<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONEXANT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 25-1799439
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
</TABLE>
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
(949) 483-4600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DWIGHT W. DECKER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CONEXANT SYSTEMS, INC.
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
(949) 483-4600
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
RAYMOND Y. LIN, ESQ. RICHARD M. STEIN, ESQ.
LATHAM & WATKINS HUTCHINS, WHEELER & DITTMAR
885 THIRD AVENUE A PROFESSIONAL CORPORATION
NEW YORK, NEW YORK 10022 101 FEDERAL STREET
(212) 906-1200 BOSTON, MASSACHUSSETTS 02110
(617) 951-6600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consumation of the merger described herein.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement number for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(2)
<S> <C> <C> <C>
Common Stock, $1.00 par value...... 13,125,176 not applicable $963,258,641
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE(3)
<S> <C>
Common Stock, $1.00 par value...... $254,300.29
</TABLE>
(1) Based upon the maximum number of shares of common stock par value $1.00 per
share, of Conexant Systems, Inc. that may be issued pursuant to the merger.
(2) Pursuant to Rules 457(f)(1) and 457(c) of the Securities Act of 1933, and
solely for the purpose of calculation of the registration fee, the
registration fee was based on $48.4375, the average of the high and low per
share prices of common stock, par value $0.01 per share, of Maker
Communications, Inc. on the Nasdaq National Market on January 26, 2000.
(3) Pursuant to Rule 457(b) under the Securities Act, $159,859.05 of the
registration fee is offset by the filing fee previously paid by Maker
Communications, Inc. in connection with the filing of preliminary proxy
materials on Schedule 14A on January 19, 2000. Accordingly, a registration
fee of $94,441.24 is being paid herewith.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MAKER COMMUNICATIONS, INC.
SPECIAL MEETING OF STOCKHOLDERS
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
[LOGO]
FEBRUARY 9, 2000
To Our Stockholders:
As you may be aware, Maker Communications, Inc. has agreed to merge with a
subsidiary of Conexant Systems, Inc. If the merger is completed, you will
receive 0.66 of a share of Conexant common stock for each share of Maker common
stock that you own.
We invite you to attend a special meeting of the stockholders of Maker
Communications, Inc. to be held at Hutchins, Wheeler & Dittmar, A Professional
Corporation, 101 Federal Street, Boston, Massachusetts on March 10, 2000 at
10:00 a.m. At the special meeting, you will be asked to approve the merger
agreement.
The merger cannot be completed unless the merger agreement and the merger
are approved by the holders of a majority of the outstanding shares of Maker
common stock. The Maker board of directors approved the merger agreement and the
merger and recommends that you vote for the merger agreement and the merger.
Your vote is very important. Details concerning the proposed merger and other
important information appear in the accompanying proxy statement/prospectus
which you are urged to read carefully. YOU SHOULD CAREFULLY CONSIDER THE RISK
FACTORS BEGINNING ON PAGE 17 OF THE PROXY STATEMENT/PROSPECTUS BEFORE VOTING
YOUR SHARES.
YOUR VOTE IS VERY IMPORTANT. A proxy card is enclosed for your signature.
Whether or not you plan to attend the special meeting, please sign, date and
mail the proxy card to us promptly in the return envelope provided. It is
important that you return the proxy card whether or not you plan to attend the
special meeting, so that your shares of Maker common stock are voted. If you
attend the special meeting, you may revoke the proxy and vote in person. You may
also revoke your proxy by submitting a proxy having a later date or by giving
written notice of revocation to the secretary of Maker at any time before the
proxy is exercised. IF YOU DO NOT RETURN YOUR PROXY CARD OR VOTE IN PERSON AT
THE SPECIAL MEETING, THE EFFECT WILL BE THE SAME AS A VOTE AGAINST THE PROPOSAL.
Sincerely,
[SIGNATURE]
WILLIAM N. GIUDICE
Chairman of the Board of Directors,
President
and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SECURITIES TO BE ISSUED UNDER THE PROXY
STATEMENT/PROSPECTUS OR DETERMINED IF THE PROXY STATEMENT/PROSPECTUS IS ACCURATE
OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE PROXY STATEMENT/PROSPECTUS IS DATED FEBRUARY 2, 2000, AND WAS FIRST
MAILED TO STOCKHOLDERS OF MAKER ON OR ABOUT FEBRUARY 9, 2000.
