Financial Models' Board Mails Directors' Circular

Financial Models' Board Mails Directors' Circular

TORONTO, Feb. 3 /PRNewswire/ -- Financial Models Company Inc. (TSX: FMC) ("FMC" or the "Company"), a leading provider of technology solutions and services to the investment world, today announced that its board of directors has sent a directors' circular to the shareholders of FMC. The directors' circular was sent in response to the competing offers received from each of Linedata Services S.A. and 1066821 Ontario Inc., a company controlled by Mr. Stamos Katotakis, offering to purchase all of FMC's outstanding common shares and Class C shares.

The Two Bids

Mr. Stamos Katotakis, the President and Chief Executive Officer of FMC, through his holding company, is offering to purchase all of the outstanding FMC shares for $12.20 in cash per share. Mr. Katotakis currently owns 40% of the outstanding FMC shares. His offer is conditional upon, among other things, at least 50% of the FMC shares he does not already own being tendered into the Katotakis offer. That offer was mailed to FMC shareholders on December 29, 2004.

Linedata Services S.A. originally offered to buy FMC in a Take-over Bid Circular mailed to FMC shareholders on December 23, 2004. At that time, Linedata's original offer had a value of about $12.76 per FMC share. Linedata subsequently increased its offer so that it is offering $14.50 in cash for 70% of the FMC shares held by each shareholder and one Linedata share for every 1.766 FMC shares with respect to the remaining 30%. Based on the closing price of the Linedata shares on the Paris Bourse on February 1, 2005, the value of Linedata's amended offer was $14.72 per FMC share. Linedata's offer is conditional upon receiving more than 50% of the outstanding shares of FMC.

With respect to outstanding options to acquire FMC shares, both bidders have agreed that FMC will allow cashless exercises by offering to purchase all outstanding options for cash equal to an amount determined by multiplying the number of FMC shares issuable on exercise of such stock options by the difference between the exercise price per share under such options and $14.50, if the Linedata bid is successful, or $12.20, if the Katotakis bid is successful.

The Litigation

On January 10, 2005, BNY Capital Corporation commenced a proceeding in the Ontario Superior Court to determine whether BNY and Dr. William R. Waters, who collectively own 42% of the FMC shares, are contractually obligated to sell their FMC shares to a company owned by Mr. Katotakis under a shareholders agreement among those parties, or to Linedata under a significant shareholders lock-up agreement entered into by each of BNY and Dr. Waters with Linedata.

On January 17, 2005, Linedata commenced a proceeding in the Ontario Superior Court for, among other things, an order compelling BNY and Dr. Waters to tender their FMC shares to the Linedata offer under the significant shareholders lock-up agreement.

On February 1, 2005, Mr. Justice Ground of the Ontario Superior Court heard submissions from the interested parties and advised that he was reserving judgment in both proceedings and that a decision would be available on or about Tuesday, February 8, 2005.

Given that both offers are conditional upon a minimum number of shares being tendered, the decision of the Ontario Superior Court will determine which of the two bids is capable of succeeding.

Board's Recommendation if Linedata Wins

In the event that the Court determines that BNY and Dr. Waters must sell their FMC shares to Linedata, the FMC Board of Directors recommends that FMC shareholders tender into the Linedata bid. That bid is currently scheduled to expire at 5:00 p.m. on February 11, 2005.

Board Recommendation if Katotakis Wins

In the event that the Court determines that BNY and Dr. Waters must sell their FMC shares to Mr. Katotakis, the FMC Board recommends that FMC shareholders tender into Mr. Katotakis' bid. The minimum tender condition of the Linedata offer will not be capable of being satisfied in that circumstance. The offer of $12.20 is a substantial premium to where the FMC shares were trading prior to the offer announced by Linedata. The Katotakis bid is currently scheduled to expiry at noon on February 16, 2005.

Mr. Katotakis has stated in his Take-over Bid Circular that he intends to acquire the FMC shares of anyone who does not tender into the Katotakis offer pursuant to a "compulsory acquisition transaction". These transactions are legal, but they require Mr. Katotakis to provide shareholders with a right to dissent and to be paid the "fair value" of their FMC shares. The FMC Board of Directors believes that in the event Mr. Katotakis wins in the Court proceedings, FMC shareholders should consider withholding their shares from the Katotakis offer, dissenting from the compulsory acquisition transaction and demanding the fair value of their shares.

The dissent procedure from a compulsory acquisition transaction is only available to registered shareholders and requires each registered shareholder to comply with the technical provisions of the Business Corporations Act (Ontario). Those procedures will need to be described in any compulsory acquisition materials sent to shareholders by Mr. Katotakis. It would be prudent to consult a lawyer or other professional adviser to be sure you comply strictly with the provisions in the Business Corporations Act (Ontario). Otherwise, Mr. Katotakis may be entitled to acquire the remaining shares at $12.20 per share.

FMC shareholders should be aware that there is some risk in this approach. It is possible, although the Board considers it unlikely, that Mr. Katotakis will not proceed with a compulsory acquisition transaction. In that event, there may be very little liquidity for FMC shares, the shares could be de-listed from the Toronto Stock Exchange and what trading does occur could be at levels below $12.20 (the stock was at $8.25 when Linedata announced its original offer). There is also a risk that shareholders will have to prove the fair value of the FMC shares in court, which can be an expensive and slow process, so shareholders will need to choose before the expiry date between the certainty of $12.20 per share from Mr. Katotakis shortly following the expiry of his bid on February 16, 2005, and the possibility of some higher amount pursuant to the dissent and appraisal process at an uncertain time in the future.

A copy of the FMC directors' circular can be viewed on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

FMC will issue a press release as soon as practicable after the Ontario Superior Court's decision is released.

About Financial Models Company Inc.

Established in 1976, Financial Models Company Inc. is a global leader in delivering advanced technology solutions to the investment management community. FMC products and services are available either as "best of breed" solutions or as an integrated suite. From its headquarters in Toronto, and subsidiaries in the United States, Australia and Europe, FMC supports over 500 clients managing in excess of Cdn.$3 trillion. FMC is a publicly traded company on the Toronto Stock Exchange (Symbol: FMC). For more information, visit FMC's web site at http://www.fmco.com/.

This press release may contain certain forward looking statements relating, but not limited to, FMC's operations, anticipated financial performance, business prospects and strategies. Forward looking information typically contains statements with words such as "anticipate," "believe," "expect," "plan" or similar words suggesting future outcomes. Such forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward looking statements. Such factors include, but are not limited to, economic, competitive, regulatory and business conditions. Risks and uncertainties about FMC's business are more fully discussed in the Management's Discussion and Analysis published in FMC's annual report for the year ended February 29, 2004. FMC disclaims any responsibility to update any such forward looking statements.

This press release has been approved by the directors of FMC, other than Mr. Katotakis.


Source: Financial Models Company Inc.

CONTACT: John Vivash, Chairman of the Board of Directors, Financial
Models Company Inc., +1-416-601-8200 ext. 2178

Web site: http://www.fmco.com/


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