. The potential future share prices were calculated by
applying a range of forward price to earnings multiples to a range of 1999
earnings per share scenarios. A range of discount rates were used to determine
the present values of the potential future share prices.
In arriving at its opinion as to the fairness of the Offer, H&Q did not
rely exclusively upon any of the foregoing analyses, but instead carefully
considered each and applied its judgment based upon, among other things, the
data presented above.
5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Board's financial advisor in connection with the Offer and other
matters arising in connection therewith is H&Q.
Pursuant to an engagement letter dated February 19, 1998, the Company has
agreed to pay H&Q a fee in connection with its services as financial advisor to
the Board and the rendering of a fairness opinion. The Company paid a fee of
$50,000 to H&Q upon the signing of the engagement letter. Under the engagement
letter, H&Q will also be eligible to receive additional compensation equal to
0.5% of the value of the transaction in the event the Company effects a sale of
the Company. The Company also has agreed to reimburse H&Q for its reasonable
out-of-pocket expenses, including fees and expenses of counsel, and to indemnify
H&Q against certain liabilities, including liabilities under the federal
securities laws or relating to or arising out of H&Q's engagement as financial
advisor.
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H&Q is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, strategic alliances,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
The Board selected H&Q to act as its financial advisor in connection with the
Offer on the basis of its experience in advising companies in connection with
similar offers.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to holders of the Common Stock on its behalf concerning the
Offer.
6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except for the option grants described in Item 3(b)(i)(8) above and Mr.
Kissling's agreement described in Item 3(b)(i)(10) above, to the best of the
Company's knowledge, no transactions in Shares have been effected during the
last 60 days by the Company or by any executive officer, director, affiliate or
subsidiary of the Company.
(b) The Company has no knowledge whether its affiliates currently intend to
tender any Shares in response to the Offer. The Company anticipates that its
directors, officers and other option holders will either exercise in-the-money
options or surrender them for cash in accordance with the Merger Agreement.
7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as indicated above in connection with the Offer, no activities,
discussions or negotiations are underway or being undertaken by the Company
which relate to or would result in: (1) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any subsidiary of the
Company; (2) a purchase, sale or transfer of a material amount of assets of the
Company or any subsidiary of the Company; (3) a tender offer for, or other
acquisition of, securities by or of the Company; or (4) any material change in
the present capitalization or dividend policy of the Company.
(b) None.
8. ADDITIONAL INFORMATION TO BE FURNISHED
None.
9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
99.1 Joint Press Release issued by the Company and Siebe, dated
February 24, 1998.
99.2 Notice of Annual Meeting and Proxy Statement of the Company
issued in connection with the Company's 1997 Annual Meeting
of Stockholders held on May 12, 1997.(1)
99.3 Employment Agreement, dated November 28, 1995, between the
Company and Roy H. Slavin.(2)
99.4 Form of Consulting Agreement, dated February 24, 1998,
entered into between the Company and each of the Company's
executive officers (Messrs. Slavin, Auriemma, Cowan and
Kissling and Ms. Stowe).(3)
99.5 Internal Revenue Code Section 280G Cut Back Agreement dated
February 24, 1998, between Jeffrey L. Kissling and the
Company.
99.6 Confidentiality Agreement, dated February 17, 1998, between
the Company and Parent.
99.7 Agreement and Plan of Merger, dated February 24, 1998, among
the Company, Parent, Offeror and Merger Sub.
99.8 Opinion Letter of Hambrecht & Quist LLC, dated February 22,
1998.
</TABLE>
16
<PAGE> 17
- ---------------
(1) Incorporated by reference to the Company's definitive proxy materials filed
with the Commission on April 7, 1997 pursuant to Rule 14a-6 under the
Exchange Act in connection with the Company's 1997 Annual Meeting of
Stockholders. With respect thereto, copies of relevant portions of pages
9-17, set forth under the caption "Executive Compensation," "Stock Option
Grants and Exercises," Employment Agreements," "Compensation Committee
Report," "Option Repricing Information" and "Certain Transactions" are
submitted with this Schedule as part of Exhibit 99.2.
(2) Filed as Exhibit 10.14 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference.
(3) The first sentence of Section 2(a) of the Consulting Agreement for Mr.
Kissling contains the following additional language "plus an initial fee
upon consummation of the Offer of $60,000."
17
<PAGE> 18
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
WONDERWARE CORPORATION
/s/ ROY H. SLAVIN
--------------------------------------
Roy H. Slavin
Chairman of the Board, President and
Chief Executive Officer
Date: March 2, 1998
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S> <C>
99.1 Joint Press Release issued by the Company and Siebe, dated
February 24, 1998.
99.2 Notice of Annual Meeting and Proxy Statement of the Company
issued in connection with the Company's 1997 Annual Meeting
of Stockholders held on May 12, 1997.(1)
99.3 Employment Agreement, dated November 28, 1995, between the
Company and Roy H. Slavin.(2)
99.4 Form of Consulting Agreement, dated February 24, 1998,
entered into between the Company and each of the Company's
executive officers (Messrs. Slavin, Auriemma, Cowan and
Kissling and Ms. Stowe).(3)
99.5 Internal Revenue Code Section 280G Cut Back Agreement dated
February 24, 1998, between Jeffrey L. Kissling and the
Company.
99.6 Confidentiality Agreement, dated February 17, 1998, between
the Company and Parent.
99.7 Agreement and Plan of Merger, dated February 24, 1998, among
the Company, Parent, Offeror and Merger Sub.
99.8 Opinion Letter of Hambrecht & Quist LLC, dated February 22,
1998.
</TABLE>
- ---------------
(1) Incorporated by reference to the Company's definitive proxy materials filed
with the Commission on April 7, 1997 pursuant to Rule 14a-6 under the
Exchange Act in connection with the Company's 1997 Annual Meeting of
Stockholders. With respect thereto, copies of relevant portions of pages
9-17, set forth under the caption "Executive Compensation," "Stock Option
Grants and Exercises," Employment Agreements," "Compensation Committee
Report," "Option Repricing Information" and "Certain Transactions" are
submitted with this Schedule as part of Exhibit 99.2.
(2) Filed as Exhibit 10.14 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference.
(3) The first sentence of Section 2(a) of the Consulting Agreement for Mr.
Kissling contains the following additional language "plus an initial fee
upon consummation of the Offer of $60,000."
19
<PAGE> 1
EXHIBIT 99.1
U.K.-BASED SIEBE PLC TO ACQUIRE WONDERWARE CORPORATION
IRVINE, CALIF., FEB. 24, 1998 -- Siebe plc and Wonderware Corporation (Nasdaq
Trading Symbol: WNDR) announced today that Siebe has entered into a definitive
agreement to acquire Wonderware for $24 per share in cash, or approximately $375
million.
The offer was unanimously approved by Wonderware's Board of Directors. Siebe plc
expects to initiate a cash tender offer as soon as possible to complete the
transaction, which is expected to occur in April of 1998.
Founded in 1987, Wonderware pioneered Microsoft Windows-based software for
developing industrial automation applications. The company's FactorySuite(TM);
product line is an integrated suite of easy-to-use software tools for creating
factory applications and provides one of the broadest ranges of functionality
available on the market today. Based in Irvine, Calif., Wonderware has regional
offices in the U.S., Europe, Latin America and Asia to provide support to its
network of nearly 150 distributor offices. The company reported record revenues
of $82.5 million for 1997.
"We are excited about the opportunity this acquisition gives Siebe to further
expand our Windows NT-based industrial automation software product range," said
Allen Yurko, Siebe managing director and chief executive officer. "Industrial
automation is clearly a core area of focus for Siebe and our recent significant
success at launching the Foxboro I/A system on Microsoft Windows NT was an
important strategic milestone.
"The acquisition of Wonderware and its high growth FactorySuite software
products will clearly complement our already strong software position in batch
and process applications, providing Siebe with the broadest range of both UNIX
and Windows NT software for the industrial automation market," Yurko added.
"We're pleased with this transaction and excited by the strategic alliance this
represents going forward," said Roy H. Slavin, Wonderware chairman, president
and chief executive officer. "Our shareholders will receive a significant
premium to Wonderware's current market value. Our customers will benefit from
the association with a powerful and experienced global group that is committed
to a fully integrated range of industrial automation software products. In
addition, our employees and distributors will benefit from the opportunities
that will soon be available across a broader industrial stage."
<PAGE> 2
Siebe intends to finance the acquisition of Wonderware with existing lines of
credit. Siebe expects to promptly commence a tender offer, at $24 per share, for
all outstanding shares of Wonderware. The offer is subject to the condition that
a majority of the shares are tendered and other customary conditions. If the
tender offer is successful, it will be followed as promptly as possible by a
merger in which any remaining shares of Wonderware stock will be converted into
the right to receive $24 per share in cash. Siebe was advised in the acquisition
by Merrill Lynch. Wonderware was advised by Hambrecht & Quist LLC.
Siebe, based in Windsor, Berkshire, is one of Britain's largest diversified
engineering and electronics groups, incorporating more than 200 companies and
employing more than 50,000 people worldwide. The group designs and manufactures
temperature and appliance controls, process automation and control systems, and
industrial equipment. Leading subsidiaries of Siebe Control Systems include
Foxboro, Barber-Colman, Triconex and APV. For the year ended April 5, 1997,
Siebe reported revenues of more than (pound)3 billion pounds (approximately
US$4.95 billion).
This news release contains forward-looking statements that involve risks and
uncertainties, including the risks associated with satisfying the various
conditions to closing the proposed transaction. Certain of these factors as well
as additional risks and uncertainties, are detailed from time to time in
Wonderware's periodic filings with the Securities & Exchange Commission.
For more information contact:
SIEBE PLC WONDERWARE CORPORATION
Allen Yurko, Chief Executive Roy Slavin, Chairman & CEO
Barry Francis, Sam Auriemma, Vice President, CFO
Group Public Relations Director
Telephone: (714) 450-7967
Telephone: (+44) 1753 855 411
CONFERENCE CALL FOR ANALYSTS AND INSTITUTIONS:
A dial-in conference call for analysts and institutions, to be chaired by Allen
Yurko, chief executive of Siebe, has been arranged for today (2/24/98) at 3:00
p.m. London time, 10:00 a.m. New York time, and 7:00 a.m. California time. The
contact telephone number in the U.K. is 0181 781 0579 and in the U.S.A. is (800)
857-5752.
<PAGE> 1
EXHIBIT 99.2
Excerpts from Definitive Proxy Statement for the
1997 Annual Meeting of Stockholders
* * *
EXECUTIVE COMPENSATION
Compensation of Directors
Commencing in April 1994, each Non-Employee Director received a
per-meeting fee of $1,000 for attendance, in person or telephonicly, at
regularly scheduled Board meetings; no additional compensation is paid for
committee meetings. In addition, one director, Jay L. Kear, receives $1,500 per
day for service as a consultant. In the fiscal year ended December 31, 1996,
$12,000 in aggregate compensation was paid by the Company to directors of the
Company who were not otherwise employed by the Company or any affiliate of the
Company ("Non-Employee Directors") for attendance at regularly scheduled
meetings. The members of the Board of Directors are eligible for reimbursement
for their expenses incurred in connection with attendance at Board and committee
meetings in accordance with Company policy.
Non-Employee Directors are also eligible for grants of options under the
1994 Non-Employee Directors' Stock Option Plan, as amended (the "Directors'
Plan"). The Directors' Plan provides for the granting of stock options only to
Non-Employee Directors. Option grants under the Directors' Plan are intended by
the Company not to qualify as incentive stock options under the Code and are
nondiscretionary. Under the Directors' Plan, on the date of each annual meeting
of stockholders of the Company, each Non-Employee Director is granted an option
to purchase 10,000 shares of Common Stock which vests 25% on the date one year
after the date of grant and 6.25% for each full three-month period thereafter,
provided that the optionee has, during the period beginning on the date of grant
for such option and ending on such vesting date, continuously served as a
Non-Employee Director or as an employee of or consultant to the Company or any
affiliate of the Company.
During 1996, the Company granted options covering 10,000 shares of
Common Stock to each eligible Non-Employee Director, each at an exercise price
per share of $21.125, the fair market value of the Common Stock on the date of
grant (based on the closing sales price reported on the NASDAQ National Market
for the date of grant). As of January 31, 1997, options to purchase an aggregate
of 55,000 shares had been granted under the Directors' Plan, and 2,500 options
had been exercised.
In November 1995, Mr. Kear entered into a consulting agreement with the
Company. Pursuant to the agreement, Mr. Kear provides assistance to the Chief
Executive Officer in connection with management reorganization issues, for which
he receives a consulting fee of $1,500 per day. In 1996, Mr. Kear received
$4,708 in consulting fees for services performed for the Company.
<PAGE> 2
Compensation of Executive Officers
The following table shows for the fiscal years ending December 31, 1996,
1995 and 1994, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer, its other four most highly compensated executive officers at
December 31, 1996, and two former executive officers who departed from the
Company during fiscal year 1996 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation(1) Awards(2)
-------------------------- -----------
Shares
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options(3)
- --------------------------- ---- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Roy H. Slavin 1996 $320,600 $37,734 $ 50,000(4) 400,000
Chairman of the Board, President 1995 $103,000 $70,645 $450,501(5) 200,000
and Chief Executive Officer 1994 -- -- -- --
Sam M. Auriemma 1996 $113,719 $14,880 -- 45,000
Vice President, Finance, Chief 1995 -- -- -- --
Financial Officer and Secretary 1994 -- -- -- --
Joseph Cowan 1996 $142,761 $13,440 $109,521(6) 16,900
Vice President, Marketing 1995 $ 77,147 $30,060 -- 16,900
1994 $ 72,100 $34,963 -- 8,100
Jeffrey Kissling 1996 $118,333 $13,440 -- 35,000
Vice President, Development 1995 $ 23,333 $ 673 -- --
1994 -- -- -- --
Lawrence T. Whelan(7) 1996 $140,600 $13,440 -- 20,000
Former Vice President, International Sales 1995 $ 87,032 $44,461 $15,373(8) 10,000
1994 $ 34,125 $13,628 -- 15,000
Ronald C. Mehaffey(9) 1996 $131,730 $13,440 $48,892(10) 45,000
Former Vice President, Product 1995 -- -- -- --
Development 1994 -- -- -- --
Gary J. Wilson(11) 1996 $144,107 -- -- 5,000
Former Vice President, North American 1995 $ 91,699 $45,589 -- --
Sales 1994 $ 86,690 $53,325 -- 15,000
</TABLE>
- ------------------------
(1) Includes amounts earned but deferred at the election of the executive
officer.
(2) None of the Named Executive Officers held restricted stock at December
31, 1996.
(3) Of the options to purchase an aggregate of 566,900 shares of Common
Stock granted to the Named Executive Officers as a group in 1996,
options to purchase only 185,000 shares of Common Stock were original
option grants, and the remaining option grants were repricings of
options previously granted to such Named Executive Officers. See
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION--Option Repricing" and "Option Repricing
Information."
(4) Includes a signing bonus of $50,000.
(5) Includes a relocation allowance of $56,081 and $394,420 in loans
forgiven by the Company.
(6) Includes a relocation allowance of $21,521 and $88,000 in loans
forgiven by the Company.
(7) Mr. Whelan's employment with the Company terminated on January 3, 1997.
(8) Includes a relocation allowance of $15,373.
(9) Mr. Mehaffey's employment with the Company terminated on December 6,
1996.
(10) Includes a relocation allowance of $48,892.
(11) Mr. Wilson's employment with the Company terminated on September 9,
1996.
<PAGE> 3
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under the 1989
Stock Option Plan, as amended (the "1989 Plan"). As of December 31, 1996,
options to purchase a total of 1,550,659 shares were outstanding under the 1989
Plan and options to purchase 903,382 shares remained available for grant
thereunder.