<PAGE>
MAKER COMMUNICATIONS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of the stockholders of Maker Communications, Inc., will be
held at Hutchins, Wheeler & Dittmar, 101 Federal Street, Boston, Massachusetts
on March 10, 2000 at 10:00 a.m. for the following purposes:
1. To consider and vote on proposals to:
- approve and adopt the Agreement and Plan of Merger, dated as of December
18, 1999, by and among Conexant Systems, Inc., Merlot Acquisition Corp.
and Maker Communications, Inc.; and
- merge Maker with and into Merlot Acquisition Corp., a wholly-owned
subsidiary of Conexant, whereby holders of Maker common stock would
receive 0.66 of a share of Conexant common stock for each share of Maker
common stock. A copy of the merger agreement is attached as Appendix A to
the accompanying proxy statement/prospectus.
2. To transact such other and further business as may properly come before the
special meeting or any adjournments or postponements of the special meeting.
The affirmative vote of a majority of the outstanding shares of Maker common
stock is required to approve the Agreement and Plan of Merger and the
transactions contemplated by it, including the merger.
The close of business on February 1, 2000 is the record date for determining
the stockholders entitled to vote at the special meeting and any adjournments or
postponements thereof. Only holders of record of shares of Maker common stock at
the close of business on the record date are entitled to vote at the special
meeting.
The accompanying proxy statement/prospectus describes the merger agreement,
the proposed merger and certain actions to be taken in connection with the
merger. You are cordially invited to attend the meeting in person. To ensure
that your vote will be counted, please complete, date and sign the enclosed
proxy card and return it promptly in the enclosed postage-paid envelope, whether
or not you plan to attend the special meeting. You may revoke your proxy in the
manner described in the accompanying proxy statement/prospectus at any time
before it is voted at the special meeting. Executed proxies with no instructions
indicated thereon will be voted "FOR" approval and adoption of the merger
agreement.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT.
By Order of the Board of Directors
[SIGNATURE]
MICHAEL RUBINO
Secretary
February 9, 2000
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR PROXY.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF
YOUR CERTIFICATES.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
The Companies....................................... 4
Summary of the Transaction.......................... 5
Reasons for Merger.................................. 5
Recommendation to Maker Stockholders................ 6
Maker Special Meeting............................... 6
Record Date; Voting Power........................... 6
Vote Required....................................... 6
Effective Time of the Merger; Exchange of Shares.... 6
Fees and Expenses................................... 7
Accounting Treatment................................ 7
Federal Income Tax Consequences..................... 7
Fairness Opinion of Financial Advisor to Maker...... 7
Appraisal Rights.................................... 7
The Merger Agreement................................ 8
Listing of Conexant Common Stock.................... 9
Forward-Looking Statements.......................... 9
Comparative Market Data............................. 10
Summary Selected Historical Consolidated Financial
Data of Conexant.................................... 11
Summary Consolidated Financial Data of Maker........ 13
Summary Selected Unaudited Pro Forma Combined
Financial Information of
Conexant.......................................... 14
Comparative Historical and Unaudited Pro Forma Per
Share Data.......................................... 15
RISK FACTORS................................................ 17
Risks Relating to The Merger........................ 17
Maker stockholders will receive a fixed ratio of
0.66 of a share of Conexant common stock per
Maker share even if there are changes in the
market value of Maker common stock or Conexant
common stock before the completion of the
merger........................................ 17
There are technical, operational and strategic
challenges that may prevent Conexant from
successfully integrating Maker with
Conexant...................................... 17
Officers and directors of Maker have different
interests from yours as a Maker stockholder... 17
Risks Related to Conexant's Business................ 18
Conexant's future success depends largely on the
growth of its expansion
platforms..................................... 18
Research and development expenses are an
integral part of Conexant's business.......... 18
Conexant's success is dependent on its ability
to timely develop new products and reduce
costs......................................... 18
Capital expenditures are an integral part of
Conexant's business........................... 19
Although Conexant believes that its sources of
liquidity will be sufficient, it is dependent
on the availability of future capital......... 19
Conexant's operating results may be impacted by
factors beyond its control.................... 19
Conexant is dependent on its ability to
