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(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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(as permitted by Rule
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[x] Soliciting material under Rule 14a-12.
CYLINK CORPORATION
______________________________________________________________________
(Name of Registrant as Specified in Its Charter)
______________________________________________________________________
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Payment of filing fee (check the appropriate box):
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_______________________________________________________________________
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_______________________________________________________________________
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1
Cylink Corporation (the "Company" or "Cylink") has made the following
information regarding the acquisition of Cylink by SafeNet, Inc. available on
its website. The information can be accessed from the Company's website at
http://www. cylink.com.
[GRAPHIC OMITTED]
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SafeNet and Cylink ... A Compelling Combination.
Cylink has announced that it has signed a definitive merger agreement with
SafeNet. Under an all-stock acquisition agreement, SafeNet will issue to Cylink
approximately 1.839 million shares, or 16% of the Company. The market value of
the transaction is $35.4 million. The acquisition is expected to close in the
first quarter of 2003 following shareholder approvals.
For additional information about the proposed acquisition, check the links
below.
Letter to Customers and Partners Press Release
Acquisition Fact Sheet SEC Filings
SafeNet Website
For more information, contact us at info@cylink.com.
Home Corporate I News & Events (Sales I Products & Solutions (Service & Support
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For questions or comments about this site, please contact; webmaster@cylink.com
<: 2001 Cylink Corporation, All Rights Reserved. Privacy Policy Site Credits:
Lost Horizon Interactive SafeNet
2
Cylink has issued the following letter to certain of its customers and partners
regarding the acquisition of Cylink by SafeNet, Inc. The letter also can be
accessed from the Company's website at http://www.cylink.com.
TO OUR CUSTOMERS AND PARTNERS
I am pleased to announce that on Oct. 30 Cylink entered into a definitive
agreement to be acquired by SafeNet Inc. We are now engaged in the process
of SEC and shareholder approval, and anticipate the transaction should
close in the first quarter of 2003.
We believe this is great news for our customers and partners because the
merged company will provide you with a broader range of products under a
single comprehensive security management platform. In addition, the
strength of our combined engineering and support capabilities means that we
will be able to better meet your immediate and future network security
needs as they evolve.
SafeNet (www.safenet-inc.com) is a NASDAQ listed public company
headquartered in Baltimore, MD, which was founded in 1983, and has been a
leader in the Internet VPN business. The company is growing, profitable and
has a strong balance sheet.
SafeNet is organized into two business units as outlined below:
The Enterprise Security Division provides VPN systems and client software
as well as managed security services. In its direct sales, this division
focuses on large financial institutions and government agencies. The client
software is also licensed to equipment manufacturers (including Cylink) for
inclusion in their solutions. Cylink will become part of this division,
under the leadership of Chris Fedde, General Manger.
The Embedded Security Division, packages SafeNet VPN security technology
into chips, software and add-in boards, which are sold to original
equipment manufacturers for inclusion in their products. This technology is
also licensed to other companies like Texas Instruments, who include it in
their own designs for security-enabled devices.
Cylink customers will dramatically benefit from this merger. The combined
company will be a strong player in the security marketplace with a product
line that is unparalleled in the industry. These products meet the
requirements of government, financial and multi-national customers for an
integrated approach to handling security within their core ATM and Frame
networks as well as VPN connectivity to their partners, customers and
vendors, all supported by a unified security policy management system.
SafeNet and Cylink have known each other for many years. The two companies
have engaged in partnering activities with very positive results. This
transaction is the logical extension of this relationship. Our merged
organization will also have a larger and very experienced sales and
customer service team that will be able to provide you with technical, help
desk, and maintenance support worldwide.
We look forward to bringing you the best security solutions into the
future. If you have questions, please don't hesitate to contact me or your
Cylink or SafeNet sales representative.
Sincerely,
William Crowell
President and CEO
Cylink Corp.
3
Cylink has issued the following press release regarding the acquisition of
Cylink by SafeNet, Inc. The press release also can be accessed from the
Company's website at http://www. cylink.com.
[GRAPHIC OMITTED]
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Cylink Corp. Announces Agreement To Be Acquired By SafeNet
SANTA CLARA, Calif., - October 30, 2002- E-business security provider Cylink
Corporation (Nasdaq: CYLK), today announced that it has signed a definitive
merger agreement with SafeNet Corporation (NASDAQ: SFNT). Under the merger
agreement, SafeNet will issue 0.05 shares of SafeNet common stock for each
outstanding share of Cylink common stock, or approximately 1.839 million shares,
which will represent approximately 16 % of the outstanding stock of SafeNet
after closing of the merger. Based on today's closing price for SafeNet's stock,
the market value of the transaction is $35.4 million.
According to William P. Crowell, Cylink's president and chief executive officer,
"The combination of our two companies will provide important benefits to both
company's customers from the outset. We believe that Cylink's reputation in the
enterprise marketplace, coupled with our industry-leading hardware and security
management capabilities, will be an important addition to SafeNet's position as
a leading provider of Internet security technology that is the de facto standard
in the VPN industry. As a result, not only can we reduce costs through operating
efficiencies, the combined companies will offer an expanded line of
complimentary security solutions to an expanded cross-section of markets."