The following tables show for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by and held at year
end by the Named Executive Officers:
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996*
Individual Grants
-----------------
Number% of Total Potential
of Shares Options Realizable Value at
Underlying Granted to Assumed Annual Rates
Options Employees Exercise of Stock Price Appreciation
Granted in Fiscal Price Expiration for Option Term(4)
Name (#)(1)(2) 1996(3) ($/sh) Date(2) 5%($) 10%($)
- ---- ----------- -------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roy H. Slavin 100,000 7.6% $ 15.25 cancelled -- --
200,000 15.2% $ 9.75 8/30/06 $1,226,345 $3,107,798
100,000 7.6% $ 9.75 8/30/06 $ 613,172 $1,553,899
Sam M. Auriemma 20,000 1.5% $ 22.50 cancelled -- --
20,000 1.5% $ 9.75 8/30/06 $ 122,634 $ 310,780
5,000 0.4% $ 9.75 8/30/06 $ 30,658 $ 77,695
Joseph Cowan 16,900 1.3% $ 9.75 8/30/06 $ 103,626 $ 262,609
Jeffrey Kissling 10,000 0.8% $21.125 cancelled -- --
10,000 0.8% $ 9.75 8/30/06 $ 61,317 $ 155,390
15,000 1.1% $ 9.75 8/30/06 $ 91,976 $ 233,085
Lawrence T. Whelan(5) 5,000 0.4% $21.125 cancelled -- --
10,000 0.8% $ 9.75 8/30/06 $ 61,317 $ 155,390
5,000 0.8% $ 9.75 8/30/06 $ 30,659 $ 77,695
Ronald C. Mehaffey(6) 10,000 0.8% $ 16.00 cancelled -- --
10,000 0.8% $21.125 cancelled -- --
10,000 0.8% $ 9.75 cancelled -- --
10,000 0.8% $ 9.75 cancelled -- --
5,000 0.4% $ 9.75 cancelled -- --
Gary J. Wilson(7) 5,000 0.4% $21.125 4/21/06 $ 66,427 $ 168,339
</TABLE>
- --------------------------
* Of the options to purchase an aggregate of 566,900 shares of Common
Stock granted to the Named Executive Officers as a group in 1996,
options to purchase only 185,000 shares of Common Stock were original
option grants, and the remaining option grants were repricings or
amendments of options previously granted to such Named Executive
Officers. See "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION--Option Repricing" and "Option
Repricing Information."
(1) All options granted to the Named Executive Officers (or repriced or
amended) in 1996 and remaining outstanding at December 31, 1996 vest
50% two years from the date of grant, and 25% for each full year
thereafter.
(2) The Board of Directors may reprice outstanding options under the terms
of the 1989 Plan.
(3) Based on options to purchase an aggregate of 1,313,100 shares granted
in 1996. (Includes options to purchase an aggregate of 566,900 shares
of Common Stock granted to the Named Executive Officers as a group in
1996, of which options to purchase only 185,000 shares of Common Stock
were original option grants, and and the remainder of which represented
repricings or amendments of options previously granted to such Named
Executive Officers in connection with the Company's option repricing
program. See "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION--Option Repricing" and "Option
Repricing Information.") This number is not necessarily indicative of
the number of shares subject to options to be granted in the future.
(4) The potential realizable value is calculated based on the term of the
option (ten years) and the fair market value at the time of its grant
(which, in each case, is equal to the exercise price).
<PAGE> 4
(5) Mr. Whelan's options ceased vesting as of his termination, and the
vested portion of his options will expire if unexercised by April 3,
1997.
(6) All of Mr. Mehaffey's options terminated unvested following the
termination of his employment.
(7) Mr. Wilson's options ceased vesting as of March 9, 1997, and the vested
portion of his options will expire if unexercised by June 9, 1997.
Aggregated Option Exercises in Fiscal 1996 and
Value of Options at End of Fiscal 1996
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Options at End Options at End of
Shares Acquired Value Realized of Fiscal 1996 (#) Fiscal 1996 ($)(2)
Name on Exercise ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- -------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Roy H. Slavin -- -- 0/300,000 $0/$0
Sam M. Auriemma -- -- 0/25,000 $0/$0
Joseph Cowan -- -- 2,284/19,816 $0/$0
Jeffrey Kissling -- -- 0/25,000 $0/$0
Lawrence T. Whelan(3) -- -- 4,800/21,600 $0/$0
Ronald C. Mehaffey(4) -- -- 0/0 $0/$0
Gary J. Wilson(5) -- -- 8,100/12,800 $11,271/$6,069
</TABLE>
- -------------------------------
(1) Value realized is based on the fair market value of the Company's
Common Stock on the date of exercise minus the exercise price and does
not necessarily indicate that the optionee sold such stock.
(2) Fair market value of the Company's Common Stock at December 31, 1996
($8.89) minus the exercise price of the options.
(3) Mr. Whelan's options ceased vesting as of his termination, and the
vested portion of his options will expire if unexercised by April 3,
1997.
(4) All of Mr. Mehaffey's options terminated unvested.
(5) Mr. Wilson's options ceased vesting as of March 9, 1997, and the vested
portion of his options will expire if unexercised by June 9, 1997.
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement between the Company and Roy H.
Slavin entered into in November 1995, Mr. Slavin's annual salary and bonus are
determined by the Compensation Committee of the Board of Directors. To assist
Mr. Slavin in his purchase of a home in connection with his relocation to
Southern California, a loan by the Company to Mr. Slavin in the amount of
$394,420 was made and subsequently forgiven by the Company in 1995. Mr. Slavin
also received a relocation allowance of $56,081 pursuant to the agreement. Under
the terms of the agreement, options to purchase 200,000 shares of the Company's
Common Stock under the 1989 Plan were granted to Mr. Slavin at an exercise price
of $37.75, the market price of the Common Stock as of July 31, 1995. Such
options originally vested at the rate of 24% one year from the date of grant and
2 percent per month thereafter. On August 31, 1996, the terms of these options
were revised such that the exercise price was reduced to $9.75 (the market price
of the Common Stock on August 30, 1996) and the vesting schedule was revised so
that 50 percent of the options vest two years from August 31, 1996 and 25
percent per year thereafter. See "Option Repricing Information." Either Mr.
Slavin or the Company may terminate this employment relationship at will.
In August 1996, the Compensation Committee of the Board of Directors
authorized severance protection agreements covering all officers of the Company.
Under the agreement covering the Chief Executive Officer of the Company, such
officer will receive 2.5 times his annual average salary over the last three
years in the event that he is either terminated other than for cause, or a
change of control of the Company occurs and he decides not to continue his
employment with the Company. The agreements covering officers other than the
Chief Executive Officer have essentially the same terms as the agreement with
the Chief Executive Officer except that the payment will be one times the
officer's average annual salary over the last three years. Under all of the
severance agreements, in the event of a change of control of the Company, all
unvested stock options held by the officers shall immediately vest and become
exercisable.
<PAGE> 5
Pursuant to an agreement between the Company and Gary J. Wilson entered
into in September 1996, Mr. Wilson resigned as Vice President, North American
Sales as of September 9, 1996. Pursuant to this agreement, Mr. Wilson was paid
$11,667 per month, and Mr. Wilson's unvested options continued to vest, until
March 9, 1997.
* * *
COMPENSATION COMMITTEE REPORT(1)
Compensation Philosophy
The compensation policies adopted by the Committee are designed to (i)
align compensation with business objectives and performance; (ii) attract,
retain and reward executive officers and other key employees who contribute to
the long-term success of the Company and (iii) motivate the Company's executive
officers and other key employees to enhance long-term stockholder value. Key
elements of this philosophy are:
- The Company's salaries must be competitive with leading software
companies with which the Company competes for highly qualified
and experienced executives. To date, the Committee has relied on
its members' experience in working with other comparable software
companies to ensure executive salaries are competitive. Since
becoming a public company in July 1993, the Company has retained
the services of an executive compensation consulting firm to
regularly compare the Company's salaries to these companies and
assist the Company in setting its salary parameters.
- The Company maintains annual incentive programs sufficient to
provide motivation to achieve specific operating goals and to
generate rewards that bring total compensation to competitive
levels.
- The Company provides significant equity-based incentives for
executives and other key employees to ensure that they are
motivated over the long term to respond to the Company's business
challenges and opportunities as stockholders as well as
employees.
The Committee's objective is to set executive compensation within a
range which the Committee believes is comparable to the average range of
compensation set by companies of comparable size in the software industry. The
group of comparable companies is not necessarily the same as the companies
included in the market indices included in the performance graph on page 17 of
this Proxy Statement. The primary components of executive compensation are base
salary, short- and long-term cash incentives and long-term equity incentives.
Each year, the Compensation Committee reviews the criteria upon which all
aspects of employee compensation are based.
Base Salary. The Committee annually reviews each executive officer's
base salary. When reviewing base salaries, the Committee considers a number of
subjective criteria, including individual and Company performance, levels of
responsibility, prior experience and competitive pay practices. The Committee
does not make individual salary decisions according to specific criteria and
does not ascribe specific weights to the factors it considers.
Annual Incentives. In fiscal 1996, the Company awarded year-end bonuses
to its executive officers, non-executive officers and certain other employees.
The actual bonuses paid to each individual were determined by multiplying a
predetermined amount (which is a graduated percentage of salary dependent on
employee level, typically 5-15%) by a percentage determined by the Compensation
Committee to be a fair adjustment of the predetermined amount based on actual
Company performance during the year. In addition, selected other employees
received "spot" bonus awards during the year based on achievement of specific
operational goals.
Long-Term Incentives. The Company's long-term incentive program consists
of options granted under the 1989 Plan, other stock options and the Purchase
Plan. Option grants include vesting periods to encourage key employees to
continue in the employ of the Company. Through option grants, executives receive
significant equity incentives to build long-term stockholder value. Grants are
generally made at 100% of fair market value on the date of grant.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
officers in a taxable year. Compensation above $1 million may be deducted if it
is "performance-based compensation" within the meaning of the Code. The
Compensation Committee has determined that stock options granted under the 1989
Plan with an exercise price at least equal to the fair market value of the
Common Stock on the date of grant
<PAGE> 6
will be treated as performance-based compensation under the final Treasury
regulations promulgated under Section 162(m) of the Code.
Executive officers receive value from these grants only if the Common
Stock appreciates over the long term. The amount of individual option grants is
determined based in part on competitive practices at comparable software
companies and on the Company's philosophy of significantly linking executive
compensation with stockholder interests. In determining the size of individual
grants, the Committee also considers the number of shares subject to options
previously granted to each executive officer, including the number of shares
that have vested and that remain unvested. The Committee believes that option
grants by the Company to its executive officers and employees are comparable to
the average range for comparable companies. In 1996, the Committee granted
options to purchase 575,900 shares of the Company's Common Stock to eight
executive officer(s), of which options to purchase only 194,000 shares of Common
Stock were original option grants, and of which the remaining option grants were
repricings or amendments of options previously granted to such Named Executive
Officers. See "--Option Repricing" and "Option Repricing Information."
Option Repricing
In January 1996, the Company implemented an option exchange program
applicable to all employees of the Company, excluding executive officers. In
August 1996, the Company implemented an option exchange program applicable to
the Company's executive officers other than the Chief Executive Officer.
Concurrently therewith, the Compensation Committee amended Mr. Slavin's
outstanding option to purchase 200,000 shares of Common Stock under the 1989
Plan and exchanged Mr. Slavin's outstanding option to purchase 100,000 shares of
Common Stock under the 1989 Plan to reduce, in each case, the exercise price of
such options to equal the fair market value of the Common Stock on the date of
amendment or exchange. As a result of these actions, the number of shares
subject to each exchanged or amended option remained the same, but in each case
the exercise price was reduced to equal the market price of the common stock on
the date of such exchange or amendment. In addition, the vesting of the options
was revised so that 50 percent of the options vest two years from the date of
the exchange or amendment of such option and 25 percent vest each year
thereafter. At the times these repricings were effected, substantially all of
the options then outstanding under the 1989 Plan, including those held by
executive officers, had exercise prices significantly above the current market
price of the Company's Common Stock. In light of the decline in the Company's
Common Stock Price and because options are a key component of the Company's
long-term incentive program, the Committee determined that repricing of options
held by executive officers was necessary in order to retain such employees. For
additional details regarding the effect of such repricing programs on options
held by the Named Executive Officers, see "Option Repricing Information."
Corporate Performance and Chief Executive Officer Compensation
Mr. Slavin's base salary for 1996 as President and Chief Executive
Officer was $320,600. In setting the base salary for Mr. Slavin, the Committee
took into account (i) the terms of Mr. Slavin's employment agreement with the
Company which stipulated an increase in his 1996 base salary over his starting
salary, (ii) the expanded scope of Mr. Slavin's responsibilities, including his
duties as Chairman of the Board, and (iii) the Board's confidence in Mr. Slavin
to lead the Company's continued development. Mr. Slavin's annual salary was
estimated to provide an annual base compensation level at the average as
compared to a selected group of other software companies. Based on the Company's
performance, Mr. Slavin also received annual incentive payments totaling
$37,734. This payment represented a significant reduction from the target bonus
to reflect the Company's 1996 financial performance. In addition, in August
1996, the Committee amended Mr. Slavin's outstanding option to purchase 200,000
shares of Common Stock under the 1989 Plan and exchanged Mr. Slavin's
outstanding option to purchase 100,000 shares of Common Stock under the 1989
Plan to reduce, in each case, the exercise price of such options to equal the
fair market value of the Common Stock on the date of amendment or exchange.
Other than such amended and repriced options, Mr. Slavin received no original
options grants during 1996. See "--Option Repricing" above and "Option Repricing
Information."
Conclusion
Through the programs described above, a significant portion of the
Company's compensation program and the compensation of the Company's Chief
Executive Officer are contingent on Company performance, and realization of
benefits is closely linked to increases in long-term stockholder value. The
Company remains committed to this philosophy of pay for performance, recognizing
that the competitive market for talented executives and the volatility of the
Company's business may result in highly variable compensation for a particular
time period.
COMPENSATION COMMITTEE
F. Rigdon Currie
Jay L. Kear
John E. Rehfeld
<PAGE> 7
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended (the
"Securities Act") or Exchange Act, whether made before or after the date
hereof and irrespective of any general incorporation language contained in
such filing.
OPTION REPRICING INFORMATION
The following table shows certain information concerning the repricing
of options received by the Named Executive Officers since the Company's initial
public offering in July 1993. See also "REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION--Option Repricing."
<TABLE>
<CAPTION>
Length of
Number of Market Price Exercise Original
Securities of Stock at Price at Time Option Term
Underlying Time of of Repricing Remaining at
Options Repricing or or Date of
Repriced or Amendment Amendment New Exercise Repricing or
Name Date Amended (#) ($) ($) Price ($) Amendment
- ---- ---- ----------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Roy H. Slavin 8/31/96 200,000 $9.75 $37.75 $9.75 9 years
8/31/96 100,000 $9.75 $15.25 $9.75 9.5 years
Sam M. Auriemma 8/31/96 20,000 $9.75 $22.50 $9.75 9.5 years
Joseph Cowan 8/31/96 16,900 $9.75 $17.125 $9.75 9.25 years
Jeffrey Kissling 8/31/96 10,000 $9.75 $21.125 $9.75 9.5 years
Lawrence T. Whelan(1) 8/31/96 10,000 $9.75 $27.00 $9.75 8.5 years
8/31/96 5,000 $9.75 $21.125 $9.75 9.5 years
Ronald C. Mehaffey(2) 8/31/96 10,000 $9.75 $16.00 $9.75 9.5 years
8/31/96 10,000 $9.75 $21.125 $9.75 9.5 years
Gary J. Wilson(3) -- -- -- -- -- --
</TABLE>
- ---------------------------
(1) Mr. Whelan's options ceased vesting as of his termination, and the
vested portion of his options will expire if unexercised by April 3,
1997.
(2) All of Mr. Mehaffey's options were cancelled as of December 31, 1996.
(3) Mr. Wilson's options ceased vesting as of March 9, 1997, and the vested
portion of his options will expire if unexercised by June 9, 1997.
* * *
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
Bylaws.
The Company has entered into certain additional transactions with its
directors and executive officers, as described under the captions "Executive
Compensation--Compensation of Directors" and "Executive Compensation--Employment
Agreements."
<PAGE> 1
EXHIBIT 99.4
CONSULTING AGREEMENT*
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of this 24th day of February, 1998, by and between Wonderware Corporation, a
Delaware corporation (the "Company"), and __________________ (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Company is a party to an Agreement and Plan of Merger,
dated February 24th, 1998, by and among the Company, Siebe plc, WDR Acquisition
Corp. and WDR Sub Corp. (the "Merger Agreement");
WHEREAS, subject to certain conditions precedent, the Company desires to
retain the services of the Consultant and the Consultant desires to provide
services to the Company during the Consulting Term (as defined below), upon the
terms and conditions set forth herein;
WHEREAS, the parties desire to set forth the exact nature of the amount
of compensation and benefits to be provided to the Consultant and the rights and
obligations of the Company and the Consultant pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Term. The term of the retention of the Consultant hereunder shall not
commence unless the Offer (as defined in the Merger Agreement) is consummated.