integrate companies it acquires............... 20
Conexant is a party to a credit facility that
restricts its operating and financial
flexibility................................... 20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Potential litigation with respect to
intellectual property rights could harm
Conexant's business........................... 21
Conexant operates in a highly cyclical
industry...................................... 22
Conexant operates in a highly competitive
industry and could lose business to its
competitors................................... 22
The markets for Conexant's products are subject
to rapid technological change................. 23
Conexant's manufacturing process is extremely
complex and specialized....................... 24
Uncertainties involving the ordering and
shipment of Conexant's products could
adversely affect its business................. 25
Conexant is subject to the risks of doing
business internationally...................... 25
Conexant's success depends on its ability to
effect suitable investment, alliance or
acquisition transactions in the future........ 27
Conexant's success could be negatively affected
if its key personnel leave.................... 27
Conexant's management may be subject to a
variety of demands for its attention.......... 27
Conexant may be liable for penalties under
environmental laws, rules and regulations,
which could negatively affect its success..... 28
Conexant has a limited history as an independent
company....................................... 28
Certain provisions in Conexant's Organizational
Documents and Rights
Agreement may make it more difficult for a
person or entity to acquire control of
Conexant...................................... 28
There are certain Federal income tax
considerations that relate to the spin-off
from Rockwell................................. 29
Risks Related to Maker's Business................... 30
Maker has a limited operating history and
limited profitability......................... 30
Maker experiences fluctuations in its operating
results due to a number of frequently changing
business conditions........................... 30
Maker has a costly and lengthy sales cycle which
may increase its exposure to customer
cancellations or similar risks................ 31
Maker's revenues could decrease if there is a
slowdown in the growth in demand for
communications systems........................ 32
Maker's future success depends upon its
customers' acceptance of its processors as an
alternative to traditional solutions.......... 32
Maker's failure to introduce new products on a
timely basis could diminish its ability to
attract and maintain customers................ 32
Maker is susceptible to competitive pressures in
the marketplace............................... 33
The loss of any of Maker's key personnel or the
failure to hire additional personnel could
impact Maker's ability to meet customer and
technological demands......................... 33
Maker needs to protect its intellectual property
and avoid infringement of the intellectual
property of others............................ 34
FORWARD-LOOKING STATEMENTS.................................. 35
THE MERGER.................................................. 36
Background of the Merger............................ 36
Maker's Reasons for the Merger; Recommendation of
the Maker Board..................................... 42
Opinion of Deutsche Bank, Financial Advisor to
Maker............................................... 44
Accounting Treatment................................ 50
Material Federal Income Tax Consequences............ 51
Delisting and Deregistration of Maker Common
Stock............................................... 52
Conduct of the Business if the Merger is not
Completed........................................... 53
Regulatory Compliance............................... 53
Appraisal Rights.................................... 53
Federal Securities Laws Consequences; Stock Transfer
Restrictions........................................ 53
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
THE MERGER AGREEMENT........................................ 54
General............................................. 54
The Merger.......................................... 54
Effective Time and Closing of the Merger............ 54
Procedure to Exchange Certificates.................. 54
Representations and Warranties...................... 55
Covenants Relating to Conduct of Business........... 56
Additional Agreements............................... 58
Conditions Precedent to the Merger.................. 60
Termination; Amendment and Waiver................... 61
ADDITIONAL AGREEMENTS....................................... 64
Voting Agreements................................... 64
Non-Competition Agreements.......................... 65
Employment Agreements............................... 65
THE MAKER SPECIAL MEETING................................... 66
Date, Time and Place................................ 66
Purpose............................................. 66
Record Date and Outstanding Shares.................. 66
Vote Required....................................... 66
Recommendation of Maker Board of Directors.......... 67
Proxies............................................. 67
Solicitation of Proxies; Expenses................... 67