Crowell continued, "Together the companies will offer the most comprehensive
line of network security solutions available in the market today. Their
customers will benefit from the stronger position of the combined company in the
marketplace, the combination of wide area network and internet solutions, all
under a single comprehensive security management platform, and the excellent
product support and service that both companies have provided to their
customers. Thus, it is an opportunity for Cylink's customers to maintain their
existing investment in network security while providing them with a better
migration path for their future needs, particularly as they incorporate VPN
technology into their environments."
Crowell concluded by saying, "SafeNet and Cylink share a number of common
cultural values. We were early pioneers in this industry, each having been
founded in 1983. We have a history of long-time relationships with prestigious
customers who have led the way in the use of commercial encryption technologies
to protect their networks. I believe that this combination offers strong
positives to our employees, partners, customers, and investors."
Crowell will assume the role of Special Advisor to the Chairman and CEO at
SafeNet after the acquisition has closed.
First Analysis Securities Corporation of Chicago was the financial advisor to
Cylink.
About the Transaction
The acquisition has been unanimously approved by the Boards of Directors of both
SafeNet and Cylink. Under the terms of the definitive agreement, all of the
outstanding shares of Cylink stock will be exchanged for SafeNet stock pursuant
to the terms of the definitive agreement. The merger is subject to the
satisfaction of customary closing
4
conditions, including the approval of Cylink's and SafeNet's shareholders, and
is expected to close during the first quarter of 2003. Certain officers and
directors holding approximately 23 % of Cylink common stock in the aggregate
have entered into stockholder agreements with SafeNet agreeing to vote in favor
of the merger. In addition, Anthony Caputo, CEO of SafeNet, holding
approximately 9 % of SafeNet's common stock in the aggregate, has entered into a
stockholder agreement with Cylink agreeing to vote in favor of the merger.
The foregoing summary is a general description of certain pricing and related
terms contained in the definitive agreement for the transaction, and is
qualified in its entirety by reference to the definitive agreement, a copy of
which will be filed by Cylink with the Securities and Exchange Commission.
SafeNet intends to file a Registration Statement on Form S-4 and a Proxy
Statement, and SafeNet and Cylink intend to file a Proxy Statement with the
Securities and Exchange Commission in connection with the transaction. SafeNet
and Cylink expect to mail a Joint Proxy Statement/Prospectus to shareholders of
SafeNet and Cylink. These documents contain important information about the
transaction. Investors and security holders are urged to read these documents
carefully when they are available. Investors and security holders will be able
to obtain free copies of these documents through the website maintained by the
Securities and Exchange Commission at www.sec.gov.
Investor Conference Call
SafeNet will host an investor conference call on Wednesday, October 30, at 6:00
p.m. EST. To join the conference call, dial 1-877-282-1086 and use pin #
6285049.
About Cylink
Cylink develops, markets, and supports a comprehensive portfolio of hardware and
software security products for mission-critical private networks and business
communications over the Internet. The company's solutions offer competitive
advantages by lowering the cost of deploying and managing secure, reliable
private networks, while enabling the use of the Internet for trusted
transactions with business partners and customers. Headquartered in Santa Clara,
California, Cylink has 175 employees worldwide working in six offices around the
world.
About SafeNet, Inc.
SafeNet, Inc. (Nasdaq: SFNT) has set the industry standard for virtual private
network (VPN) technology and secure business communications. With more than 18
years experience in developing, deploying, and managing network security systems
for the most security-conscious financial institutions and government
organizations around the world, SafeNet's proven technology has emerged as the
de facto industry standard for VPNs. SafeNet created the first Internet VPN
system, which has evolved into the only encryption platform to meet every
security need in every product category. SafeNet security solutions, based on
SecurelP Technology"'", and part of the CGX Security Platform, have become the
products of choice for leading Internet infrastructure manufacturers, service
providers, and security vendors. With SafeNet securing the infrastructure of
today's e-business communications as well as leading the way in government
Homeland and classified data security, the company has opened new markets for
interoperable, secure, and deployable VPN communications. Commercial customers
include Texas Instruments, Microsoft, Samsung, Centillium Communications, ARM,
and Cisco Systems. Government customers include U.S. Department of Defense, U.S.
Internal Revenue Service, and the Social Security Administration. For more
information, visit http://www.SafeNet-inc.com/.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
The statements contained in this release, which are not historical facts, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21 E of the Securities Exchange Act of 1934. Examples of
such forward looking statements include Cylink's belief that the proposed
combination will provide synergy, reduce costs, provide expanded product
offerings and markets, and other benefits and strong positives of this
combination. These statements are subject to uncertainties that could cause
actual results to differ materially from those set forth in or implied by
forward-looking statements. These risks and uncertainties include contract
termination risks, risks associated with acquiring other companies, including
integration risks, and other risks described in SafeNet's and Cylink's
Securities and Exchange Commission filings.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
The statements contained in this release, which are not historical facts, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21 E of the Securities Exchange Act of 1934.