If the Offer is consummated and Consultant shall terminate his employment with
the Company, the term of the consulting arrangement hereunder shall commence
immediately after the termination by the Consultant of his employment with the
Company, and shall continue in full force and effect until the second
anniversary thereafter, unless earlier terminated as provided herein (the
"Consulting Term").
2. Compensation.
(a) Consulting Fee. In consideration of the performance by the
Consultant of the Consultant's obligations during the Consulting Term, the
Company will during the Consulting Term pay the Consultant a consulting fee (the
"Consulting Fee") at an annual rate of $25,000.* The Consulting Fee shall be
payable in accordance with the normal payroll practices of the Company then in
effect.
(b) Taxes. The parties hereto acknowledge that the Consultant
shall be acting as an "independent contractor" during the Consulting Term.
Nevertheless, the
- --------------------
* The Consulting Agreement with Jeffrey Kissling includes the following
language at the end of the first sentence of Section 2(a): "plus an initial
fee upon consummation of the Offer of $60,000."
1.
<PAGE> 2
Consulting Fee, and all other forms of compensation, if any, paid or owing to or
earned by the Consultant, shall be subject to all applicable taxes and other
amounts, if any, required to be withheld by the Company pursuant to federal,
state or local law. The Consultant shall be solely responsible for all taxes
imposed on the Consultant attributable to any cash or non-cash compensation and
benefits provided by the Company.
(c) Lack of Employee Benefits. During the Consulting Term, the
Consultant shall not be entitled to any benefits ordinarily accrued to
employees, officers or directors of the Company.
3. Consulting Services.
The advisory and consulting services to be provided by the
Consultant pursuant to this Section 3 shall be rendered on a non-exclusive basis
as an independent contractor. The Consultant agrees to be available, upon
reasonable request, for consultation and advice on matters relating to the
business of the Company for at least 10 hours during each month during the
Consulting Period, which consultation and advice may be mutually agreed to be by
telephonic conversation and/or written report.
4. Consultant Covenants.
(a) Unauthorized Disclosure. The Consultant agrees and
understands that in the Consultant's position with the Company, the Consultant
has been exposed to and has received information relating to the business
affairs of the Company, including, but not limited to, technical information,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, business policies and practices, and other forms of
information considered by the Company to be confidential and in the nature of
trade secrets. Except to the extent that the proper performance of the
Consultant's duties, services and responsibilities hereunder may require
disclosure, the Consultant agrees that during the Consulting Term and thereafter
the Consultant will keep such information confidential and not disclose such
information, either directly or indirectly, to any third person or entity
without the prior written consent of the Company. This confidentiality covenant
has no temporal, geographical or territorial restriction. Upon termination of
this Agreement, the Consultant will promptly supply to the Company all property,
keys, notes, memoranda, writings, lists, files, reports, customer lists,
correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical
data or any other tangible product or document which has been produced by,
received by or otherwise submitted to the Consultant during or prior to the
Consulting Term.
(b) Non-competition. By and in consideration of the Company's
entering into this Agreement and the Consulting Fees and severance benefits to
be provided by the Company hereunder and otherwise, and further in consideration
of the Consultant's exposure to the proprietary information of the Company, the
Consultant agrees that the Consultant will not, during the Consulting Term,
directly or indirectly, own, manage, operate, join, control, be
2.
<PAGE> 3
employed by, or participate in the ownership, management, operation or control
of, or be connected in any manner, including, but not limited to, holding the
positions of shareholder, director, officer, consultant, independent contractor,
employee, partner, or investor, with, any Competing Enterprise. For purposes of
this paragraph, the term "Competing Enterprise" means any person or entity
engaged in the development, marketing and sale of industrial automation and
process control software products or other business conducted by the Company or
Siebe Control Systems Division. The prohibition of this clause (c) shall not be
deemed to prevent Consultant from owning 2% or less of any class of equity
securities of an entity that has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended.
(c) Non-solicitation. In consideration of the Consulting Fees,
during the Consulting Term, the Consultant shall not interfere with the
Company's relationship with, or endeavor to entice away from the Company, any
person who at any time during the Consulting Term was an employee or customer of
the Company or otherwise had a material business relationship with the Company.
(d) Remedies. The Consultant acknowledges and agrees that the
provisions of this Section 4 are reasonable and that the Company would not have
entered into this Agreement without the inclusion herein of such provisions. The
Consultant agrees that any breach of the terms of this Section 4 would result in
irreparable injury and damage to the Company or its affiliates for which the
Company or its affiliates would have no adequate remedy at law; the Consultant
therefore also agrees that in the event of said breach or any threat of breach,
the Company or its affiliates shall be entitled to an immediate injunction and
restraining order to prevent such breach and/or threatened breach and/or
continued breach by the Consultant and/or any and all persons and/or entities
acting for and/or with the Consultant, without having to prove damages, in
addition to any other remedies to which the Company or its affiliates may be
entitled at law or in equity. The terms of this paragraph shall not prevent the
Company or its affiliates from pursuing any other available remedies for any
breach or threatened breach hereof, including but not limited to the recovery of
damages from the Consultant.
The provisions of subsections (a), (b), (c) and (d) of this Section 4
shall survive any termination of this Agreement. The existence of any claim or
cause of action by the Consultant against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of the covenants and agreements of this Section 4.
(f) "Company". For the purposes of this Section 4, the term
"Company" shall mean, collectively, Wonderware Corporation, a Delaware
corporation, and its successors, assigns and nominees, and all individuals,
corporations and other entities that directly, or indirectly through one or more
intermediaries, control or are controlled by or are under common control with
any of the foregoing.
3.
<PAGE> 4
5. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given (i) if
personally delivered, when so delivered, or (ii) if mailed, three (3) business
days after having been placed in the United States mail, registered or
certified, postage prepaid, addressed to the party to whom it is directed at the
address set forth below:
If to the Company:
Wonderware Corporation
100 Technology Drive
Irvine, CA 92618
Attention: Chief Financial Officer
Telephone: (714) 727-3200
Facsimile: (714) 453-6509
with copies to:
Wonderware Corporation
100 Technology Drive
Irvine, CA 92618
Attention: General Counsel
Telephone: (714) 727-3200
Facsimile: (714) 453-6509
If to the Consultant, at:
Wonderware Corporation
100 Technology Drive
Irvine, CA 92618
Attention: Consultant
Telephone: (714) 727-3200
Facsimile: (714) 453-6509
by registered or certified mail, postage prepaid, return receipt requested.
6. Binding Effect/Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
personal representatives, estates, successors (including, without limitation, by
way of merger) and assigns. Notwithstanding the provisions of the immediately
preceding sentence, the Consultant shall not assign all or any portion of this
Agreement without the prior written consent of the Company.
7. Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto with respect to the subject matter hereof as expressed in
the third recital to this Agreement and supersedes all prior agreements, written
or oral, between them as to such
4.
<PAGE> 5
subject matter. Notwithstanding the foregoing, the severance arrangements
described in the minutes of the Compensation Committee of the Board of Directors
meeting held on October 27, 1997 previously awarded to the Consultant, shall
continue in full force and effect.
8. Severability. If any provision of this Agreement, or any application
thereof to any circumstances, is invalid, in whole or in part, such provision or
application shall to that extent be severable and shall not affect other
provisions or applications of this Agreement.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without reference
to the principles of conflict of laws.
10. Modifications and Waivers. No provisions of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
11. Headings. The headings contained herein are solely for the purposes
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by authority of its Board of Directors, and the Consultant has hereunto set his
hand, as of the day and year first above written.
WONDERWARE CORPORATION
By:
------------------------------------
Name:
Title:
------------------------------------
Name:
(Consultant)
5.
<PAGE> 1
EXHIBIT 99.5
INTERNAL REVENUE CODE
SECTION 280G CUT BACK AGREEMENT
I, Jeffrey Kissling, hereby agree that in the event the transaction contemplated
by the Agreement and Plan of Merger, dated February 24, 1998, between Siebe plc,
WDR Acquisition Corp., WDR Sub Corp. and Wonderware Corporation is consummated
and, as a result of the consummation of such transaction, I would be deemed to
have received, solely in connection with stock options held by me, an "excess
parachute payment" under Sections 280G and 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), I shall forfeit, on the date immediately
preceding the closing of such transaction, such number of stock options as is
necessary such that I am not deemed to have received an "excess parachute
payment" under Sections 280G and 4999 of the Code not to exceed 4,000 options.
Signed: /s/Jeffrey Kissling
Dated: February 23, 1998
<PAGE> 1
Exhibit 99.6
[WONDERWARE LETTERHEAD]
February 17, 1998
PERSONAL AND CONFIDENTIAL
- -------------------------
Mr. Jim Bays
Siebe PLC
Saxon House
2-4 Victoria Street
Windsor, Berkshire, SL4 1EN
Gentlemen:
In connection with consideration by Siebe PLC ("Siebe") of a possible
transaction with Wonderware Corporation ("Wonderware"), each of Siebe and
Wonderware has requested information concerning the other. As a condition to
each party being furnished such information regarding the other, each party who
receives any information hereunder (the "Receiving Party") agrees to treat any
information concerning the other which is furnished by or on behalf of the
other party (the "Disclosing Party") whether furnished on or after the date of
this letter agreement (herein collectively referred to as the "Evaluation
Material") in accordance with the provisions of this letter agreement (this
"Agreement"). The term "Evaluation Material" does not include information which
(i) was or becomes generally available to the public other than as a result of
a disclosure by the Receiving Party or its directors, officers, employees,
agents or advisors, or (ii) was or becomes available to the Receiving Party on
a nonconfidential basis from a source other than the Disclosing Party or its
advisors provided that such source is not known by the Receiving Party to be
bound by a written confidentiality obligation with the Disclosing Party, or
(iii) was within the Receiving Party's possession prior to it being furnished
to the Receiving Party by or on behalf of the Disclosing Party, provided that
the source of such information was not known by the Receiving Party to be bound
by a confidentiality obligation with the Disclosing Party in respect thereof,
or (iv) was demonstrated by the Receiving Party to have been independently
developed by Receiving Party.
Each party hereby agrees that the Evaluation Material provided by or on
behalf of the other party will be used by the Receiving Party solely for the
purpose of evaluating a possible transaction involving the Disclosing Party,
and that, except as required by law, such information will be kept strictly
confidential by the Receiving Party and its advisors; provided, however, that
(i) any such information may be disclosed to the Receiving Party's directors,
officers, employees, advisors and representatives of the Receiving Party's
advisors who need to know such information (collectively "Informed Persons")
for the purpose of evaluating any such possible transaction involving the
Disclosing Party and the Receiving Party (it being agreed that all Informed
Persons shall be informed by the Receiving Party of the confidential nature of
such information and the Receiving Party shall instruct them to treat such
information confidentially, and (ii) any disclosure of such information may be
made to which the Disclosing Party consents in writing.
<PAGE> 2
February 17, 1998
Page 2
Without prior written consent of Disclosing Party, Receiving Party will not,
except as required by law, and will direct all its Informed Persons not to,
except as required by law, disclose to any person either the fact that
discussions or negotiations are taking place concerning a possible transaction
involving Disclosing Party or any of the terms, conditions or other facts with
respect to any such possible transaction, including the status thereof. The
term "person" as used in this agreement shall be broadly interpreted to include
without limitation any corporation, company, group, partnership, other entity
or individual.
Receiving Party hereby acknowledges that Receiving Party is aware, and
that Receiving Party will advise all Informed Persons, that the United States
securities laws prohibit any person who has material, nonpublic information
concerning the matters which are the subject of this Agreement from purchasing
or selling securities of a company which may be a party to a transaction of a
type contemplated by this Agreement or from communicating such information to
any other person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell such securities.
In the event that Receiving Party is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any information
supplied to Receiving Party in the course of Receiving Party's dealings with
Disclosing Party or its representatives, it is agreed that Receiving Party will
(i) provide Disclosing Party with prompt notice of such request(s) and the
documents requested thereby so that Disclosing Party may seek an appropriate
protective order and/or waive Receiving Party's compliance with the provisions
of this Agreement, and (ii) consult with Disclosing Party on the advisability
of taking legally available steps to resist or narrow such request. It is
further agreed that if in the absence of a protective order or the receipt of a
waiver hereunder Receiving Party is nonetheless, on the advice of Receiving
Party's counsel, compelled to disclose information concerning Disclosing Party
to any tribunal or else stand liable for contempt or suffer other censure or
penalty, Receiving Party may disclose such information to such tribunal without
liability hereunder; provided, however, that Receiving Party shall give
Disclosing Party notice of the information to be so disclosed in a commercially
reasonable manner so that Disclosing Party will have an opportunity to obtain
an order or other reliable assurance that confidential treatment will be
accorded to such portion of the information required to be disclosed as
Disclosing Party designates.
Siebe hereby acknowledges that the Evaluation Material is being
furnished to Siebe in consideration of Siebe's agreement that, for a period of
eighteen months from the date hereof: (i) Siebe will not make any public
announcement with respect to, or submit any proposal for, a transaction between
Wonderware or any of its security holders and Siebe or any of its affiliates
(other than transactions in the ordinary course of business of the parties)
whether or not any other parties are also involved, directly or indirectly, in
such proposal or transaction, unless such proposal is directed and disclosed
solely to the management of Wonderware or its designated representatives and
Wonderware shall have requested in advance in writing, the submission of each
proposal; and (ii) unless Wonderware shall have consented in advance in writing
Siebe and
<PAGE> 3
February 17, 1998
Page 3
its successors (whether by merger or otherwise) will not directly or indirectly,
by purchase or otherwise, through its affiliates or otherwise, alone or with
others, acquire, offer to acquire, or agree to acquire, ownership (including,
but not limited to, beneficial ownership as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of any securities or direct or indirect rights
(including convertible securities) or options to acquire such ownership of any
securities of Wonderware or any of its affiliates (or otherwise act in concert
with any person which so owns or acquires, offers to acquire, or agrees to
acquire any such securities, rights or options), or otherwise seek to influence
or control the management or policies of Wonderware or any of its affiliates.
Siebe agrees that neither it nor any of its affiliates for a period of
two years from the date hereof, will solicit or otherwise attempt to induce any
executive, manager or key software employee of Wonderware or any affiliate of
Wonderware to leave the employment of Wonderware or its affiliate to accept
employment with Siebe or of any of its affiliates; provided, however, that
neither general advertisements or use of independent executive search firms
shall constitute an employee solicitation without use of the Evaluation
Material.
Receiving Party agrees that, except as required by law, Receiving Party
will have no discussion, correspondence, or other contact concerning Disclosing
Party or its securities, or any transaction with or concerning Disclosing Party
or its securities, except with the management of Disclosing Party or except as
otherwise contemplated by this Agreement. Receiving Party further acknowledges
and agrees that Disclosing Party reserves the right, in its sole and absolute
discretion, to reject any or all proposals and to terminate discussions and
negotiations with Receiving Party at any time.
At any time upon Disclosing Party's request Receiving Party shall
promptly redeliver to Disclosing Party, or destroy, all written material
containing or reflecting any information contained in the Evaluation Material
(whether prepared by Disclosing Party or otherwise, and whether in Receiving
Party's possession or the possession of the Informed Persons) and will not
retain any copies, extracts or other reproductions in whole or in part of such
written material. All documents, memoranda, notes and other writings whatsoever
(including all copies, extracts or other reproductions) prepared by Receiving
Party based on the information contained in the Evaluation Material shall be
destroyed, and such destruction shall be certified in writing to Disclosing
Party by an authorized officer who supervised such destruction. The redelivery
of such material shall not relieve Receiving Party's obligation of
confidentiality or other obligations hereunder.
Although Disclosing Party has endeavored to include in the Evaluation
Material information known to Disclosing Party which Disclosing Party believes
to be relevant for the purpose of Receiving Party's investigation, Receiving
Party understands that Disclosing Party does not make any representation or
warranty as to the accuracy or completeness of the Evaluation Material except as
may be set forth in a definitive Purchase Agreement.
<PAGE> 4
February 17, 1998
Page 4
It is further understood and agreed that no failure or delay by Disclosing
Party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise of any right, power or privilege.