THE COMPANIES............................................... 68
Conexant............................................ 68
Maker............................................... 69
SELECTED CONSOLIDATED FINANCIAL DATA OF MAKER............... 70
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MAKER........................ 72
Results of Operations............................... 72
Quarterly Results of Operations..................... 74
Liquidity and Capital Resources..................... 76
Income Taxes........................................ 77
Quantitative and Qualitative Disclosure About Market
Risk................................................ 77
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION............................................... 78
Notes to the Unaudited Pro Forma Condensed Combined
Financial Information............................... 81
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 83
DESCRIPTION OF CONEXANT CAPITAL STOCK....................... 88
Authorized Capital Stock............................ 88
Conexant Common Stock............................... 88
Conexant Preferred Stock............................ 89
Preferred Share Purchase Rights and Junior
Participating Preferred Stock....................... 90
COMPARISON OF RIGHTS OF STOCKHOLDERS OF MAKER AND
CONEXANT.................................................. 92
EXPERTS..................................................... 104
LEGAL MATTERS............................................... 104
FUTURE STOCKHOLDER PROPOSALS................................ 104
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................... 104
MAKER INDEX TO FINANCIAL STATEMENTS......................... F-1
MAKER NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS................................................ F-7
LIST OF APPENDICES:
APPENDIX A - Agreement and Plan of Merger................... A-1
APPENDIX B - Opinion of Deutsche Bank Securities, Inc....... B-1
APPENDIX C - Certificate of Incorporation of Conexant....... C-1
APPENDIX D - By-Laws of Conexant............................ D-1
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION IN WHICH IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OR
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
iv
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Conexant from documents filed with the SEC that have not been included in
or delivered with this document. Conexant will provide you with copies of this
information, without charge, upon your written or oral request to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: Investor Relations
Telephone: (949) 483-CNXT (2698)
In order to receive timely delivery of the documents in advance of the
special stockholders meeting, you should make your request no later than
February 18, 2000.
For more information on the matters incorporated by reference in this
document and the availability of other documents concerning both Conexant and
Maker that have been filed with the SEC, see "WHERE YOU CAN FIND MORE
INFORMATION" on page 104.
v
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
<TABLE>
<S> <C> <C>
Q: WHAT IS THE PROPOSED TRANSACTION? A:
Q: WHAT WILL I RECEIVE IN THE MERGER? A:
Q: WILL I BE ABLE TO TRADE THE CONEXANT COMMON A:
STOCK THAT I RECEIVE IN THE MERGER?
Q: WHEN AND WHERE IS THE SPECIAL MEETING? A:
Q: WHAT DO I NEED TO DO NOW? A:
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE? A:
<S> <C>
Q: Maker and Conexant will form a combined company by merging
Q: Each share of Maker common stock that you own will be
converted into and exchanged for 0.66 of a share of
Conexant common stock. This is called the merger
consideration. Conexant will not issue fractional shares
to you. Instead, Conexant will pay you cash for any
fractional shares of Conexant common stock you would
otherwise have received.
For example, if you own 100 shares of Maker common stock
you will receive 66 shares of Conexant common stock and no
cash payment. If you own 101 shares of Maker common stock,
you will receive 66 shares of Conexant common stock plus
cash equal to the market value of 0.66 of a share of
Conexant common stock.
Q: Yes. The Conexant common stock will be listed on the Nasdaq
National Market under the symbol "CNXT."
Q: The special meeting will take place at Hutchins, Wheeler &
Dittmar, A Professional Corporation, 101 Federal Street,
Boston, Massachusetts on March 10, 2000 at 10:00 a.m.,
local time.
Q: After carefully reading this proxy statement/ prospectus,
mark on your proxy card how you want to vote, and sign and
mail it in the enclosed return envelope as soon as
possible, so your shares will be represented at the
special meeting. If you sign and send in your proxy and do
not indicate how you want to vote, your proxy will be
counted as a vote for the merger. If you do not send in
your proxy or you abstain, it will have the effect of a
vote against the merger.
Q: Just mail or deliver a later-dated, signed proxy card so
that the proxy card is received by us before the special
meeting, or attend the special meeting in person and tell
the secretary you want to cancel your proxy and vote in
person.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY A:
BROKER, WILL MY BROKER VOTE MY SHARES FOR
ME?
Q: WHEN DO YOU EXPECT THE MERGER TO BE A:
COMPLETED?