5
Examples of such forward looking statements include SafeNet's belief that Cylink
is an excellent fit with SafeNet and that the acquisition of Cylink will
strengthen SafeNet's current activities, add a base of new government and
financial customers, expand the scope of SafeNet's product line and be accretive
in the first quarter of combined operations. These statements are subject to
uncertainties that could cause actual results to differ materially from those
set forth in or implied by forward-looking statements. These risks and
uncertainties include contract termination risks, risks associated with
acquiring other companies, including integration risks, and other risks
described in SafeNet's and Cylink's Securities and Exchange Commission filings.
SafeNet, Cylink and their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies from the security
holders of SafeNet and Cylink in favor of the merger. The directors and
executive officers of SafeNet and their beneficial ownership of SafeNet common
stock are set forth in the most recent proxy statement filed by SafeNet with the
Securities and Exchange Commission. The directors and executive officers of
Cylink and their beneficial ownership of Cylink common stock are set forth in
the most recent proxy statement filed by Cylink with the Securities and Exchange
Commission. Copies of those proxy statements may be obtained free of charge at
the Commission's website, www.sec.gov. Security holders of SafeNet and Cylink
may obtain additional information regarding the interests of the foregoing
people by reading the Proxy Statement/Prospectus when it becomes available.
6
Cylink has made the following Acquisition Fact Sheet regarding the acquisition
of Cylink by SafeNet, Inc. available on its website. The information can be
accessed from the Company's website at http://www. cylink.com.
Fact Sheet: SafeNet's Planned Acquisition of Cylink
Transaction
o Purchase of Cylink and related operations
o In an all-stock deal, SafeNet will acquire Cylink according to a definitive
merger agreement signed on October 30, 2002
o Estimated purchase price of $35.4 million, or 16% of the combined company
o Each share of Cylink common stock, issued and outstanding immediately prior to
the closing date, shall be converted into .05 shares of common stock of
SafeNet
o All Cylink stock options, outstanding at the closing date, that are vested and
have an exercise price in the money, will be assumed by SafeNet
o Under Section 368 of the Internal Revenue Code of 1986, the purchase
transaction will be treated as a tax-free reorganization
o Subject to shareholder and SEC approval, the merger is expected to close in
the first quarter of 2003.
Profile: SafeNet, Inc.
Founded in 1983, SafeNet develops the technology that provides the foundation of
Internet security. The Company's intellectual property, silicon hardware, and
software solutions enable the secure communications needed to conduct
e-business, government operations, and healthcare via the Internet. SafeNet
provides and manages complete enterprise security systems as well as creates
embedded technology, in the form of IP, chips, and accelerator cards, that is
the de facto industry standard for VPN client software. SafeNet's combination of
client, managed, and developer services means its engineering expertise can be
found in every level of Internet Security. The Company's virtual private network
(VPN) products and services are internationally respected, safeguarding 13 of
the top 15 US banks, the FBI, U.S. Department of Treasury, and many Fortune 1000
companies worldwide. SafeNet's chips and boards are embedded in the most
reputable VPN products on the market provided by such companies as Cisco
Systems, Texas Instruments, Samsung, and Nokia.
Profile: Cylink
Cylink develops, markets, and supports a comprehensive portfolio of hardware and
software security products for mission-critical private networks and business
communications over the Internet. Founded in 1983, the company's solutions offer
competitive advantages by lowering the cost of deploying and managing secure,
reliable private networks, while enabling the use of the Internet for trusted
transactions with business partners and customers. Cylink is headquartered in
Santa Clara, California, and 175 employees worldwide. Cylink has sales and
services offices in Jersey City, NJ, Fairfax, VA, and Basingstoke, UK and in
Singapore. Cylink's ATM Technology Center is located in Raleigh-Durham, NC. The
Company has a range of government and financial customers, including the
Department of the Treasury, the Census Bureau, the Drug Enforcement Agency and
Department of Commerce, as well as Wells Fargo, UBS Warburg, Sumitomo
Corporation and Deutsche Bank.
Benefits
o The acquisition, exclusive of restructuring charges, is expected to be
accretive to earnings in the first quarter of combined operations
o Underlying business fundamentals will be strengthened, setting the stage for
continued profitable growth o Increases focus on government and finance
verticals
- Cylink widens SafeNet's government/financial customer base -Government
customers will comprise 40% of total revenues in 2003
- Government and financial customers will account for 65% of total revenues in
2003 o Reduces risk of customer concentration
- Sales from largest customer is expected to drop to less than 25% of total;
only one customer is expected to represent more than 10% of total sales.
o Improved liquidity
7
- Float is expected to increase by 30%
o Expected increase in international sales to 38% of expected total revenues
Market Synergies
o Offers existing and new customers a single-source vendor for WAN and VPN
security solutions
o Allows Cylink customers an easy and low-cost migration path to broad range of
VPN products
o Leverages collective strengths and wider product portfolio to more effectively
target and capture increased government spending on IT security o
International expansion opportunities
o Creates industry's most competitive product offering to financial and
government clients.