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by Receiving Party and that
Disclosing Party shall be entitled to seek specific performance and injunctive
or other equitable relief as a remedy for any such breach, and Receiving Party
further agrees to waive any requirement for the securing or posting of any bond
in connection with such remedy. Such remedy shall not be deemed to be the
exclusive remedy for Receiving Party's breach of this Agreement, but shall be
in addition to all other remedies available at law or equity to Disclosing
Party.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of California without giving effect to the principles
of conflict of laws thereof.
If either party hereto incurs legal fees, whether or not an action is
instituted, to enforce the terms of this Agreement or to recover damages or
injunctive relief for breach of this Agreement, it is agreed that the
successful or prevailing party shall be entitled to reasonable attorneys' fees,
expert witness fees and other costs in addition to any other relief to which it
may be entitled.
This Agreement shall terminate two years after the date of this
Agreement. All evaluation material not theretofore redelivered to Disclosing
Party shall be redelivered to Disclosing Party or destroyed in accordance with
the provisions of this Agreement upon termination. The obligation to redeliver
all evaluation shall survive termination of this Agreement.
If Receiving Party is in agreement with the foregoing, please so indicate
by signing and returning one copy of this Agreement, whereupon it will
constitute the agreement between Receiving Party and Disclosing Party with
respect to the subject matter hereof.
Very truly yours, CONFIRMED AND AGREED TO:
Wonderware Corporation Siebe PLC
/s/ SAM AURIEMMA /s/ GEORGE SARNEY
- ---------------------- ----------------------------
By: Sam Auriemma By: George Sarney
-------------------------
Its: Vice President, Its:
Chief Financial Officer ------------------------
<PAGE> 1
EXHIBIT 99.7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 24, 1998 (the
"Agreement"), by and among Siebe plc, a United Kingdom public limited company
(the "Parent"), WDR Acquisition Corp., a Delaware corporation and an indirect
wholly-owned subsidiary of Parent (the "Purchaser"), WDR Sub Corp., a Delaware
corporation and a wholly-owned subsidiary of the Purchaser (the "Merger Sub"),
and Wonderware Corporation, a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Parent, the Purchaser, the
Merger Sub and the Company have each determined that it is in the best interests
of their respective stockholders for the Purchaser to acquire the Company on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, it is proposed that the Purchaser and
the Merger Sub shall make a cash tender offer to acquire all of the issued and
outstanding shares of common stock, par value $.001 per share, of the Company
(the "Company Common Stock"), together with the associated Rights (as
hereinafter defined) for $24.00 per share of Company Common Stock (all issued
and outstanding shares of Company Common Stock, together, except where the
context otherwise requires, with the associated Rights, being hereinafter
collectively referred to as the "Shares"), net to the seller in cash, in
accordance with the terms and subject to the conditions provided for herein and
in the offering documents relating to the Offer (as defined below); and
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that each of the Offer and the Merger (as defined below) is fair to
and in the best interests of the Company and its stockholders and (ii) resolved
to approve and adopt this Agreement and the transactions contemplated hereby and
to recommend acceptance of the Offer and approval and adoption by the
stockholders of the Company of this Agreement and the Merger on the terms and
conditions set forth herein of the Merger Sub with and into the Company
following the Offer.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, the Purchaser, the Merger Sub and the Company hereby agree as
follows:
<PAGE> 2
ARTICLE 1
THE OFFER
1.1 The Offer. (a) Provided that none of the conditions set forth in
Annex I to this Agreement shall have occurred, the Purchaser (or one or more
other direct or indirect wholly-owned subsidiaries of Parent) shall, not later
than one business day after execution of this Agreement, publicly announce the
transactions contemplated hereby, and not later than five business days after
execution of this Agreement, commence (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), an offer
to purchase all Shares at a price of $24.00 per Share, net to the seller in cash
(the "Offer," which term shall include any amendments to such Offer not
prohibited by this Agreement) and, subject to a minimum of not less than a
majority of the outstanding Shares (on a fully-diluted basis) being validly
tendered and not withdrawn prior to the expiration of the Offer (the "Minimum
Condition") and the further conditions set forth in Annex I of this Agreement,
shall consummate the Offer. The Offer shall be made by means of an offer to
purchase containing the Minimum Condition and the further conditions set forth
in Annex I. The Purchaser hereby covenants and agrees that it shall hold the
Offer open for no less than 25 business days. Simultaneously with the
commencement of the Offer, the Purchaser shall file with the Securities and
Exchange Commission (the "Commission") a Tender Offer Statement on Schedule
14D-1 with respect to the Offer (the "Schedule 14D-1"). Notwithstanding the
foregoing, in the event any of the conditions set forth in Annex I to this
Agreement shall have occurred, the Purchaser may terminate the Offer. In the
event the Purchaser terminates the Offer, it may, subject to the prior written
approval of the Board of Directors of the Company, seek the approval of the
Company's stockholders for the Merger pursuant to the applicable provisions of
the General Corporation Law of the State of Delaware, as amended ("Delaware
Law"), as provided in Section 6.11. In such event, the Company shall take all
necessary action to call a special meeting of its stockholders to seek such
approval, and to prepare and file with the Commission a proxy statement relating
to such special meeting, all in accordance with Sections 6.1 and 6.2 hereof.
(b) The Purchaser expressly reserves the right to modify the terms and
conditions of the Offer from time to time, except that, without the prior
written approval of the Company, the Purchaser shall not amend the Offer (i) to
reduce the cash price per Share to be paid pursuant thereto, (ii) to reduce the
number of Shares to be purchased thereunder, (iii) to change the form of
consideration to be paid in the Offer, (iv) to increase the minimum number of
Shares which must be tendered as a condition to the Offer, (v) to waive the
Minimum Condition if such waiver would result in less than a majority of the
outstanding Shares being accepted for payment or paid for pursuant to the Offer,
(vi) to impose additional conditions to the Offer, (vii) to extend the period of
the Offer beyond 60 days, except that the Offer may be extended beyond 60 days
(subject to the Company's right of termination in Section 8.1 herein), without
the prior written approval of the Company, if all required waiting periods under
applicable law have not expired or (viii) otherwise to amend the terms of the
Offer (including the conditions set forth in Annex I) in a manner that is
materially adverse to stockholders of the Company.
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1.2 Company Action.
(a) The Company hereby consents to the Offer and represents that
its Board of Directors has unanimously (i) approved the Offer and the
Merger (as defined in Section 2.1), has determined that this Agreement
and the Offer are fair to and in the best interest of the Company and
its stockholders and has resolved to recommend acceptance of the Offer
to the Company's stockholders, and that the stockholders tender their
Shares in the Offer and, if applicable, vote to approve and adopt this
Agreement and the Merger, (ii) (x) taken all action necessary to render
Section 203 of the Delaware General Corporation Law, and (y) within 5
days of the date hereof, shall have taken all action necessary to render
the Company's Rights Agreement, dated as of February 15, 1996, between
the Company and The First National Bank of Boston, as rights agent, (the
"Rights Agreement"), inapplicable to the Offer, the Merger and this
Agreement or any of the transactions contemplated hereby or thereby. The
Company hereby consents to the inclusion in the Offer Documents (as
hereinafter defined) of the recommendation of the Board of Directors
described in the first sentence of this Section 1.2, except as such
consent may be withdrawn by the Board of Directors of the Company in the
exercise of its fiduciary duties as set forth in Section 6.6(b) hereof.
The Company represents that it has received the opinion of Hambrecht &
Quist LLC ("H&Q") to the effect that the consideration offered pursuant
to the Offer and Merger is fair to stockholders of the Company from a
financial point of view; it being understood and acknowledged that such
opinion has been rendered to the Board of Directors of the Company and
may not be relied upon by Parent, Purchaser or Merger Sub or their
affiliates or their respective stockholders.
(b) Simultaneously with, or as promptly as possible after, the
commencement of the Offer, the Company shall file with the Commission
and mail to the holders of Shares a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which shall reflect
the recommendation of the Board of Directors; provided that prior to the
filing of such Schedule 14D-9, the Company shall have provided the
Purchaser's counsel with a reasonable opportunity to review and make
comments with respect to such Schedule 14D-9. Such recommendation shall
not be withdrawn or adversely modified except by resolution of the Board
of Directors adopted in the exercise of applicable fiduciary duties upon
the advice of counsel.
(c) The Company shall promptly furnish the Purchaser with mailing
labels containing the names and addresses of the record holders and, if
available, of non-objecting beneficial owners of Shares and lists of
securities positions of Shares held in stock depositories, each as of
the most recent practicable date, and shall from time to time furnish
the Purchaser with such additional information, including updated or
additional lists of stockholders, mailing labels and lists of securities
positions, and other assistance as the Purchaser may reasonably request
in order to be able to communicate the Offer to the stockholders of the
Company. Subject to the requirements of law, and except for such steps
as are necessary to disseminate the Offer and any other documents
necessary to consummate the Merger, Parent, the Purchaser and the Merger
Sub and each
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of their affiliates shall treat all information contained in such
labels, lists and additional information as "Evaluation Material" in
accordance with the letter agreement dated February 17, 1998 between
Parent and the Company (the "Confidentiality Agreement").
1.3 Directors. Promptly upon the payment by the Purchaser or any of
Parent's direct or indirect subsidiaries pursuant to the Offer for such number
of Shares which represent at least a majority of the outstanding Shares and from
time to time thereafter, the Company shall increase the size of its Board of
Directors to nine members, and the Purchaser shall be entitled to designate
members of the Company's Board of Directors such that the Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, will have a number of
representatives on the Board of Directors, rounded up to the next whole number,
equal to the product obtained by multiplying nine by the percentage of Shares
beneficially owned by Parent and any of its subsidiaries. The Company shall,
upon request by the Purchaser, promptly increase the size of the Board of
Directors to the extent permitted by its Certificate of Incorporation and/or use
its best efforts to secure the resignations of such number of directors as is
necessary to enable the Purchaser's designees to be elected to the Board of
Directors and shall use its best efforts to cause the Purchaser's designees to
be so elected. At the request of the Purchaser, the Company shall take, at its
expense, all action necessary to effect any such election, including the mailing
to its stockholders of the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, in form and substance reasonably
satisfactory to the Purchaser and its counsel.
Notwithstanding the foregoing, (i) the affirmative vote of a majority of
the directors of the Company who are directors on the date hereof and who remain
directors shall be required to amend, modify or waive any provision of this
Agreement, or to approve any other action by the Company with respect to the
Offer or the other transactions contemplated hereby, which adversely affects the
interests of the stockholders of the Company with respect to such transactions
and (ii) none of the Purchaser, the Merger Sub or Parent shall, directly or
indirectly, cause the Company to breach its obligations hereunder.
ARTICLE 2
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.3), in
accordance with this Agreement and Delaware Law, the Merger Sub (or another
direct or indirect Delaware subsidiary of Parent) shall be merged with and into
the Company (the "Merger"), the separate existence of the Merger Sub (except as
may be continued by operation of law) shall cease, and the Company shall
continue as the surviving corporation under the corporate name it possesses
immediately prior to the Effective Time. The Company, in its capacity as the
corporation surviving the Merger, sometimes is referred to herein as the
"Surviving Corporation." Notwithstanding the foregoing, the Purchaser may revise
the structure of the Merger (including merging the Company into the Merger Sub
or merging the Company with or into another direct or indirect wholly-owned
subsidiary of Parent) provided that any such restructuring does not
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adversely affect the stockholders of the Company or does not cause the Company
to breach its representations and warranties hereunder.
2.2 Effect of the Merger. The Surviving Corporation shall possess all
the rights, privileges, immunities and franchises, both public and private, of
the Merger Sub and the Company (collectively, the "Constituent Corporations");
shall be vested with all property, whether real, personal, or mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest belonging to or due to each
of the Constituent Corporations; and shall be responsible and liable for all the
obligations and liabilities of each of the Constituent Corporations, all with
the effect set forth in the Delaware Law.
2.3 Consummation of the Merger. As soon as is practicable after the
satisfaction or waiver, if possible, of the conditions set forth in Article 7,
and in no event later than five business days after such satisfaction or waiver,
the parties hereto will cause an Agreement or Certificate of Merger to be filed
with the Secretary of State of the State of Delaware, in such form as required
by, and executed in accordance with, the relevant provisions of applicable law
using the procedures permitted in Section 253 (if possible) or Section 251 of
the Delaware Law. The Merger shall be effective at the time of the filing of the
Agreement or Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time").
2.4 Certificate of Incorporation and By-Laws; Directors and Officers.
The Certificate of Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation immediately after the
Effective Time and shall thereafter continue to be its Certificate of
Incorporation and By-Laws until amended as provided therein and under the
Delaware Law. The directors of the Merger Sub holding office immediately prior
to the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the Merger Sub, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time, other than Shares to be canceled pursuant to Section
2.5(b) hereof, shall automatically be canceled and extinguished and,
other than Shares with respect to which appraisal rights are properly
exercised ("Dissenting Shares"), be converted into and become a right to
receive in cash the highest price per share paid pursuant to the Offer
(the "Merger Consideration").
(b) Each Share issued and outstanding immediately prior to the
Effective Time and held in the treasury of the Company or owned by
Parent, the Purchaser or any subsidiary thereof shall automatically be
canceled and retired and no payment shall be made with respect thereto.
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(c) Each share of the Merger Sub's Common Stock, par value $.01
per share, issued and outstanding immediately prior to the Effective
Time shall automatically be converted into and become one validly
issued, fully paid and nonassessable share of Common Stock, par value
$.001 per share, of the Surviving Corporation.
(d) The holders of Dissenting Shares, if any, shall be entitled
to payment for such shares only to the extent permitted by and in
accordance with the provisions of Section 262 of the Delaware Law;
provided, however, that if, in accordance with such Section of the
Delaware Law, any holder of Dissenting Shares shall (i) subsequently
withdraw his demand for payment for such shares, or (ii) fail to
maintain a petition for appraisal as provided in such Section; or if
neither any holder of Dissenting Shares nor the Surviving Corporation
has filed suit as provided in Section 262 of the Delaware Law, such
holder or holders (as the case may be) shall forfeit such right to
payment of such Shares, and such Shares shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration.
2.6 Company Stock Options; Stock Purchase Plan. Each holder of then
outstanding options to purchase Shares ("Options") granted under any employee or
non-employee compensation plan or arrangement of the Company (the "Stock Plans")
shall be entitled, at the Effective Time, to exercise his or her Options, or to
surrender them for payment in accordance with the provisions of Section 6.3(a)
hereof. Any Options not so exercised or surrendered shall be terminated and
canceled at the Effective Time. The Company shall have the right to cause all
funds held in the Company's Employee Stock Purchase Plan to be used to purchase
shares of Company Common Stock so that such shares will be converted into the
right to receive cash in the Merger; provided that the Employee Stock Purchase
Plan is thereupon terminated.
2.7 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, the Purchaser shall designate a
bank or trust company reasonably satisfactory to the Company to act as
agent for the holders of Shares (the "Exchange Agent") to receive the
Merger Consideration, and at or immediately following the Effective
Time, Parent shall take all steps necessary to cause the Purchaser to
have sufficient funds to be able to provide the Exchange Agent with the
funds necessary to make the payments contemplated by this Article II.
(b) Promptly after the Effective Time, the Exchange Agent shall
mail to each person who was, at the Effective Time, a holder of record
of Shares entitled to receive the Merger Consideration pursuant to
Section 2.5(a) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
certificates previously representing Shares to be exchanged pursuant to
the Merger (the "Certificates") shall pass, only upon proper delivery of
such Certificates to the Exchange Agent) and instructions for use
thereof in effecting the surrender of the Certificates. Upon surrender
to the Exchange Agent of the Certificates, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions
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thereto, and such other documents as may be requested, the Exchange
Agent shall promptly deliver to the persons entitled thereto the Merger
Consideration payable in respect of the Shares represented by the
Certificates, and the Certificates shall forthwith be canceled. Until so
surrendered and exchanged, each such Certificate (other than
Certificates representing Shares held in the treasury of the Company, by
the Purchaser or any subsidiary of the Purchaser and Dissenting Shares)
evidencing Shares shall, after the Effective Time, be deemed to evidence
only the right to receive the Merger Consideration.
(c) If delivery of the Merger Consideration in respect of
canceled Shares is to be made to a person other than the person in whose
name a surrendered Certificate or instrument is registered, it shall be
a condition to such delivery or payment that the Certificate or
instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the person requesting
such delivery or payment shall have paid any transfer and other taxes
required by reason of such delivery or payment in a name other than that
of the registered holder of the Certificate or instrument surrendered or
shall have established to the satisfaction of the Surviving Corporation
or the Exchange Agent that such tax either has been paid or is not
payable.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of
transfers of Shares thereafter on the records of the Company. From and
after the Effective Time, holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided herein or by law. No interest shall be paid or accrue on any
portion of the Merger Consideration.