Q: WHOM CAN I CALL WITH QUESTIONS? A:
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER A:
TO ME?
Q: AM I ENTITLED TO APPRAISAL RIGHTS? A:
Q: WILL MY RIGHTS AS A MAKER STOCKHOLDER CHANGE A:
AS A RESULT OF THE MERGER?
Q: No. Your broker will vote your shares for you only if you
provide instructions on how to vote. You should instruct
your broker to vote your shares, following the directions
provided by your broker. Without instructions, your broker
will not vote your shares, which will have the same effect
as a vote against the merger.
Q: We are working toward completing the merger as quickly as
possible. In addition to stockholder approval, we must
also receive clearance under the Hart-Scott-Rodino
Antitrust Improvements Act. We hope to complete the merger
before March 31, 2000.
Q: If you have any questions about the merger or any related
transactions, please call Conexant Shareowner Relations at
(949) 483-4533 or Conexant Investor Relations at (949)
483-CNXT (2698) or Michael Rubino at Maker at (508)
628-0622. If you would like copies of any of the documents
we refer to in this proxy statement/prospectus, you should
call Conexant if the documents relate to Conexant, or call
Maker if the documents relate to Maker.
Q: Conexant and Maker each expect the merger to be tax free.
Conexant and Maker have structured the merger so that
their legal counsel expect to be able to deliver opinions,
the delivery of which is a condition to the closing of the
merger, stating that Conexant and Maker will not recognize
any gain or loss for U.S. federal income tax purposes in
the merger. Maker stockholders will not recognize gain or
loss for U.S. federal income tax purposes with respect to
Conexant common stock received in the merger. Set forth
below in more detail on page 51 is a description of the
material U.S. federal income tax consequences of the
transaction. The tax consequences to you will depend on
the facts of your own situation. Please consult your tax
advisors for a full understanding of the tax consequences
to you of the merger.
Q: No. Holders of Maker common stock are not entitled to
appraisal rights in connection with the merger.
Q: Yes. While your stockholder rights will remain governed by
Delaware law, currently Maker stockholder rights are
governed by Maker's certificate of incorporation and
by-laws, while Conexant stockholder rights are governed by
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW? A:
Q: WHAT DOES THE MAKER BOARD OF DIRECTORS A:
RECOMMEND?
Conexant's certificate of incorporation and by-laws. You
will become a Conexant stockholder as a result of the
merger. In addition, you will receive as part of this
merger consideration a stockholder right or "poison pill"
right that may make a takeover of Conexant more difficult.
A detailed description of the Conexant rights plan is set
forth on page 90.
Q: No. After the merger is completed, Conexant will send you
written instructions for exchanging your stock
certificates.
Q: Our board of directors approved the merger and recommends
that you vote "FOR" the proposal to approve the merger.
</TABLE>
3
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD CAREFULLY READ THE REST OF THIS DOCUMENT AND THE OTHER
DOCUMENTS TO WHICH WE REFER, INCLUDING THE "RISK FACTORS" SECTION BEGINNING OF
PAGE 17. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 104.
THE COMPANIES
CONEXANT SYSTEMS, INC.
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
TELEPHONE: (949) 483-4600
Conexant is the world's largest independent company focused exclusively on
providing semiconductor products for communications electronics. With more than
30 years of experience in developing dial-up modem technology, Conexant draws
upon its expertise in mixed-signal processing and communications technology to
deliver semiconductor integrated circuit products and system-level solutions for
a broad range of communications applications. These products facilitate
communications worldwide through wireline voice and data communications
networks, cordless and cellular wireless telephony systems and emerging cable
and wireless broadband communications networks. Conexant has aligned its
business into five platforms: personal computing, network access, wireless
communications, digital infotainment, and personal imaging.
On December 31, 1998, Conexant became an independent public company by means
of a tax-free spin-off from Rockwell International, Inc.