Restructuring Plans
Eliminating the overlap in business structure allows SafeNet to achieve cost
savings totaling $14 million.
SafeNet anticipates that the total costs expected for the acquisition to be
approximately $5 million which are associated with severance, insurance, and
professional fees. We also anticipate that the total costs expected for
integration to be approximately $4 million, which are associated with
outsourcing of manufacturing and consolidation of development and corporate
functions. The expected total cost is $9 million.
SafeNet and Cylink ... a compelling combination
[OBJECT OMITTED]
High Assurance High Assurance
Security Center Gateways
|
ATM Encryptor--------- | |--New 1.5 Mpbs
| | |
| WAN |--SafeNet 10 Mbps
Frame Encryptor---------------- Backbone ------ Internet --- |
| | |--NetHawk 100 Mbps
| | |
Link Encryptor-------- | |--PLANNED 1 Gbps
|
---------------------
Pocket Windows Palm
---------------------
The combination of SafeNet and Cylink product offerings will create the best
Virtual Private Network security solution on the market today.
SafeNet, Inc. o 8029 Corporate Drive, Baltimore, Maryland 21236 o 410.931.7500 p
o 410.931.7524 f www.safenet-inc.com
8
Cylink has made the following Acquisition Q&A regarding the acquisition of
Cylink by SafeNet, Inc. available to its employees. The Acquisition Q&A was sent
by email to the Cylink employees and is available to all Cylink employees on the
Company's intranet.
Acquisition Q&A
================================================================================
ABOUT THE TRANSACTION
The following FAQ includes summaries of some provisions in the recently
executed definitive merger agreement between Cylink and SafeNet's
subsidiary, Sapphire, Inc. This summary is not intended as a substitute
for the terms of the legal agreement, and if there is any conflict between
this FAQ and the merger agreement, the merger agreement shall be the
controlling document.
================================================================================
Why does SafeNet want to acquire Cylink?
================================================================================
SafeNet's acquisition of Cylink offers immediate financial and investor
benefits, accelerates the growth of the combined companies in the
government and financial services market segments and further strengthens
SafeNet's position as the de facto standard for Virtual Private Network
(VPN) technology. The acquisition immediately places SafeNet in a
strategically stronger position. It would have taken SafeNet several years
of internal development and smaller acquisitions to reach the size,
technological depth, and market penetration that the acquisition of Cylink
will give them in a single transaction. This allows SafeNet to not only
obtain Cylink's technology, but to also significantly expand SafeNet's
sales force and partner channels, while adding key customers and
engineering breadth to the right target markets.
SafeNet finds value in the fact that the two companies have a common
approach to serving security-sensitive large enterprises that combines
strong system level encryption with the expert support that is needed by
those customers to implement complex security solutions.
================================================================================
================================================================================
Who is SafeNet?
================================================================================
SafeNet is a NASDAQ listed public company which was founded in 1983,
around the same time as Cylink. Tony Caputo is the Chairman and CEO. The
company was originally called Information Resource Engineering or IRE
until two years ago when its name was changed to SafeNet to acknowledge
the success of its SafeNet branded VPN technology. The company is
headquartered in Baltimore, MD and has four other major locations in the
US and Europe. SafeNet is now organized into two business units and is
both growing and profitable.
The first business unit, the Enterprise Security Division, provides VPN
systems and client software as well as managed security services. In its
direct sales, this division focuses on large enterprises like financial
institutions and government agencies, but the client software is also
licensed to other equipment manufacturers (like Cylink) for inclusion in
their solutions. Cylink will become part of this division.
The second business unit, the Embedded Security Division, packages SafeNet
VPN security technology on chips and add-in boards which are sold to
original equipment manufacturers for inclusion in their products. This
technology is also licensed to other companies who include it in their own
designs.
================================================================================
================================================================================
Why is SafeNet making this acquisition now?
================================================================================
SafeNet's management has a strategy in place to grow both internally and
through acquisitions. This acquisition is aimed at strengthening the
Enterprise Security Division which is focused on government and financial
services. At this time, these organizations - especially government
agencies - have both an increasing interest in security solutions and the
funding available to obtain them. The products, and particularly the
people expertise that exist at Cylink, will significantly advance
SafeNet's ability to address this market opportunity now. Consequently, it
is very much the right time for this acquisition.
================================================================================
================================================================================
9
================================================================================
Why did Cylink agree to the acquisition?
================================================================================
The Cylink Senior Management team and Board of Directors considered all
options, including remaining as a standalone company until the market
environment improved and seeking other types of additional investment.
Ultimately, we concluded that choosing SafeNet gave Cylink's customers,
shareholders and employees the greatest overall benefit because of
SafeNet's business vision and the readily apparent synergies upon which a
profitable future could be built.