(e) Notwithstanding anything to the contrary in this Section 2.7,
none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of Shares for any amount properly
paid to a public official pursuant to any applicable property, escheat
or similar law.
2.8 Taking of Necessary Action; Further Action. Parent, the Purchaser,
the Merger Sub and the Company, respectively, shall use all reasonable efforts
to take all such action as may be necessary or appropriate in order to
effectuate the Offer and the Merger as promptly as possible and to carry out the
transactions provided for herein or contemplated hereby. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges,
immunities, powers and franchises of either of the Constituent Corporations, the
officers and directors of the Surviving Corporation are fully authorized in the
name of either of the Constituent Corporations or otherwise to take, and shall
take, all such action.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARENT,
THE PURCHASER AND THE MERGER SUB
The Parent, the Purchaser and the Merger Sub hereby agree and represent
and warrant, on a joint and several basis, to the Company as follows:
3.1 Organization and Qualification. Each of the Parent, the Purchaser
and the Merger Sub has been duly incorporated and is validly existing as a
corporation and in good standing under the laws of the United Kingdom in the
case of Parent and the laws of Delaware in the case of the Purchaser and Merger
Sub and has the requisite corporate power to carry on its respective business as
now conducted. Each of the Parent, the Purchaser and the Merger Sub is duly
qualified as a foreign corporation in good standing in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the business, operations
or financial condition of the Parent and its subsidiaries, taken as a whole. As
of the date of this Agreement, the Parent, the Purchaser and the Merger Sub have
no obligations or liabilities, and none of such parties are parties to any
litigation, which in any case if paid or adversely determined would have a
material effect on their ability to consummate the transactions contemplated by
this Agreement. The Purchaser is an indirect wholly-owned subsidiary of the
Parent and the Merger Sub is a wholly-owned subsidiary of the Purchaser. The
Certificate or Articles of Incorporation and By-Laws of the Purchaser and the
Merger Sub contain no provisions which would have a material adverse effect on
the ability of either of such entities to consummate the transactions
contemplated by this Agreement.
3.2 Authority Relative to this Agreement. Each of the Parent, the
Purchaser and the Merger Sub has the requisite corporate power and authority to
enter into this Agreement and to carry out its respective obligations hereunder.
The execution and delivery of this Agreement by the Parent, the Purchaser and
the Merger Sub and the consummation by the Parent, the Purchaser and the Merger
Sub of the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of the Parent, the Purchaser and the Merger Sub,
by an indirect wholly owned subsidiary of the Parent as the sole stockholder of
the Purchaser, and by the Purchaser as the sole stockholder of the Merger Sub,
and no other corporate proceedings on the part of the Parent or any of its
subsidiaries, the Purchaser or the Merger Sub are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Parent, the Purchaser and the Merger Sub and
constitutes a valid and binding obligation of each such company, enforceable in
accordance with its terms. None of the Parent, the Purchaser or the Merger Sub
is subject to or obligated under any provision of (a) its Certificate or
Articles of Incorporation or By-Laws, or (b) any contract, indenture,
instrument, or other agreement, or (c) any license, franchise or permit, or (d)
any law, regulation, order, judgment or decree, which would be breached,
violated or defaulted or in respect of which a right of termination or
acceleration or any encumbrance on any of its assets could be created by its
execution, delivery and performance of this Agreement and the consummation by it
of the transactions contemplated hereby, other than any such breaches,
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violations, defaults, rights of termination or acceleration, or encumbrances,
which will not, individually or in the aggregate, have a material adverse effect
on the ability of the Parent, the Purchaser or the Merger Sub to consummate the
Offer or the Merger or any of the transactions contemplated hereby. Other than
in connection with or in compliance with the provisions of the Delaware Law, the
Exchange Act and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act"), no authorization, consent or approval of,
or filing with, any public body, court or authority is necessary on the part of
the Parent, the Purchaser or the Merger Sub for the consummation by the Parent,
the Purchaser and the Merger Sub of the transactions contemplated by this
Agreement other than filings with such foreign jurisdictions in which
subsidiaries of the Company are organized which may require filings to be made
in connection with the transfer of control of such subsidiaries, and Parent, the
Purchaser and the Merger Sub each agrees to make any and all such filings on or
prior to the Effective Time if any of such parties are required to make such
filings under applicable law.
3.3 Offer Documents. The Offer to Purchase and related Letter of
Transmittal and Schedule 14D-1 (and any amendments or supplements to the
foregoing) (which together constitute the "Offer Documents") shall in all
material respects conform with the requirements of the Exchange Act and the
rules and regulations thereunder (except that the foregoing representation shall
not apply with respect to the accuracy of information relating to the Company
which has been excerpted or derived from public sources or furnished in writing
by the Company specifically for inclusion in the Offer Documents). As of their
respective dates, and on the date they are first published, sent or given to
holders of Shares, the Offer Documents, taken as a whole, shall not contain any
misstatement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading. Parent and the
Purchaser agree to correct the Schedule 14D-1 and the other Offer Documents if
and to the extent that any of them shall become false or misleading in any
material respect, and Parent and the Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable law.
The information supplied by Parent for inclusion in the proxy statement to be
sent to the stockholders of the Company in connection with the meeting of the
Company's stockholders to consider the Merger, or the information statement to
be sent to such stockholders, as appropriate, shall not, on the date the proxy
statement or information statement is first mailed to stockholders, at the time
of such stockholders' meeting, if any, or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading with respect to any material fact, or
shall omit to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for such
stockholders' meeting which has become false or misleading. The Company and its
counsel shall be given reasonable opportunities to review and comment on the
Offer Documents.
3.4 Financing. Parent, the Purchaser and the Merger Sub have available
financing in an amount sufficient to consummate the Offer and the Merger.
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3.5 No Violation of the Margin Rules. None of the transactions
contemplated by this Agreement will violate or result in the violation of
Section 7 of the Exchange Act or any regulation promulgated pursuant thereto,
including, without limitation, Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent, the Purchaser
and the Merger Sub, except as set forth in the Disclosure Schedule which was
dated and delivered to the Parent, the Purchaser and the Merger Sub on or prior
to the date hereof, as follows:
4.1 Organization and Qualification. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of Delaware. The Company is duly qualified as a foreign corporation in good
standing in each jurisdiction in which the character of its properties owned or
leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the financial condition, properties, business, or results of
operations of the Company or the Surviving Corporation and their respective
subsidiaries, taken as a whole (a "Company Material Adverse Effect"). The
Company has full corporate power and authority to own its properties and conduct
its business as presently owned and conducted. The copies of the Certificate of
Incorporation and By-Laws of the Company previously delivered to the Purchaser
are true, correct and complete as of the date hereof.
4.2 Subsidiaries. Each subsidiary of the Company, all of which are
listed in either Exhibit 22 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (the "Form 10-K Report") or the Disclosure
Schedule, has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation, is duly
qualified as a foreign corporation in good standing in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified would not have a Company Material Adverse Effect, and has full power
and authority to own its properties and conduct its business as presently owned
and conducted. The Company owns, directly or indirectly, all of the outstanding
shares of capital stock of each such subsidiary free and clear of all liens,
claims. charges or encumbrances; there are no irrevocable proxies with respect
to such shares; and all such shares are validly issued, fully paid and
nonassessable. Except for the capital stock of such subsidiaries or otherwise as
disclosed in the Form 10-K Report, the Company does not own, directly or
indirectly, any investment in (a) any general partnership or joint venture or
(b) any equity or debt investment having either a fair market or face value or
cost in excess of $100,000. Except as disclosed in the Disclosure Schedule,
neither the Company nor any of its subsidiaries is obligated to make any
payments in the form of earn-outs, deferred purchase price or other
consideration in respect of the purchase price payable in connection with the
acquisition of any subsidiary or business.
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4.3 Capitalization. The authorized capital stock of the Company consists
of 50,000,000 Shares and 10,000,000 shares of preferred stock, $.001 par value
("Preferred Stock"), of which 500,000 shares have been designated Series A
Junior Participating Preferred Stock (the "Series A Preferred Stock"). As of the
date hereof, 14,314,078 Shares, and no shares of Preferred Stock, are issued and
outstanding. All issued and outstanding Shares are duly authorized and issued,
and are fully paid and nonassessable. As of the date hereof, (a) 2,231,757
shares of Common Stock are reserved for issuance pursuant to outstanding stock
options and (b) approximately 165,458 shares of Series A Preferred Stock are
reserved for issuance pursuant to preferred stock purchase rights (the "Rights")
issued under the Rights Agreement. Section 4.3 of the Disclosure Schedule sets
forth a complete and correct list of the Company's outstanding stock options,
including for each the name of the option holder, the date of grant, the
expiration date, the plan under which the option (or any portion thereof) was
granted. Except as otherwise described in the Disclosure Schedule, there are no
options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating the Company or any of its subsidiaries to
issue or sell any shares of, or make any payments based on the value or
appreciation of any, capital stock of the Company or any of its subsidiaries or
securities or obligations of any kind convertible into or exchangeable for any
shares of capital stock of the Company, any of its subsidiaries or any other
person. The holders of outstanding Shares are not entitled to any contractual or
statutory preemptive or other similar rights. Upon consummation of the Merger in
accordance with the terms of this Agreement, the Purchaser will own the entire
equity interest in the Company, and there will be no options, warrants,
conversion privileges or other rights, agreements, arrangements or commitments
obligating the Company or any of its subsidiaries to issue or sell any shares of
capital stock of the Company or of any of its subsidiaries.
4.4 Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and unanimously authorized by the Board of Directors of
the Company and, except for the approval of its stockholders (if required) as
set forth in Section 6.1, no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. Neither the Company nor any of its
subsidiaries is subject to or obligated under any provision of (a) its
Certificate or Articles of Incorporation or By-Laws, (b) except as set forth in
the Disclosure Schedule, any contract, (c) any license, franchise or permit, or
(d) any law, regulation, order, judgment or decree, which would be breached or
violated or in respect of which a right of termination or acceleration or any
encumbrance on any of its or any of its subsidiaries' assets could be created by
the Company's execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby, other than
any such breaches, violations, rights or encumbrances which will not,
individually or in the aggregate, have a Company Material Adverse Effect. Other
than in connection with or in compliance with the provisions of the Delaware
Law, the Exchange Act and the Hart-Scott-Rodino Act, no
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authorization, consent or approval of, or filing with, any public body, court or
authority is necessary for the consummation by the Company of the transactions
contemplated by this Agreement other than filings with such foreign
jurisdictions in which subsidiaries of the Company are organized which may
require filings to be made in connection with the transfer of control of such
subsidiaries, and the Company agrees to make any and all such filings on or
prior to the Effective Time if the Company is required to make such filings
under applicable law.
4.5 Commission Filings. The Company has heretofore delivered to the
Purchaser copies of the Company's (a) Form 10-K Report, (b) Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997 (collectively, the "Form 10-Q Reports"), and (c) all proxy
statements relating to the Company's meetings of stockholders (whether annual or
special) during 1996 and 1997, in each case as filed with the Commission. The
Company has heretofore made available to the Purchaser all other reports,
registration statements and other documents filed by the Company with the
Commission under the Exchange Act and the Securities Act. All such documents
described in the first two sentences of this section are collectively referred
to herein as the "Commission Filings." Except as set forth on the Disclosure
Schedule, the Company has not filed any Form 8-K Reports with the Commission
since January 1, 1997. The Company has timely filed all reports, registration
statements and other documents required to be filed with the Commission under
the rules and regulations of the Commission, and all Commission Filings complied
with the requirements of the Securities Act or the Exchange Act, as the case may
be. As of their respective dates, the Commission Filings (including in all cases
any exhibits or schedules thereto or documents incorporated therein by
reference) did not contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.6 Financial Statements and Related Data. The (i) audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company included in the Form 10-K Report and the Form 10-Q Reports and (ii)
consolidated financial statements as of and for the fiscal year ended December
31, 1997 (the "1997 Financial Statements") have each been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto and
except, in the case of the unaudited statements, as may be permitted under Form
10-Q of the Exchange Act) and fairly present the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended, subject, in the case of the unaudited consolidated
interim financial statements, to normal year-end adjustments. Upon completion of
the audit of the 1997 Financial Statements, the Company will provide a copy
thereof to the Purchaser, which will be the same in all material respects
(including footnotes) as the 1997 Financial Statements previously provided to
the Purchaser, will be accompanied by an unqualified audit opinion by Deloitte &
Touche LLP, the Company's independent public accountants, and will contain notes
that do not include any information that is different from that provided to the
Purchaser under or pursuant to this Agreement or any document referenced herein
or in the Disclosure Schedule hereto to the extent that such differences, taken
as a whole,
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reflect changes which would have a Company Material Adverse Effect (the "Audited
1997 Financial Statements").
4.7 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, or reflected in any financial statement or note thereto referred to
in Section 4.6 or reflected in the Disclosure Schedule, or reflected in any
Commission Filing filed prior to date hereof, since December 31, 1997, there has
not been (a) any change which would have a Company Material Adverse Effect; (b)
any damage, destruction or loss, whether covered by insurance or not, having a
Company Material Adverse Effect; (c) any entry by the Company or any subsidiary
into any commitment or transaction material to the Company and its subsidiaries
taken as a whole, which is not in the ordinary course of business; (d) any
change by the Company in accounting principles or methods except insofar as may
be required by a change in generally accepted accounting principles; (e) any
declaration, payment or setting aside for payment of any dividends or purchase
or redemption of any securities of the Company or (f) any entering into or
modification of any employment or severance contract with any executive officer
of the Company or any of its subsidiaries or any increase in compensation
payable by the Company or any of its subsidiaries to any of their executive
officers or any material increase under any bonus, pension or benefit plan.
4.8 Litigation. Except as disclosed in the Form 10-K Report, the Form
10-Q Reports or the Disclosure Schedule, there are no claims, actions,
proceedings, or investigations pending or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries or any of their
respective officers, directors, employees or agents (in their capacities as
such) before any court or governmental or regulatory authority or body, which if
adversely determined would have (to the extent not adequately reserved against
on the Company's December 31, 1997 balance sheet), individually or in the
aggregate, a Company Material Adverse Effect or would materially adversely
affect (i) the completion of the transactions contemplated by this Agreement or
(ii) the ability of the Purchaser or Parent through the acquisition of Shares to
own or operate the business of the Company.
4.9 Liabilities. Except as disclosed in the 1997 Financial Statements,
neither the Company nor any of its subsidiaries has any material obligation or
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company, whether due or to become due) other than
(a) liabilities incurred since December 31, 1997 in the ordinary course of
business consistent with past practice or (b) obligations and liabilities which
have been incurred in the ordinary course of business pursuant to contracts and
should not be reflected under generally accepted accounting principles on the
1997 Financial Statements, which in the aggregate are not material to the
Company and its subsidiaries, taken as a whole.
4.10 Environmental Matters. The Company and its subsidiaries have
obtained all material permits, licenses and other authorizations which are
required under applicable federal, state, local and foreign laws relating to
public health and safety, worker health and safety, pollution or protection of
the environment, including those relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes, except where
its failure to obtain the
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same would not have a Company Material Adverse Effect. The Company and its
subsidiaries have complied and are in compliance with all terms and conditions
of any and all required permits, licenses, and authorizations, and with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
federal, state, local or foreign law or any regulation, code, plan, order,
decree or judgment relating to public health and safety, worker health and
safety, and pollution or protection of the environment, or any notice or demand
letter issued, entered, promulgated or approved thereunder, except where the
failure to comply would not have a Company Material Adverse Effect. To the best
knowledge of the Company, no facts, events or conditions relating to the
Company's or any of its subsidiaries' past or present operations, facilities or
properties interfere in any material respect with or prevent continued
compliance with, or give rise to any material present or potential legal, common
law or statutory liability under, any applicable law or regulation related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or related to the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant, or
hazardous or toxic material or waste.
4.11 Employee Benefit Plans.
(a) Section 4.11(a) of the Disclosure Schedule hereto sets forth
a list of all "employee benefit plans," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other material employee benefit or compensation
arrangements, including, without limitation, any such arrangements
providing severance pay, sick leave, vacation pay, salary continuation
for disability, retirement benefits, deferred compensation, bonus pay,
incentive pay, stock options (including those held by directors,
employees, and consultants), hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, that
are maintained by the Company, any subsidiary of the Company or any
Company ERISA Affiliate (as defined in this Section 4.11) or with
respect to which the Company, any subsidiary of the Company or any
Company ERISA Affiliate has or may have any liability, contingent or
otherwise (the "Company Employee Benefit Plans").