RECENT DEVELOPMENTS
On February 2, 2000, Conexant completed a private offering of $500 million
in aggregate principal amount of its 4% Convertible Subordinated Notes due 2007
pursuant to Rule 144A under the Securities Act of 1933. Pursuant to the terms of
that offering, the initial purchaser of the notes has the right to purchase an
additional $150 million in aggregate principal amount of the notes. The notes
are convertible, at the option of the holders thereof, into common stock of
Conexant at any time on or before February 1, 2007, at a conversion price of
$108.00 per share, subject to adjustment in certain events. The notes may be
redeemed by Conexant on or after February 6, 2003, at certain specified
redemption prices, plus accrued and unpaid interest.
In January 2000, Conexant completed the acquisition of the wireless
broadband business unit of Oak Technology, Inc. located in Bristol, England. The
purchase price was approximately $25 million, paid in a combination of shares of
Conexant common stock and cash. Conexant also completed the acquisition of
Microcosm Communications Limited, a leading supplier of high-speed integrated
circuits for fiber optic communications located in Bristol, England in January
2000. The purchase price was approximately $129 million, paid in shares of
Conexant common stock.
Conexant had revenues of $510.0 million in the quarter ended December 31,
1999, the first quarter of its fiscal year 2000. This compared to revenues of
$294.7 million in the first quarter of fiscal 1999 and $452.2 million in the
fourth quarter of fiscal 1999. Net income in the first quarter of fiscal 2000
was $51.8 million compared to a net loss of $57.1 million in the first quarter
of fiscal 1999 (which included special charges aggregating $37.9 million) and
net income of $38.0 million in the fourth quarter of fiscal 1999.
4
<PAGE>
MERLOT ACQUISITION CORP.
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
TELEPHONE: (949) 483-4600
Merlot Acquisition is a newly formed, wholly-owned subsidiary of Conexant.
Upon the completion of the merger, Merlot Acquisition will be merged with and
into Maker. Maker will become a wholly-owned subsidiary of Conexant following
the merger and Merlot Acquisition will no longer have a corporate existence.
MAKER COMMUNICATIONS, INC.
73 MOUNT WAYTE AVENUE
FRAMINGHAM, MASSACHUSETTS 01702
TELEPHONE: (508) 628-0622
Maker is a fabless semiconductor company that develops and markets high
performance programmable communications processors, development tools and
application software for use in communications systems equipment. Maker's
processors have a proprietary architecture and instruction set optimized for
processing and switching data, voice and video in broadband networks. They
perform high band width or compute-intensive functions such as traffic
management and internetworking in Asynchronous Transfer Mode, or ATM, and
Internet Protocol, or IP, Packet Switching Networks.
SUMMARY OF THE TRANSACTION
In the merger, Merlot Acquisition will merge with and into Maker. As a
result, Merlot Acquisition will cease to exist as a separate corporate entity
and Maker will continue as the surviving corporation. Maker will become a
wholly-owned subsidiary of Conexant. Immediately after the merger, current
Conexant stockholders will own approximately 94% of the combined public
company's approximately 212 million pro forma outstanding shares, while Maker
stockholders will own approximately 6% (prior to giving effect to outstanding
stock options or other convertible securities).
Stockholders of Maker will receive 0.66 of a share of Conexant common stock
for each share of Maker common stock held by them. Conexant will not issue
fractional shares to Maker stockholders, but instead, will pay them cash for any
fractional shares they would otherwise have received.
REASONS FOR MERGER
The Maker board of directors believes that the terms of the merger and
merger agreement are fair to, and in the best interests of, Maker and its
stockholders. In reaching its decision, the Maker board of directors considered
the following factors among other things:
- Maker's business, results of operations and future prospects as an
independent entity.
- The relative interests of Maker and Conexant stockholders in the equity of
the combined company.
- The expectation that the merger would result in certain cost savings which
might improve the operating results of the combined company.
- Industry trends toward consolidation and the advantages that the combined
company might receive due to its greater size and financing strength in
the marketplace and its greater product portfolio and greater geographic
reach.
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RECOMMENDATION TO MAKER STOCKHOLDERS
The Maker board of directors has concluded that the merger agreement and the
merger are advisable and fair to, and in the best interest of, the Maker
stockholders and recommends that the stockholders vote to adopt and approve the
merger agreement and the merger.
MAKER SPECIAL MEETING
The special meeting of Maker stockholders will be held on March 10, 2000 at
10:00 a.m., local time, at Hutchins, Wheeler & Dittmar, 101 Federal Street,
Boston, Massachusetts 02110. At the special meeting, you will be asked to
consider and vote upon a proposal to approve the merger agreement.