================================================================================
================================================================================
Who initiated the merger discussions?
================================================================================
The two companies have known each other for many years; in fact they've
served common customers for at least 10 years. Bill Crowell and Tony
Caputo met several years ago and since that time Cylink has become a
SafeNet customer because we use their technology for the NetHawk VPN
Client. More recently the two companies have been doing some partnering
activities together, with very positive results. This transaction is a
logical outcome of the continuing partnership between Cylink and SafeNet.
================================================================================
================================================================================
Is Cylink SafeNet's largest acquisition?
================================================================================
Yes. SafeNet has made a number of small transactions in the past that have
given the company acquisition consolidation and integration experience.
Their last acquisition was Securealink, which was made at the start of
this year and already is successfully integrated into SafeNet's Embedded
Security Division. We are confident that the merger with Cylink will be
successful because both companies have a long tradition of design
excellence in high performance security solutions and the ability to
understand and meet the needs of sophisticated customers who have complex
information protection requirements. The combined product portfolios of
the two companies will deliver the leading VPN offering in the marketplace
and offer the only common platform for integration WAN and VPN security.
The companies have looked at the synergies possible through this
acquisition, from the perspectives of both growing revenue and reducing
expenses, and we are extremely optimistic about the financial benefits
that will accrue to the shareholders of both SafeNet and Cylink.
================================================================================
================================================================================
Is there a chance that the merger will not close?
================================================================================
The merger is subject to shareholder approval and SEC review. However
insiders from both companies, who own significant percentages of the
respective companies shares, have agreed to vote for the transaction. We
think that the rest of our shareholders, when they understand the
significant benefits that will occur from this transaction, will be
equally enthusiastic.
================================================================================
================================================================================
What are the benefits to SafeNet?
================================================================================
The merger with Cylink provides a multitude of benefits for all SafeNet
stakeholders, including customers and partners, employees and
shareholders. SafeNet will "own" a larger portion of the security market
for government and financial institutions. The transaction will build
market share and industry leadership, more than triple enterprise
revenues, provide the strongest product offering in the industry, build
world-class sales, distribution and engineering teams, be immediately
accretive to earnings and deliver a major competitive advantage as the
only company offering a common platform for WAN and VPN
integration/migration.
================================================================================
================================================================================
What are the benefits to Cylink?
================================================================================
The merger is an opportunity for Cylink's stockholders to become owners of
a profitable company with the financial strength and the right mix of
products and talent to build a great future for itself. It is an
opportunity for Cylink's employees to become part of - and make a distinct
contribution to the success of - a more powerful global team that has
exciting growth prospects.
================================================================================
================================================================================
What are the benefits to Cylink's customers and partners?
================================================================================
Our customers and partners will benefit because of the increased financial
strength and market presence of the newly merged company. They will
continue to receive the same excellent products and services they expect,
but they will gain a stronger and more comprehensive set of solutions.
Thus,
================================================================================
10
================================================================================
it is an opportunity for Cylink's customers to maintain their existing
investment in network security while providing them with a better
migration path for their future needs, particularly as they incorporate
VPN technology into their environments.
================================================================================
================================================================================
ORGANIZATIONAL QUESTIONS
================================================================================
What will the combined company be called?
================================================================================
The name of the combined companies will be SafeNet. The name is very
descriptive of what the company does. It's well known in the industry
already and becoming better known every day.
================================================================================
================================================================================
Where will the headquarters of the merged company be located?
================================================================================
The company's headquarters will remain in Baltimore, Maryland.
================================================================================
================================================================================
Can you describe the new organizational structure?
================================================================================
Cylink will be merged into SafeNet's Enterprise Security Division since
both entities focus on the same customers and deliver system level
security products. The leader of the combined group will be Chris Fedde,
who is currently the General Manager of this division for SafeNet. A more
detailed organization and management structure will be developed as part
of the integration plan.
================================================================================
================================================================================
Why is the combination of SafeNet and Cylink expected to be profitable?
================================================================================
SafeNet management does not want to jeopardize their current profitability
because of the Cylink acquisition. Consequently, they have developed a
high-level financial restructuring plan that is intended to both meet
customer/marketplace needs and maintain/grow profitability. This plan is
based on a realistic assessment of the initial contribution to SafeNet
revenues that the addition of Cylink's products and services will make as
well as anticipated savings from integrating Cylink into SafeNet. These
savings will be achieved by a combination of consolidating or outsourcing
business functions, reducing facilities costs and rationalizing product
roadmaps. In total, these actions are expected to save the company $14
million dollars annually and SafeNet estimates the one-time cost of this
restructuring to be $9 million dollars.
================================================================================
================================================================================
Do you have a timetable for the integration of SafeNet and Cylink? How
long will it take and how is it being handled?