(b) None of the Company Employee Benefit Plans is a
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"), and neither the Company nor any subsidiary of the
Company or Company ERISA Affiliate presently maintains or has maintained
such a plan.
(c) Except as provided in Part 6 of Title I of ERISA, neither the
Company nor any subsidiaries of the Company maintain or contribute to
any plan or arrangement which provides or has any liability to provide
life insurance or medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of
employment, and neither the Company nor any of its subsidiaries have
ever represented, promised or contracted (whether in oral or written
form) to any employee or former employee that such benefits would be
provided.
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(d) Except as provided for in the Options described in Section
4.3 of the Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not, either alone or
upon the occurrence of subsequent events, result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any individual. The only severance
agreements or severance policies applicable to the Company or the
subsidiary of the Company in the event of a change of control of the
Company are the agreements and policies specifically referred to in
Section 4.11(d) of the Disclosure Schedule. Section 4.11(d) of the
Disclosure Schedule sets forth all payments or benefits which will or
may be made by the Company, Parent or any of their subsidiaries or
affiliates pursuant to contracts or arrangements in effect on the date
hereof with respect to any employee of the Company or any subsidiary of
the Company which may be characterized as a "parachute payment" within
the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986,
as amended.
(e) Each Company Employee Benefit Plan that is intended to
qualify under Section 401 of the Code, and each trust maintained
pursuant thereto, has been determined to be exempt from federal income
taxation under Section 501 of the Code by the IRS, and, to the Company's
knowledge, nothing has occurred with respect to the operation or
organization of any such Company Employee Benefit Plan that would cause
the loss of such qualification or exemption or the imposition of any
liability, penalty or tax under ERISA or the Code. No Company Employee
Benefit Plan is a "defined benefit plan" within the meaning of Section
3(35) of ERISA, and neither the Company nor any subsidiary of the
Company or any Company ERISA Affiliate maintains or has ever maintained
such a plan.
(f) (i) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made
under any of the Company Employee Benefit Plans to any funds or trusts
established thereunder or in connection therewith have been made by the
due date thereof, (ii) the Company and each of its subsidiaries have
complied in all material respects with any notice, reporting and
documentation requirements of ERISA and the Code, (iii) there are no
pending actions, claims or lawsuits which have been asserted, instituted
or, to the Company's knowledge, threatened, in connection with the
Company Employee Benefit Plans, and (iv) the Company Employee Benefit
Plans have been maintained, in all material respects, in accordance with
their terms and with all provisions of ERISA and the Code (including
rules and regulations thereunder) and other applicable federal and state
laws and regulations.
(g) Section 4.11(g) of the Disclosure Schedule sets forth a
complete list of all amounts outstanding relating to bonuses payable to
employees and any obligation to pay bonuses to employees relating to the
Company's performance, the employee's performance or the transactions
contemplated hereby.
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(h) All compensation attributable to outstanding Options
constitutes "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
For purposes of this Agreement, "Company ERISA Affiliate" means any
business or entity which is a member of the same "controlled group of
corporations," under "common control" or a member of an "affiliated service
group" with the Company within the meanings of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with the Company under Section 414(o) of
the Code, or is under "common control" with the Company, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under
any of the foregoing Sections.
4.12 Labor Matters. (i) There are no controversies pending or, to the
knowledge of the Company, threatened, between the Company or any of its
subsidiaries and any group of their respective employees; (ii) neither the
Company nor, to the knowledge of the Company, any of its subsidiaries, is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or its subsidiaries nor does the
Company know of any activities or proceedings of any labor union to organize any
such employees; (iii) neither the Company nor any of its subsidiaries has
breached or otherwise failed to comply with any provision of any such agreement
or contract and there are no grievances outstanding against any such parties
under any such agreement or contract; (iv) there are no unfair labor practice
complaints pending against the Company or any of its subsidiaries before the
National Labor Relations Board or any current union representation questions
involving employees of the Company or any of its subsidiaries; and (v) the
Company has no knowledge of any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any employees of the Company or any of
its subsidiaries. No consent of any union which is a party to any collective
bargaining agreement with the Company is required to consummate the transactions
contemplated by this Agreement.
4.13 Offer Documents. Neither the Schedule 14D-9 nor any of the
information supplied by the Company for inclusion in the Offer Documents shall,
at the respective times the Schedule 14D-9, the Offer Documents or any such
amendments or supplements are filed with the SEC or are first published, sent or
given to stockholders, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In the event that the
Purchaser has not designated a majority of the members of the Company's Board of
Directors pursuant to the terms of Section 1.3 hereof and a stockholder vote is
required, all information supplied by the Company for inclusion in any proxy
statement filed with the Commission and sent or given to stockholders pursuant
to Section 6.2 hereof shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading at the time of filing with the Commission,
mailing to stockholders or any meeting of stockholders. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information which is supplied in writing by Parent, the Purchaser or the Merger
Sub specifically for inclusion
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and which is contained in any of the foregoing documents or which is excerpted
or derived from public sources.
4.14 Proprietary Rights.
(a) The Company and its subsidiaries possess or have adequate
rights to use all material trademarks, trade names, patents, service
marks, marks, brand names, computer programs, databases, industrial
designs and copyrights necessary for the operation of the businesses of
each of the Company and its subsidiaries (collectively, the "Proprietary
Rights"). All of the Proprietary Rights that are material to the conduct
of the Company's business taken as a whole are owned by the Company or
its subsidiaries free and clear of any and all encumbrances that would
have a material adverse effect on the value of, or ability of Purchaser
or Merger Sub to utilize, the item of the Proprietary Rights to which
such encumbrance relates, and neither the Company nor any such
subsidiary has forfeited or otherwise relinquished any Proprietary
Rights which forfeiture would have a Company Material Adverse Effect.
The use of the Proprietary Rights by the Company 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, except where such conflict,
infringement, violation, interference or appropriation would not result
in a Company Material Adverse Effect. The Company has received no
written notice that the use of any Proprietary Rights or trade dress by
the Company or its subsidiaries conflicts with, infringes upon, violates
or interferes with any rights of any other person. There are no pending
claims that any of the Proprietary Rights 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
Proprietary Rights that is material to the conduct of the Company's
business. Neither the Company nor any of its subsidiaries is in default
under the terms of any third party license or other right to use any of
the Proprietary Rights which default is likely to have a Company
Material Adverse Effect.
(b) It is the Company's policy to have each employee, consultant
or contractor of the Company execute a proprietary information and
confidentiality agreement substantially in the form of the Company's
standard forms of such agreement, and substantially all of the Company's
employees, consultants and contractors have executed such an agreement.
All computer software included in the Company's products (i) has been
either created by employees of the Company within the scope of their
employment or otherwise on a work-for-hire basis or by consultants or
contractors who have created such software themselves and have assigned
all right, title and interest they have in such software to the Company
or (ii) is licensed to the Company pursuant to valid and binding
agreements.
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4.15 Taxes. Each of the Company and its subsidiaries has filed all
federal and state tax returns and reports, and all material local and foreign
tax returns and reports, that it was required to file. All such tax returns and
reports were correct and complete in all material respects. All taxes owed by
any of the Company and its subsidiaries have been paid. Each of the Company and
its subsidiaries has withheld and paid all taxes required to have been withheld
and paid in connection with amounts paid to any employee, independent
contractor, creditor, stockholder, or other third party. Neither the Internal
Revenue Service (the "IRS") nor any other taxing authority or agency is now
asserting or, to the best of the Company's knowledge, threatening to assert
against the Company or any of its subsidiaries any deficiency or claim for
material additional taxes or interest thereon or penalties in connection
therewith. Neither the Company nor any of its subsidiaries has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any federal, state, local or foreign income tax.
The accruals and reserves for taxes reflected in the balance sheet of the
Company as of December 31, 1997 are adequate to cover all taxes accruable
through such date (including interest and penalties, if any, thereon) in
accordance with generally accepted accounting principles. Neither the Company
nor any of its subsidiaries has made an election under Section 341(f) of the
Code. The Company is not, and has not been during the period specified in
Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c) of the Code.
4.16 Brokers, Advisors. No broker, finder or investment banker (other
than H&Q) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company has heretofore
furnished to the Purchaser and the Merger Sub a complete and correct copy of all
agreements between the Company and H&Q pursuant to which such firm would be
entitled to any payment relating to the transactions contemplated hereunder.
4.17 Product Liabilities. Except as set forth in the Disclosure
Schedule, there are no product warranty, product liability or similar claims
pending, or to the best knowledge of the Company overtly threatened, against the
Company or any of its subsidiaries.
4.18 Related Party Transactions. Except as set forth in the Disclosure
Schedule, or the SEC Reports for the year ended December 31, 1996 and for the
nine months ended September 30, 1997, no current or former stockholder,
director, officer or key employee of the Company or any of its subsidiaries nor
any "Associate" (as defined in Rule 405 promulgated under the Securities Act) of
any such person, is presently or has been, directly or indirectly through his
affiliation with any other person or entity, a party to any transaction with the
Company or any of its subsidiaries providing for the furnishing of services
(except as an employee) by or to, or rental of real or personal property from or
to, or otherwise requiring cash payments by or to any such person. In addition,
except as set forth in the Disclosure Schedule or the SEC Reports, during such
periods there was no relationship or transaction involving the Company or any of
its subsidiaries which is described in Item 404 of Regulation S-K promulgated
under the Securities Act.
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4.19 Rights Agreement. No later than 5 days from the date hereof, the
Company shall have amended the Rights Agreement so that the Rights Agreement
will not be applicable to this Agreement, the Offer, the announcement of the
Offer, the purchase of Shares by Parent, the Purchaser or the Merger Sub
pursuant to the Offer or the Merger, or any other action contemplated hereby.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, prior to the Effective Time, unless the Purchaser
shall otherwise agree in writing or as otherwise expressly contemplated or
permitted by this Agreement:
(a) The business of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall maintain
their facilities in, the ordinary course of business and consistent with
past practice.
(b) The Company shall not directly or indirectly do or permit to
occur any of the following: (i) issue, sell, pledge, dispose of or
encumber (or permit any of its subsidiaries to issue, sell, pledge,
dispose of or encumber) any shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of,
any capital stock of the Company or any of its subsidiaries (other than
shares issuable upon exercise of the outstanding (as of the date hereof)
Options or any rights to purchase shares of Company Common Stock
pursuant to the Employee Stock Purchase Plan, in each case in accordance
with their respective terms in effect on the date hereof); (ii) amend or
propose to amend the Certificate or Articles of Incorporation or By-Laws
of it or any of its subsidiaries; (iii) split, combine or reclassify any
outstanding Shares, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect
to the Shares; (iv) redeem, purchase or acquire or offer to acquire (or
permit any of its subsidiaries to redeem, purchase or acquire or offer
to acquire) any Shares or other securities of the Company or any of its
subsidiaries other than as contemplated by Section 2.5 hereof and other
than for the repurchase by the Company, pursuant to existing agreements,
of any outstanding Shares upon termination of an employment, director or
consulting relationship with the Company; or (v) enter into or modify
any agreement, commitment or arrangement with respect to any of the
foregoing.
(c) Neither the Company nor any of its subsidiaries shall (i)
sell, pledge, lease, dispose of or encumber any material assets other
than in the ordinary course of business consistent with past practice;
(ii) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, partnership or other business
organization or enterprise or material assets thereof; (iii) incur any
indebtedness for borrowed money or issue any debt securities for
borrowings except in the ordinary course of business and consistent with
past practice; (iv) guarantee, endorse or otherwise became liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other
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person (other than a subsidiary of the Company or the Company) except in
the ordinary course of business consistent with past practice and in
amounts immaterial to the Company; or (v) enter into or modify any
contract, agreement, commitment or arrangement with respect to any of
the foregoing.
(d) Neither the Company nor any of its subsidiaries shall (i)
enter into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors; or (ii) in the case of
employees who are not officers or directors, take any action other than
in the ordinary course of business consistent with past practice (none
of which actions shall be unreasonable or unusual) with respect to the
grant of any bonuses, salary increases, severance or termination pay or
with respect to any increase of benefits in effect on the date of this
Agreement.
(e) Except as may be required by applicable law, neither the
Company nor any of its subsidiaries shall adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan,
agreement, trust fund or arrangement for the benefit or welfare of any
employee.
(f) Except to the extent required by fiduciary obligations under
applicable law as advised by counsel, the Company will not (i) call any
meeting (other than any meeting contemplated by Section 6.1) of its
stockholders or (ii) waive or modify any provision of, or terminate any,
confidentiality or standstill agreement entered into by the Company with
any person.
(g) The Company shall use its best efforts to cause its current
insurance (or reinsurance) policies not to be canceled or terminated or
any of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled,
terminated or lapsed policies for substantially similar premiums are in
full force and effect.
(h) The Company (i) shall use its reasonable efforts, and cause
each of its subsidiaries to use reasonable efforts, to preserve intact
their respective business organizations and goodwill, keep available the
services of its officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors, customers and
others having business relationships with it or its subsidiaries; (ii)
shall confer on a regular and frequent basis with representatives of the
Purchaser and the Merger Sub to report operational matters and the
general status of ongoing operations; (iii) shall not take any action,
and shall not permit any of its
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subsidiaries to take any action, which would render, or which reasonably
may be expected to render, any representation or warranty made by it in
this Agreement untrue at any time prior to the Effective Time; and (iv)
shall notify the Purchaser and the Merger Sub of any emergency or other
change in the normal course of its or any of its subsidiaries' business
or in the operation of its or any of its subsidiaries' properties and of
any governmental or third party complaints, investigations or hearings
(or communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would have a
Company Material Adverse Effect, or would materially adversely affect
any party's ability to consummate the transactions contemplated by this
Agreement.
(i) Neither the Company nor any of its subsidiaries shall adopt a
plan of liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or reorganization.
(j) Neither the Company nor any of its subsidiaries shall make
any material tax election or settle or compromise any material federal,
state, local, or foreign tax liability, except in the ordinary course of
business and consistent with past practice.
(k) Except as contemplated by Section 6.3, the Company shall not
modify or accelerate the exercisability of any stock options, rights or
warrants presently outstanding, and shall not amend, change or waive (or
exempt any person from the effect of) the Rights Agreement, except in
the exercise of its fiduciary duties by the Board of Directors as set
forth in Section 6.6(b) of this Agreement or as contemplated by Section
4.19 hereof.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Action of Stockholders. The Company shall take all action necessary
in accordance with the Delaware Law and its Certificate of Incorporation and
By-Laws to convene a meeting of its stockholders promptly following consummation
of the Offer to consider and vote upon the Merger, if a stockholder vote is
required. If a stockholders' meeting is convened, the Board of Directors shall
recommend that the stockholders of the Company vote to approve the Merger. Such
recommendation shall not be withdrawn or adversely modified except by resolution
of the Board of Directors adopted in the exercise of applicable fiduciary duties
upon the advice of counsel. In the event that proxies are to be solicited from
the Company's stockholders, the Company shall, if and to the extent requested by
the Purchaser, use its best efforts to solicit from stockholders of the Company
proxies in favor of such approval and shall take all other reasonable action
necessary or, in the opinion of the Purchaser, helpful to secure a vote or
consent of stockholders in favor of the Merger, except where the Board of
Directors of the Company determines not to undertake such actions and efforts in
the exercise of its fiduciary duties as set forth in Section 6.6(b) hereof. At
any such meeting, the Purchaser shall vote or cause to be voted all of the
Shares then owned by the Purchaser or any subsidiary of the Purchaser in favor
of the Merger and the Company shall vote all Shares in favor of the Merger for
which proxies in the form distributed by the Company shall have been given and
with respect to which no contrary direction shall have been made.
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6.2 Proxy Statement. If a stockholder vote is required, the Company and
the Purchaser shall cooperate with each other and use all reasonable efforts to
prepare, and the Company and the Purchaser shall file with the Commission as
soon as reasonably practicable following consummation of the Offer and use their
best efforts to have cleared by the Commission, a proxy statement or information
statement, as appropriate, with respect to the approval of the Merger by the
Company's stockholders. The information provided and to be provided by the
Purchaser, the Merger Sub and the Company, respectively, for use in the proxy
statement or information statement shall be true and correct in all material
respects and shall not omit to state any material fact required to be stated
therein or necessary in order to make such information not misleading.