================================================================================
SafeNet is taking a very systematic approach to this acquisition. The
high-level restructuring plan will be supported by a thoughtful and
comprehensive integration plan in order to achieve the business and
financial goals the company needs to make this deal successful. The final
integration plan will be developed by an Integration Team with
representatives from both companies, assisted by external resources who
specialize in this work. Sean Price, who is SafeNet's Senior Vice
President of Business Development, will lead this integration effort.
With regards to integration, SafeNet and Cylink will continue to operate
as two separate companies until the close. However, due to existing
synergies, some aspects of integration like teaming on selected sales
opportunities will happen in advance of the acquisition, and will make
sense for current and prospective customers.
The transaction is expected to close early in the first quarter of 2003.
In terms of the closing, the single most important issue is the
shareholder vote and so each company will focus on getting that out of the
way as quickly as possible. The timing of this is dependent on SEC
approval of the proxy filings. Immediately on the closing, management will
begin executing the integration plan with the goal of completing that
integration in the second quarter of 2003.
================================================================================
================================================================================
Do you expect any layoffs? If so, will they occur at Cylink, at SafeNet or
at both?
================================================================================
Yes, the expected savings in the restructuring plan does assume layoffs
will occur. It is too soon to say exactly who will be involved in
personnel reductions, when they will occur and at what locations. However,
the savings target in the restructuring plan was built on the expectation
that
================================================================================
11
================================================================================
headcount would be reduced to 225 employees from the approximately 315
employees of the combined companies at the time the transaction closes and
that these actions would be taken during the integration period. The final
integration plan will determine the sequence and timing of layoffs.
================================================================================
================================================================================
Does the acquisition mean that employees of either company will be asked
to relocate?
================================================================================
Some employees may be asked to relocate but specific plans have not been
determined yet.
================================================================================
================================================================================
How will Cylink's US offices be affected?
================================================================================
Cylink's offices in New Jersey and Virginia will become part of SafeNet's
sales and support network and will help advance SafeNet's strategy of
expanding its presence in the target markets of financial services and
government. Santa Clara will also have sales and support resources but its
primary mission will be as a development center. This will also be the
primary mission of the ATM-TC. The corporate functions in Santa Clara will
be consolidated into SafeNet's corporate offices. New product
manufacturing in Santa Clara will be outsourced on a schedule still being
developed while outsourcing of manufacturing at the ATM-TC will be tied to
the introduction of the next generation ATM encryptor family.
================================================================================
================================================================================
How will Cylink's global offices be affected?
================================================================================
Cylink's offices in the UK and in Singapore will be added to SafeNet's
global sales and support network. This is just one of the many areas where
this acquisition advances SafeNet's business strategy. It has always been
one of their goals to globally serve large, security-sensitive enterprise
organizations. This combination allows them, like so many aspects of the
merger, to move forward much more quickly than they would have been able
to proceed alone.
================================================================================
================================================================================
When can we start talking to our counterparts at SafeNet?
================================================================================
As part of the integration planning process or in customer teaming visits,
some of you will have the opportunity to work with your counterparts at
SafeNet in the near future. But as we previously stated, we must operate
as two separate companies until the required approvals are received and
the deal closes. Therefore, we will each conduct business as usual and
focus on achieving our 2002 objectives. It is very important that we all
keep this in mind as we perform our jobs over the next few months.
================================================================================
================================================================================
TECHNOLOGY QUESTIONS
================================================================================
Why is the Cylink technology so compelling to SafeNet?
================================================================================
There is a trend among larger enterprises, particularly in the key markets
which Cylink serves, to expand their use of encryption technology beyond
just protecting their core backbone networks typically built with wide
area technologies (ATM, Frame Relay and Link) to the use of VPNs to
protect networks built on the Internet Protocol. That trend is growing and
we expect it to be of continuing importance for a long period of time due
to the wide availability of internet services and their lower cost when
compared to private networks.
With the addition of Cylink's products, SafeNet will be able to offer
these world-class customers the ability to protect both their core
backbone networks and their VPNs with a great set of solutions from a
single supplier, all which can be controlled by one powerful security
management platform in PrivaCy Manager. This broad capability can be a
significant differentiator for SafeNet, allowing it to continually meet
the network security requirements of enterprise customers as their network
environments evolve over time.
It is also important to note that Cylink's NetHawk platform greatly
strengthens the VPN solution capabilities that SafeNet can bring to the
marketplace in tandem with their existing VPN technology.
================================================================================
================================================================================
Will the companies' product lines be integrated?
================================================================================
Cylink's product lines will be integrated into the overall solutions
portfolio of SafeNet's Enterprise Division.
================================================================================
12
================================================================================
================================================================================
How does the acquisition by SafeNet affect Cylink's product plans?
================================================================================
The product roadmaps and associated development plans for the two
companies are going to be rationalized into a consolidated roadmap as part
of the overall integration plan. Given the focus of SafeNet, it is clear
that solutions which protect and manage VPNs will remain a high strategic
priority in the new roadmap.
================================================================================
================================================================================
HUMAN RESOURCE QUESTIONS
================================================================================
If I am laid off as a result of the merger will I receive severance?
================================================================================
If you are terminated without cause within one (1) year of the date of
acquisition, SafeNet will apply Cylink's standard severance practice.
================================================================================
================================================================================
What will happen with my benefit plans?
================================================================================
You will continue on the Cylink benefit plans until the acquisition
closes. SafeNet has comparable benefit plans to Cylink's medical, dental,
vision, disability, life insurance, flexible spending account, and 401(k).
Some are better than Cylink's, others aren't and some are just different.
Everyone realizes that benefits are an important piece of an employee's
compensation and there will be an integration team that will focus on this
topic. We will keep you informed as decisions are made.
================================================================================
================================================================================
What will happen to the shares of Cylink stock that I own - either as an
investor or through the Employee Stock Purchase Plan?
================================================================================
Upon the closing of the merger, each Cylink shareholder will receive .05
of a share of SafeNet stock for each 1 share of Cylink stock. To calculate
how many shares of SafeNet stock you will receive simply multiply the
number of Cylink stock shares you own by .05. To calculate the new
purchase price for your shares, you multiply your original purchase price
by 20.
EXAMPLE:
Assume you own 2000 shares of Cylink stock that you purchased at $.60. To
apply the exchange ratio:
Converted # of shares of Stock: 2000 shares of Cylink * .05 = 100 shares
of SafeNet stock
Converted Purchase price: $.60 per share of Cylink stock * 20 = $12.00
per share of SafeNet stock.
================================================================================
================================================================================
What will happen with my stock options?
================================================================================
All stock options that are vested, outstanding and "not underwater" as
defined the merger agreement, will be exchanged for SafeNet stock options.
To calculate how many stock options for SafeNet stock you will receive
simply multiply the number of Cylink stock options granted by .05. To
calculate the new exercise price for your shares, you multiply your
original grant price by 20. The same terms and conditions that applied to
your Cylink stock options will carryover to your new SafeNet stock
options.
================================================================================
================================================================================
What do you mean by "underwater"?
================================================================================
Underwater Cylink options are determined by their exercise price after
their conversion to SafeNet options. First, multiply the strike price of
your existing Cylink Option by 20. Then compare this converted strike
price with SafeNet's market price at time of closing. If the new strike
price is greater than the market price of SafeNet stock, then the options
are "underwater" and will be cancelled.
As further protection of Cylink option holders, all options having an
exercise price of $0.625 cents per share, or less, will be converted to
SafeNet Options at closing, even if value of SafeNet's stock is less than
$12.50.
The value of SafeNet's stock at closing will be determined by the average
of the closing market price over the last five trading days prior to
close.
================================================================================
13
Cylink sent the following emails to its employees regarding the acquisition of
Cylink by SafeNet, Inc.
From: Crowell, William
Sent: Wednesday, October 30, 2002 2:37 PM
To: DL All Cylink
Subject: Cylink/SafeNet Merger
To All Cylink Employees:
I am pleased to announce that we have entered into a definitive agreement for
SafeNet, Inc., a Maryland based, publicly traded company to acquire Cylink
Corporation. SafeNet provides enterprise-wide security solutions as well as
software security products, chips, and accelerator cards. The Cylink executive
team and I strongly believe that this combination of these two very
complementary organizations will be able to deliver a compelling set of network
security solutions to our customers -particularly in the key government and
financial markets we serve. SafeNet's management is eager to add Cylink's
products and services to their offerings and to capitalize on the customer base
that Cylink serves. Tony Caputo, Chairman and CEO, and Carole Argo, CFO, will
join us on Monday, November 4th to talk to the Cylink workforce and answer
questions about SafeNet and the merger.
This transaction will be treated as an all-stock merger and its completion is
subject to the approval of the shareholders of both companies as well as the
Securities and Exchange Commission. Our goal is to have the deal close in the
first quarter of 2003 and the management of both companies will be actively
working to make this happen. The attached press release announcing the
acquisition was issued this afternoon and is also available on www.cylink.com.
Additional details on the merger will be made available later today including a
FAQ on the deal and some of the details that we believe will be important to
you.
There will be an Investor Conference Call today at 5:30 pm PST (2:30 p.m. EST).
If you would like to listen to this call here is the information:
To join the conference call, dial 1-877-282-1086 and use pin # 6285049.
At 10:00 a.m. PST tomorrow, Thursday, October 31st (1:00 p.m. EST), I invite you
to join the Chairman and CEO of SafeNet, Tony Caputo and me in a short
teleconference with all Cylink employees to learn more about this exciting time.
We look forward to speaking with you then.
Bill Crowell
________________________________________________________________________________
From: Drew, Pam
Sent: Wednesday, October 30, 2002 4:12 PM
To: DL All Cylink
Subject: Employee Conference Call with Bill Crowell, Tony Caputo, and Chris
Fedde
To All Cylink Employees:
Please join us for the Employee Conference Call with Bill Crowell, Tony Caputo,
SafeNet Chairman and CEO, and Chris Fedde, General Manager of the Enterprise
Security Division.