6.3 Employee Benefits and Stock Options.
(a) Acceleration and Cancellation. The Parent, the Purchaser, the
Merger Sub and the Company hereby acknowledge and agree that the
Surviving Corporation shall not assume or continue any outstanding stock
options under the Stock Plans, or any other stock options, or substitute
any additional options for such outstanding options. On or before the
Effective Time, the Company shall, consistently with the terms of the
Company's benefit plans and other agreements and arrangements evidencing
the issuance of options, or to the extent permissible under applicable
law, accelerate the unvested portion of all outstanding stock options,
warrants or other rights to acquire Shares issued under employee benefit
or nonemployee compensation plans or arrangements, conditioned upon the
successful completion of the Merger. In lieu of exercising such stock
options or warrants, each holder thereof shall, upon surrender for
cancellation of the same to the Company on or before the Effective Time,
be entitled to receive from the Company, subject to applicable
withholding requirements, an amount in cash equal to the excess of (a)
the product of the number of Shares covered by such stock options,
warrants or other rights to acquire Shares multiplied by the Merger
Consideration, over (b) the product of the number of Shares covered by
such stock options, warrants or other rights to acquire Shares
multiplied by the per-Share exercise, purchase or conversion price
payable upon exercise, purchase or conversion of the same. Any
outstanding stock options that shall not have been exercised or
surrendered for payment in accordance with the preceding sentence shall
terminate at the Effective Time, in accordance with the terms of the
Stock Plans. The Company shall use its best efforts to obtain consent to
the foregoing treatment by the holders of all outstanding options listed
on Section 6.3(a) of the Disclosure Schedule.
(b) Stock Purchase Plan. The Company shall take such actions, on
or before the Effective Time, as are necessary to terminate the
Company's Employee Stock Purchase Plan. After such termination, employee
participants in such Employee Stock Purchase Plan shall not be permitted
to continue to have the Company withhold any monies for investment in
such Plan and each such employee shall be permitted to elect to receive
invested cash or purchase Shares in accordance with the terms of such
plan.
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(c) Employment Agreements and Severance Agreements. Parent shall
cause the Company to honor without modification (except to the extent
the same may be modified by mutual agreement between the parties and
approved by the Purchaser) all employment agreements and severance
agreements in effect prior to the date hereof between the Company and
any employee of the Company, all of which, the Company hereby represents
and warrants, have been disclosed in writing to Parent prior to the date
hereof.
6.4 Expenses. If (a) this Agreement is terminated by the Company
pursuant to Section 8.1(e)(iii) or Section 6.6(b), or (b) this Agreement is
terminated by the Purchaser pursuant to Section 8.1(c) or (c) this Agreement is
terminated pursuant to its terms for any reason other than a material breach of
this Agreement by the Parent or the Merger Sub, and in case of this clause (c)
within six months thereafter (x) a definitive agreement is entered into between
the Company and any person other than the Purchaser or any affiliate of the
Purchaser for the acquisition of all or substantially all the assets or a
majority of the capital stock of the Company, or for a merger, consolidation or
other reorganization of the Company at a price equivalent to a price per Share
in excess of $24.00 or (y) any person or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) other than the Purchaser or any affiliate
of the Purchaser shall have acquired by way of a public tender offer beneficial
ownership of 50% or more of the outstanding Shares at a price per Share in
excess of $24.00, the Company shall pay to Parent upon demand (by wire transfer
of immediately available federal funds to an account designated by Parent for
such purpose) the amount of $12.6 million to compensate Parent, the Purchaser
and the Merger Sub for taking actions to consummate this Agreement, to reimburse
them for the time and expense relating thereto and for other direct and indirect
costs (including lost opportunity costs) in connection with the transactions
contemplated herein. The Company acknowledges that the provisions set forth in
this section are an integral part of this Agreement that have been negotiated in
order to induce Parent, the Purchaser and the Merger Sub to enter into this
Agreement; accordingly, if the Company fails to promptly pay the amounts
referred to above, the Company shall in addition pay Parent all costs and
expenses (including attorneys' fees and expenses) incurred in collecting such
fees together with interest on the amount of such fees from the date such
payment was required to be made until such time as payment is received by Parent
at the rate of the lesser of (i) 10% per annum or (ii) the maximum rate
permitted by law. Payment of such amount by the Company along with any interest,
costs and expenses as may be required under this Section 6.4 shall constitute a
full and complete discharge of all obligations or liabilities of the Company
under this Paragraph; provided, however, that under no circumstances will the
Company be liable for more than one fee payable pursuant to this Section 6.4.
In the event of any breach of the representations and warranties
contained in this Agreement by either party hereto (for purposes of this
Section, the parties to this Agreement shall mean Parent, the Purchaser and the
Merger Sub, on the one hand, and the Company, on the other hand), if the
nonbreaching party incurs damages caused by the breaching party, the breaching
party's aggregate liability for all such damages caused by all such breaches
shall not exceed $12.6 million.
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<PAGE> 24
6.5 Additional Agreements. Subject to the terms and conditions provided
herein, each of the parties agrees to use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including using best efforts to
obtain all necessary waivers, consents and approvals and to effect all necessary
registrations and filings, including but not limited to filings under the
Hart-Scott-Rodino Act and submissions of information requested by governmental
authorities.
6.6 No Solicitation.
(a) Except as provided in Section 6.6(b) below, the Company
agrees that from the date hereof until the Effective Time or the
termination of this Agreement, the Company will not, directly or
indirectly, through any officer, director, affiliate or agent of the
Company, or otherwise, solicit, initiate, or encourage any proposals or
offers from any person other than Parent or its affiliates (a "third
party") relating to any possible acquisition of the Company or any of
its subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or engage in any sale of any equity
interest in or substantial assets of the Company or any of its
subsidiaries (other than pursuant to the exercise of options outstanding
on the date hereof) to a third party (an "Alternative Acquisition"); nor
will the Company participate in any negotiations regarding, or furnish
to any person any information with respect to, or otherwise cooperate
with, facilitate or encourage any effort or attempt by any person to do
or seek, any Alternative Acquisition.
(b) Notwithstanding the foregoing, in the event that (i) the
Company shall receive a written proposal from a third party relating to
an Alternative Acquisition (which proposal may or may not be subject to
confirmatory due diligence), (ii) the Company shall have notified Parent
in writing of its receipt of such proposal and (iii) the Board of
Directors, upon the advice of independent counsel, reasonably believes
that the failure to do so would constitute a breach of its fiduciary
duties (it being understood for this purpose that the failure to respond
to an Acquisition Alternative which in the judgment of the Company's
Board of Directors and its financial advisor is superior, from a
financial point of view, to the Company's stockholders may be deemed to
be a breach of such duty), then thereafter the Company shall be entitled
to negotiate and provide information to such third party.
Notwithstanding the immediately preceding sentence, this Section 6.6
will not be violated and, without more, the Company shall be permitted
to negotiate and provide information to any third party that provides a
written proposal for an Alternative Acquisition if such written proposal
indicates that the proposed Alternative Acquisition (i) is fully
financed, (ii) provides for a purchase price which will be paid entirely
in cash, for all outstanding Shares and at a price per Share greater
than the price per Share set forth in Section 1.1 hereof and (iii) sets
forth material terms which taken as a whole are no less favorable to the
Company than the terms set forth in this Agreement, and the Company
shall have first notified the Parent in writing of its receipt of such
proposal and the terms thereof. In addition, in the event that any such
proposal, including the financing thereof, has been determined by the
Board of Directors of the Company based upon the
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<PAGE> 25
written opinion of its outside financial advisors to be on terms
financially superior to the Company's stockholders as compared with the
Offer and the Merger (a "Bona Fide Offer"), the Company may terminate
this Agreement and accept such Bona Fide Offer upon the payment to
Parent of the fee provided in Section 6.4.
(c) Notwithstanding the provisions of the sixth paragraph of the
Confidentiality Agreement (the "standstill provisions"), (i) following
any notification to Parent of a written proposal that permits the
Company to negotiate with and furnish information to any third party in
accordance with Section 6.6(b) hereof, and until any Alternative
Transaction resulting from such proposal shall have either been
consummated or the Company shall have received written notification that
any such third party shall no longer seek to engage in an Alternative
Transaction with or involving the Company, the Parent shall be entitled
to propose or present to the Company any offer in response to such third
party's offer, and (ii) if, from the date hereof until the Effective
Time or the termination of this Agreement, any third party shall
announce its intention to commence, or shall commence, any tender offer
to acquire Shares, Parent and the Purchaser shall be entitled to make
any public announcement or proposal, or to take any other action it or
they may deem appropriate, in response to such announcement or tender
offer.
6.7 Notification of Certain Matters. Each party shall give prompt notice
to the others of (a) the occurrence or failure to occur of any event, which
occurrence or failure would be likely to cause any representation or warranty on
its part contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time, and (b) any
material failure of such party, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
6.8 Access to Information. From the date hereof to the Effective Time,
the Company shall, and shall cause its subsidiaries, officers, directors,
employees and agents (including lenders, attorneys and accountants) to afford
the Parent and the Purchaser complete access at all reasonable times to its
officers, employees, agents, properties, books and records, and shall furnish
Parent and the Purchaser all financial, operating, personnel, compensation, tax
and other data and information as the Purchaser, through its officers, employees
or agents, may reasonably request. All of such information shall be treated as
"Evaluation Material" pursuant to the terms of the Confidentiality Agreement.
6.9 Stockholder Claims. The Company shall not settle or compromise any
claim brought by any present, former or purported holder of any securities of
the Company in connection with the Merger prior to the Effective Time without
the prior written consent of the Purchaser.
6.10 Indemnification.
(a) The By-Laws of the Company as the Surviving Corporation shall
contain the provisions with respect to indemnification set forth in
Article XI of the By-Laws
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<PAGE> 26
of the Company. Such provisions in the By-Laws of the Company and the
Surviving Corporation shall not be amended, repealed or otherwise
modified for a period of six years from the date Parent, the Purchaser
or the Merger Sub acquires a majority of the Shares in any manner that
would adversely affect the rights thereunder of individuals who at or
prior to the Effective Time were directors, officers, employees or
agents of the Company, unless such modification is required by law.
(b) Purchaser shall cause the Surviving Corporation to use its
reasonable best efforts to maintain in effect for six years from the
Effective Time, if available, the coverage provided by the current
directors' and officers' liability insurance policies maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions
which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that nothing
contained herein shall require the Surviving Corporation to incur any
annual premium in excess of 120% of the last annual aggregate premium
paid prior to the date of this Agreement for all current directors' and
officers' liability insurance policies maintained by the Company which
the Company represents and warrants to be $300,000 (the "Current
Premium"). If such premiums for such insurance would at any time exceed
120% of the Current Premium, then the Surviving Corporation shall cause
to be maintained policies of insurance which, in the Surviving
Corporation's good faith determination, provide the maximum coverage
available at an annual premium equal to 120% of the Current Premium.
(c) In the event the Company as the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and
in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation, or at Parent's
option, Parent, shall assume the obligations set forth in this Section
6.10. Parent further agrees to assume the obligations set forth in this
Section 6.10 and the obligations of the Surviving Corporation under the
indemnification obligations of the Company referenced in paragraph (a)
of this Section 6.10 during any period of time in which the net worth of
the Surviving Corporation, without giving effect to any accounting or
other changes in the Company's net worth resulting solely from the
Merger, shall be less than 80% of the net worth of the Company
immediately prior to the Merger by reason of dividends or distributions
by the Company to the Parent or any of its affiliates.
(d) This Section 6.10 shall survive the Effective Time, is
intended to benefit the Company, the Surviving Corporation and each of
the persons referred to in paragraph (a) of this Section and shall be
binding on all successors and assigns of the Surviving Corporation.
6.11 Conversion to Merger. In the event any of the conditions set forth
in Annex I shall occur, the Parent, the Purchaser and the Merger Sub shall have
the right to terminate the
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<PAGE> 27
Offer. In the event the Offer is terminated, the Parent, the Purchaser and the
Merger Sub shall have the right, but not the obligation, to notify the Company
that it or they desire, subject to the prior written approval of the Board of
Directors of the Company, to seek the approval of the Company's stockholders for
the Merger pursuant to Delaware Law. Unless the Board of Directors shall
determine, upon the advice of counsel, that such actions would have a material
adverse economic effect on the Company's stockholders, or that cooperation by
the Company would constitute a breach of fiduciary duty by the Company's Board
of Directors, the Company shall take all necessary actions, pursuant to Sections
6.1 and 6.2 hereto and otherwise, to obtain stockholder approval and to
accomplish the Merger in accordance with this Agreement, except in the exercise
of its fiduciary duties by the Board of Directors of the Company as set forth in
Section 6.6(b) hereof.
6.12 Consents. The Company shall use its reasonable best efforts to
obtain, without the payment of any fee or compensation without the written
approval of the Parent or the Purchaser, consents to the Offer, the Merger, and
the transactions contemplated by this Agreement from the other parties to the
agreements listed on Section 6.12 of the Disclosure Schedule.
ARTICLE 7
CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Merger shall have been approved and adopted by the vote
of the stockholders of the Company to the extent required by Delaware
Law;
(b) All waiting, review and investigation periods (and any
extension thereof) applicable to the consummation of the Merger under
the Hart-Scott-Rodino Act shall have expired or been terminated;
(c) There shall have been no law, statute, rule or order,
domestic or foreign, enacted or promulgated which would make
consummation of the Merger illegal; and
(d) No injunction or other order entered by a United States
(state or federal) court of competent jurisdiction shall have been
issued and remain in effect which would prohibit consummation of the
Merger.
7.2 Additional Conditions to Obligations of Parent, the Purchaser and
the Merger Sub. The obligations of Parent, the Purchaser and the Merger Sub to
effect the Merger after termination of the Offer in accordance with Section 6.11
are also subject to the following conditions:
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<PAGE> 28
(a) The representations and warranties of the Company contained
in this Agreement shall have been true and correct in all material
respects when made.
(b) There shall not have occurred, after the date hereof, any
event, condition or state of facts, which has resulted, or is reasonably
likely to result, in (i) a Company Material Adverse Effect or (ii) a
material adverse effect on the ability of Parent, the Purchaser or the
Merger Sub to consummate the Merger.
(c) The Company's stockholders shall have approved and adopted
the Merger and this Agreement in accordance with Delaware Law.
(d) All rights to acquire shares of the Company Common Stock as
described in Section 4.3 hereof shall have been exercised, canceled or
terminated prior to or concurrently with the Effective Time.
(e) There shall not be pending or threatened any action,
proceeding or investigation by any court or governmental or regulatory
authority or body (i) challenging or seeking damages in connection with
the Merger, (ii) seeking to require the divestiture by Parent, the
Purchaser or the Company or any of their respective affiliates of shares
of Company Common Stock or any business, asset or property of Parent or
the Company or any of their respective affiliates, or (iii) seeking to
restrain or prohibit the consummation of the Merger or otherwise limit
the right of Parent, or its subsidiaries to transact business with the
Company or otherwise own or operate in the current manner all or any
portion of the businesses or assets of the Company or its subsidiaries,
which, in either case, is reasonably likely to have a Company Material
Adverse Effect prior to or after the Effective Time, or to subject the
Company, Parent, Purchaser, Merger Sub or any of their respective
subsidiaries or any of their respective officers or directors to
substantial penalties or criminal liability.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the consummation of the Offer (or, if the Offer is terminated and thereafter
Parent and the Purchaser shall seek stockholder approval of the Merger in
accordance with Section 6.11 hereof (a "Subsequent Merger"), the Effective
Time):
(a) By mutual consent of the Boards of Directors of Parent and
the Company;
(b) By either the Purchaser or the Company if the Offer shall not
have been consummated on or before May 31, 1998, or a Subsequent Merger
shall not have occurred by September 30, 1998; provided, however, that a
party shall not be entitled to
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<PAGE> 29
terminate this Agreement pursuant to this Section 8.1(b) if it is in
material breach of its obligations under this Agreement;
(c) By the Purchaser if the Board of Directors of the Company
shall have withdrawn or adversely modified either of its recommendations
referred to in Sections 1.2 and 6.1; provided, that a finding by the
Board that an Alternative Acquisition may be superior from a financial
point of view for purposes of Section 6.6(b) shall not be deemed a
withdrawal or adverse modification of its recommendation referred to in
this Section 8.1(c) unless such finding shall be stated publicly or
otherwise disseminated;
(d) By the Purchaser prior to the purchase of Shares pursuant to
the Offer in the event any of the conditions to the Offer set forth in
Annex I shall have occurred; or
(e) By the Company if any of (i) the Offer shall not have been
commenced substantially in accordance with Section 1.1; or (ii) the
Offer shall have expired or been terminated without any Shares having
been purchased thereunder; or (iii) if a tender offer for Shares is
commenced by a person or entity, or the Company receives an offer for an
Alternative Acquisition, any of which the Board of Directors determines,
in the exercise of its fiduciary duties and subject to compliance with
Section 6.6(b), makes necessary or advisable the termination of this
Agreement; provided that the provisions of Sections 6.4 and 6.6(c) shall
survive termination of the Agreement pursuant to this clause (e)(iii).