The conference call will start at 10:00 a.m. PST on Thursday, October 31, 2002.
Conference Access
- ------------------
14
US/Canada Dial-In Number: (800) 834-7306
International/Local Dial-In Number: (706) 634-1799
Leader's Information
Conference Name: Cylink
Leader's Name: Bill Crowell
Leader's Phone: (408) 855-6002
Owner ID: 149769
The conference call will begin at 10:00 a.m. PST; however, you can conference in
as early as 9:45 a.m.
Also attached is an Employee FAQ which may answer some of your questions.
Pam Drew
VP Human Resources
& Workplace Environment
408-855-6339 Phone
408-855-6103 Confidential Fax
Email: pdrew@cylink.com
________________________________________________________________________________
From: Drew, Pam
Sent: Thursday, October 31, 2002 5:28 PM
To: DL All Cylink
Cc: 'Tony Caputo'; 'Cargo@Safenet-inc.com'; 'kcarter@safenet-inc.com';
'tserio@safenet-inc.com'
Subject: Cylink Employee Meeting - Monday, Nov. 4, 2002
Please join us on Monday, November 4, 2002, to meet with Bill Crowell, Tony
Caputo, Chairman and CEO of SafeNet and Carole Argo, CFO of SafeNet. The meeting
will begin at 9:00 a.m PST. Continental breakfast will be served beginning at
8:30 a.m.
Decathlon Club
3250 Central Expressway
Santa Clara, CA 95051
Directions:
- -----------
From the North (SF)
Take 101 South
Take the Lawrence Expressway Exit
Turn right on N. Lawrence Expressway
Take the ramp towards Central Expressway East
Merge onto Central Expressway
Decathlon Club will be on your right
From the South (SJ)
Take 101 North
Take the De La Cruz Blvd. exit towards Santa Clara
Merge onto De La Cruz Blvd.
Turn slightly right onto Central Expressway
On your left, you will pass the Decathlon Club (other side of divider)
Make a U-turn on Central Expressway
Decathlon Club will be on your right
15
Dial in numbers for conferencing:
- ---------------------------------
US/Canada Dial-In Number: (800) 834-7306
International/Local Dial-In Number: (706) 634-1799
Leader's Information
- --------------------
Conference Name: Cylink
Leader's Name: Bill Crowell
Leader's Phone: (408) 855-6002
Owner ID: 6504604
The conference call will begin at 9:00 a.m. Pacific Time; however, you can
conference in as early as 8:45 a.m.
Pam Drew
VP Human Resources
& Workplace Environment
408-855-6339 Phone
408-855-6103 Confidential Fax
Email: pdrew@cylink.com
16
Additional information and where to find it
Prior to this filing, pursuant to SEC 14a-12 (and SEC Rule 425), SafeNet, Inc.
filed a Current Report on Form 8-K containing information concerning the
expected participants in Cylink's solicitation of proxies in connection with the
proposed merger of Cylink with a subsidiary of SafeNet, Inc. (the "Merger") (the
"SafeNet Form 8-K"). Investors are urged to read the SafeNet Form 8-K carefully.
In addition, it is expected that SafeNet will file a Registration Statement on
Form S-4 with the SEC in conjunction with the Merger (the "Registration
Statement"). The Registration Statement will include a proxy statement of Cylink
with respect to its shareholders' vote on the proposed Merger, a proxy statement
of SafeNet, Inc. with respect to its shareholders' vote on the proposed Merger
and a prospectus of SafeNet with respect to the SafeNet shares to be issued to
Cylink's shareholders in the proposed merger (the "Proxy Statement/Prospectus").
Cylink Corporation and SafeNet, Inc. plan to mail the Proxy Statement/Prospectus
to their respective shareholders. Investors and security holders are urged to
read the Registration Statement and the Proxy Statement/Prospectus carefully
when they are available. The Registration Statement and the Proxy
Statement/Prospectus will contain important information about Cylink, SafeNet,
the Merger, the persons soliciting proxies relating to the merger, their
interests in the merger, and related matters. Investors and security holders
will be able to obtain free copies of these documents through the Web site
maintained by the SEC at http://www.sec.gov. In addition to the Registration
Statement and the Proxy Statement/Prospectus, Cylink and SafeNet file annual,
quarterly, and special reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements, or other information filed
by Cylink or SafeNet at the SEC public reference rooms at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at any of the SEC's other public reference rooms
in New York, N.Y., and Chicago, Ill. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Cylink's and SafeNet's
filings with the SEC are also available to the public from commercial
document-retrieval services, and at the Web site maintained by the SEC at
http://www.sec.gov.
Participants in Solicitation
Cylink, its directors, executive officers and certain other members of
management and employees may be soliciting proxies from Cylink shareholders in
favor of the approval of the Merger and related matters. Information concerning
the participants in the solicitation will be set forth in the Registration
Statement and the Proxy Statement/Prospectus.
17