8.2 Amendment. This Agreement may not be amended except by an instrument
in writing approved by the parties to this Agreement and signed on behalf of
each of the parties hereto; provided, however, that after approval of the Merger
by the stockholders of the Company (if such approval is required), no amendment
may be made which changes the amount into which each Share will be converted or
effects any change which would materially and adversely affect the stockholders
of the Company without the further approval of the stockholders of the Company.
8.3 Waiver. Subject to applicable law and the provisions of this
Agreement, at any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, or (b) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements and conditions are intended for its
benefit. For the purposes of this Section 8, Parent, the Purchaser and the
Merger Sub shall be considered to be a single party.
8.4 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, (a) this Agreement shall become void and there shall
be no liability or further obligation on the part of the Parent, the Purchaser,
the Merger Sub or the Company or their respective stockholders, officers or
directors, except as set forth in Section 6.4, in the last sentence of Section
1.2(c) hereof, and in Section 8.1(e) hereof, and (b) the Purchaser and the
Merger Sub shall terminate the Offer, if still pending, without purchasing any
Shares thereunder.
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<PAGE> 30
ARTICLE 9
GENERAL PROVISIONS
9.l Public Statements. Except as required by applicable law, neither
Parent, the Purchaser or the Merger Sub, on the one hand, nor the Company, on
the other hand, shall make any public announcement or statement with respect to
the Offer, the Merger, this Agreement or the transactions contemplated hereby,
without the approval of the Company or the Purchaser, respectively. The parties
hereto agree to consult with each other prior to issuing each public
announcement or statement with respect to the Offer, the Merger, this Agreement
or the transactions contemplated hereby.
9.2 Notices. All notices and other communications hereunder shall be in
writing and sent by hand delivery, facsimile transmission (with confirmation of
receipt), or nationally recognized overnight courier service (with proof of
delivery), to the parties at the addresses set forth below (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent, the Purchaser or the Merger Sub:
Siebe plc
Saxon House
2-4 Victoria Street
Windsor, Berkshire SL4
England
Attention: Company Secretary
Telephone: 44-1753-839-229
Facsimile: 44-1753-622-030
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
350 South Grand Avenue, 32nd Floor
Los Angeles, CA 90071
Attention: David K. Robbins, Esq.
Telephone: (213) 473-2000
Facsimile: (213) 473-2222
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<PAGE> 31
(b) if to the Company:
Wonderware Corporation
100 Technology Drive
Irvine, CA 92618
Attention: Chief Financial Officer
Telephone: (714) 727-3200
Facsimile: (714) 453-6509
with copies to:
Wonderware Corporation
100 Technology Drive
Irvine, CA 92618
Attention: General Counsel
Telephone: (714) 727-3200
Facsimile: (714) 453-6509
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121-2128
Attention: D. Bradley Peck, Esq.
Telephone: (619) 550-6000
Facsimile: (619) 453-3555
9.3 Interpretation. When a reference is made in this Agreement to
subsidiaries of the Purchaser or the Company, the word "subsidiaries" means any
"majority-owned subsidiary" (as defined in Rule 12b-2 under the Exchange Act) of
the Purchaser or the Company, as the case may be; provided, however, that the
Company shall in no event and at no time be considered a subsidiary of the
Purchaser for purposes of this Agreement. As used herein, the term "person"
means an individual, a partnership, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or other
entity. The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
References to Sections and Articles refer to sections and articles of this
Agreement unless otherwise stated.
9.4 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or enforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify the Agreement to preserve each party's anticipated
benefits under the Agreement.
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<PAGE> 32
9.5 Miscellaneous. This Agreement (together with all other documents and
instruments referred to herein, including the Confidentiality Agreement except
as expressly provided in Section 6.6(c) hereof): (a) constitutes the entire
agreement and supersedes all other prior agreements and undertakings, both
written and oral, among the parties with respect to the subject matter hereof;
(b) is not intended to confer upon any other person any rights or remedies
hereunder; (c) shall not be assigned by operation of law or otherwise, except
that the Purchaser and the Merger Sub may assign all or any portion of their
rights under this Agreement to any direct or indirect wholly-owned subsidiary of
Parent, but no such assignment shall relieve the Purchaser and the Merger Sub of
their obligations hereunder, and except that this Agreement may be assigned by
operation of law to any corporation with or into which the Purchaser may be
merged; and (d) shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
9.6 Survival of Representations and Warranties. The representations and
warranties of the parties set forth herein shall be deemed to be continuing as
if made as of the date of any determination hereunder; provided, however, that
such representations and warranties shall terminate as of the time Parent, the
Purchaser or the Merger Sub acquires more than a majority of the then
outstanding Shares, or upon the termination of this Agreement pursuant to
Section 8.1.
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<PAGE> 33
IN WITNESS WHEREOF, Parent, the Purchaser, the Merger Sub and the
Company have caused this Agreement and Plan of Merger to be executed as of the
date first written above by their respective officers thereunder duly
authorized.
SIEBE PLC
By: /s/ Colin P. Bonsey
-------------------------------
Colin P. Bonsey
Director
WDR ACQUISITION CORP.
By: /s/ James C. Bays
-------------------------------
James C. Bays
President
WDR SUB CORP.
By: /s/ James C. Bays
-------------------------------
James C. Bays
President
WONDERWARE CORPORATION
By: /s/ Roy H. Slavin
-------------------------------
Roy H. Slavin
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 34
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Agreement and Plan of Merger
(the "Agreement") or the Offer, neither the Purchaser nor the Merger Sub shall
be required to commence or continue the Offer or accept for payment, purchase or
pay for any Shares tendered, or may postpone the acceptance, purchase or payment
for Shares, or may amend (to the extent permitted by the Agreement) or terminate
the Offer (1) if the Minimum Condition is not satisfied as of the expiration of
the Offer; (2) any applicable waiting period under the Hart-Scott-Rodino Act in
respect of the Offer shall not have expired or been terminated prior to the
expiration of the Offer (provided, however, that the Purchaser and the Merger
Sub shall extend the expiration date of the Offer from time to time until May
31, 1998, if, when and as necessary to satisfy any request by the Federal Trade
Commission or the United States Department of Justice for additional information
under the Hart-Scott-Rodino Act) or (3) if, at any time on or after February __,
1998 and prior to the time of payment for any such Shares (whether or not any
Shares have theretofore been accepted for payment or paid for pursuant to the
Offer), any of the following events shall have occurred (each of paragraphs (a)
through (h) providing a separate and independent condition to the obligations of
the Purchaser and the Merger Sub pursuant to the Offer):
(a) the Company or any subsidiary of the Company shall have
authorized, recommended or proposed, or shall have announced an
intention to authorize, recommend or propose, or shall have entered into
an agreement or agreement in principle with respect to, any merger,
consolidation or business combination (other than the Merger), any
acquisition or disposition of a material amount of assets or securities
or any material change in its capitalization, or the Company's board of
directors shall have withdrawn or adversely modified (including by
amendment to the Schedule 14D-9) its favorable recommendations with
respect to the Offer and the Merger, or any corporation, entity, "group"
or "person" (as defined in the Exchange Act) other than Parent, the
Purchaser or the Merger Sub, shall have acquired beneficial ownership of
more than 50% of the outstanding Shares;
(b) the Company or any of its subsidiaries shall have authorized,
recommended or proposed, or shall have announced an intention to
authorize, recommend or propose, or shall have entered into an agreement
or agreement in principle with respect to, any release or relinquishment
of any material contract rights not in the ordinary course of business,
which release or relinquishment would have a Company Material Adverse
Effect.
(c) there shall be instituted or pending any action, litigation,
proceeding, investigation or other application (hereinafter, an
"Action") before any court of competent jurisdiction or other
governmental entity by any governmental entity that is reasonably likely
to: (i) result in a restriction or prohibition on the consummation of
the transactions contemplated by the Offer or the Merger; (ii) prohibit,
or impose any material limitations on Purchaser's or Merger Sub's
ownership or operation of all or a material portion of their
<PAGE> 35
or the Company's business or assets, or to compel Purchaser or Merger
Sub to dispose of or hold separate all or a material portion of
Purchaser's or Merger Sub's or the Company's business or assets; (iii)
make the acceptance for payment of, purchase of, or payment for, some or
all of the Shares illegal or rendering Purchaser or Merger Sub unable
to, or restricting or prohibiting, the ability of Purchaser or Merger
Sub to accept for payment, purchase or pay for some or all of the
Shares; or (iv) impose material limitations on the ability of Purchaser
or Merger Sub effectively to acquire or hold or to exercise full rights
of ownership of the Shares including, without limitation, the right to
vote the Shares purchased by them on an equal basis with all other
Shares on all matters properly presented to the stockholders of the
Company;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed to or become
applicable to the Offer or the Merger that results in any of the
consequences referred to in clauses (i) through (iv) of paragraph (c)
above;
(e) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national
securities exchange or in the over the counter market in the United
States or on the London Stock Exchange, (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States or the United Kingdom, (iii) the commencement of war,
armed hostilities or other military action, or other international or
national calamity, having a Company Material Adverse Effect, (iv) any
limitation by any governmental authority on, or any other event which
might materially adversely affect, the extension of credit by banks or
other lending institutions in the United States or the United Kingdom,
(v) from the date of this Agreement through the close of business on the
business day immediately prior to the date of termination or scheduled
expiration of the Offer, a decline of at least 25% in the Standard &
Poor's 500 Index, or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(f) except as set forth in the SEC Reports or the Disclosure
Schedule, any change shall have occurred which individually or in the
aggregate had, is continuing to have, or is reasonably likely to have a
Company Material Adverse Effect;
(g) the representations and warranties of the Company in the
Agreement shall not have been true and correct in all material respects
when made, or the Company shall not have performed in all material
respects each material covenant and complied with each material
agreement to be performed and complied with by it under the Agreement;
provided that if the breach of any such covenant or agreement is cured
within 5 calendar days after notice by the Purchaser of its intent to
terminate the Offer or if the breach shall not have a Company Material
Adverse Effect or a material adverse effect on the ability of Parent or
the Purchaser to consummate the Offer, the Merger, or the transactions
contemplated by this Agreement, the Purchaser shall not terminate the
Offer;
<PAGE> 36
(h) the Company and the Purchaser shall have reached an agreement
or understanding regarding termination of the Offer or the Agreement
shall have been terminated in accordance with its terms; or
(i) all governmental consents required to be obtained in
connection with the purchase of Shares pursuant to the Offer shall not
have been obtained prior to expiration of the Offer or any governmental
agency shall have announced an intention to seek to prohibit or
interfere with the purchase of Shares pursuant to the Offer;
which, in the good faith judgment of the Purchaser, in any such case, and
regardless of the circumstances giving rise to any such condition, make it
inadvisable to proceed with acceptance for payment or purchase of or payment for
the Shares.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by the Purchaser and Parent regardless of the
circumstances giving rise to such conditions, or may be waived by the Purchaser
or the Merger Sub in whole at any time or in part from time to time in their
sole discretion. The failure by the Purchaser or the Parent at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right and may be asserted
at any time and from time to time.
<PAGE> 1
EXHIBIT 99.8
HAMBRECHT & QUIST LLC
ONE BUSH STREET
SAN FRANCISCO, CA 94104
(415) 439-3000
February 22, 1998
CONFIDENTIAL
The Board of Directors
Wonderware Corporation
100 Technology Drive
Irvine, CA 92718
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of common stock (the "Common Stock") of
Wonderware Corporation ("Wonderware" or the "Company") of the consideration to
be received by such shareholders in connection with a proposed transaction as
set forth below.
We understand that Wonderware, Siebe plc ("Siebe"), WDR Acquisition Corp. (the
"Purchaser") and WDR Sub Corp. (the "Merger Sub") propose to enter into an
Agreement and Plan of Merger (the "Agreement") dated as of February 24, 1998.
The terms of the Agreement provide, among other things, that (i) the Purchaser
will promptly commence a tender offer (the "Offer") to purchase for cash all of
the outstanding shares of Common Stock at a purchase price of $24.00 per share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Agreement and certain ancillary documents to be filed with the
Securities and Exchange Commission; and (ii) the Merger Sub will subsequently be
merged (the "Merger") with and into the Company in a transaction which will
provide all the remaining holders of shares of Common Stock (other than
Wonderware, Siebe, the Purchaser, the Merger Sub or their respective
subsidiaries, and holders who have perfected their appraisal rights, if any,
under Delaware law) with $24.00 per share in cash. The Offer and the Merger
constitute the "Proposed Transaction."
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment banking
services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of Wonderware in connection with the Proposed Transaction, and we will
receive a fee for our services, which include the rendering of this opinion.
In the past, we have provided investment banking and other financial advisory
services to Wonderware and have received fees for rendering these services. In
the ordinary course of business, Hambrecht & Quist acts as a market maker and
broker in the publicly traded securities of
<PAGE> 2
The Board of Directors
Wonderware Corporation
Page 2
Wonderware and receives customary compensation in connection therewith, and also
provides research coverage for Wonderware. In the ordinary course of business,
Hambrecht & Quist actively trades in the equity and derivative securities of
Wonderware for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Hambrecht & Quist may in the future provide additional investment banking or
other financial advisory services to Wonderware.
In connection with our review of the Proposed Transaction, and in arriving at
our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements of
Siebe for recent years and interim periods to date and certain other relevant
financial and operating data of Siebe (including its capital structure) made
available to us from published sources;
(ii) reviewed the publicly available consolidated financial statements
of Wonderware for recent years and interim periods to date and certain other
relevant financial and operating data of Wonderware made available to us from
published sources and from the internal records of Wonderware;
(iii) reviewed certain internal financial and operating information,
including certain projections, relating to Wonderware prepared by the management
of Wonderware;
(iv) discussed the business, financial condition and prospects of the
Wonderware with certain of its officers;
(v) reviewed the recent reported prices and trading activity for the
common stocks of Wonderware and compared such information and certain financial
information for Wonderware with similar information for certain other companies
engaged in businesses we consider comparable;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(vii) reviewed the Agreement; and
(viii) performed such other analyses and examinations and considered
such other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Siebe or Wonderware considered
in connection with our review of the Proposed Transaction, and we have not
assumed any responsibility for independent verification of such information. We
have not prepared any independent valuation or appraisal of any of the assets or
liabilities of Siebe or Wonderware, nor have we conducted a physical inspection
of the properties and facilities of either company. With respect to financial
forecasts and projections made available to us and used in our analysis, we have
assumed that they reflect the best currently available estimates and judgments
of the expected future financial performance of Siebe and Wonderware. For
purposes of this opinion, we have assumed that neither Siebe nor Wonderware is a
party to any pending transactions, including external financings,
recapitalizations or material
<PAGE> 3
The Board of Directors
Wonderware Corporation
Page 3
merger discussions, other than the Proposed Transaction and those activities
undertaken in the ordinary course of conducting their respective businesses. Our
opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date of this letter and
any change in such conditions would require a reevaluation of this opinion. We
were not requested to, and did not, solicit indications of interest from any
other parties in connection with a possible acquisition of, or business
combination with, Wonderware.
It is understood that his letter is for the information of the Board of
Directors only an may not be used for any other purpose without our prior
written consent; provided, however, that this letter may be reproduced in full
in any filing with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. This letter does not constitute a
recommendation to any stockholder as to whether such stockholders should accept
the Offer.
Based upon and subject to the foregoing and after considering such other matters
as we deem relevant, we are of the opinion that as of the date hereof the
consideration to be received by the holders of the Common Stock in the Proposed
Transaction is fair to such holders from a financial point of view.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ Paul B. Cleveland
----------------------------------
Paul B. Cleveland
Managing Director