RECORD DATE; VOTING POWER
The close of business on February 1, 2000 has been fixed as the record date
for determining the holders of Maker common stock who are entitled to notice of
and to vote at the special meeting. As of the record date, there were 19,074,128
shares of Maker common stock outstanding, of which 6,850,476 shares
(approximately 36% of the outstanding shares) of Maker common stock were owned
by William N. Giudice, Tecumseh Limited Partnership I, Paul Bergantino,
Bergantino 1999 Grantor Retained Annuity Trust DTD 4/5/99, Bergantino 1999
Irrevocable Trust DTD 4/5/99, Michael Rubino, Thomas Medrek, Bessemer Venture
Partners IV L.P., Bessec Ventures IV L.P. and Greylock Equity Limited
Partnership, each of whom has agreed that it or he will vote all such shares in
favor of the approval and adoption of the merger agreement and approval of the
merger. You, as a holder of record of shares of Maker common stock on the record
date, are entitled to one vote per share of Maker common stock on each matter
submitted to a vote at the special meeting.
VOTE REQUIRED
The presence in person or by proxy of the holders of shares representing a
majority of the voting power of Maker common stock entitled to vote is necessary
to constitute a quorum for the transaction of business at the special meeting.
Holders of approximately 36% of the outstanding shares of Maker common stock
have agreed to vote for the merger. The affirmative vote of holders of at least
a majority of the Maker common stock outstanding and entitled to vote is
required for stockholder approval. The persons named as proxy holders on the
attached proxy card will vote your shares as you indicate on the card. If you do
not specify on the proxy card how to vote your shares, the proxy holders will
vote your shares in favor of the merger agreement and the merger. Abstentions
will have the same effect as negative votes.
EFFECTIVE TIME OF THE MERGER; EXCHANGE OF SHARES
The merger will become effective at the time and date when a copy of a
certificate of merger is filed with the Secretary of State of the State of
Delaware pursuant to the Delaware General Corporation Law. The time of such
filing is currently expected to occur as soon as practicable after the special
meeting, subject to adoption and approval of the merger agreement at the special
meeting and satisfaction or waiver of the conditions of the merger agreement.
If the merger is approved at the special meeting, an exchange agent will
send to you detailed instructions with regard to the surrender of your Maker
common stock certificates, together with a letter of transmittal, as soon as
reasonably practicable following the time the merger becomes effective. You
should not submit your certificates to the exchange agent until you have
received these materials. Upon surrender of your shares, you will receive a
certificate representing the number of Conexant shares you are entitled to
receive under the merger agreement. You will receive cash in lieu of fractional
shares based on the closing price for shares of Conexant common stock on the
Nasdaq National Market on the last full trading day prior to the effective time
of the merger. No interest will
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be paid or will accrue on any cash payable in lieu of any fractional shares of
Conexant common stock. See "THE MERGER AGREEMENT."
YOU SHOULD NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
FEES AND EXPENSES
Each party will pay its own costs and expenses. However, all filing fees and
printing expenses related to this proxy statement/prospectus will be shared
equally by Conexant and Maker. If the merger agreement is terminated as a result
of a breach, the breaching party will reimburse the non-breaching party for all
out-of-pocket expenses, up to $3,000,000.
ACCOUNTING TREATMENT
The merger will be accounted for as a "purchase" transaction for accounting
and financial reporting purposes, in accordance with generally accepted
accounting principles. Accordingly, a determination of the fair value of Maker's
assets and liabilities will be made in order to allocate the purchase price to
the assets acquired and the liabilities assumed. In connection with the merger,
it is anticipated that Conexant will take a one-time charge consisting of a
write-off of the value of purchased in-process research and development,
estimated to be approximately $31 million. The purchase price allocation,
including the one-time charge for write-off of the value of purchased in-
process research and development, is subject to revision when additional
information concerning asset and liability valuation is obtained.
FEDERAL INCOME TAX CONSEQUENCES
The merger has been structured as a tax-free reorganization for United
States federal income tax purposes. Accordingly, Maker stockholders generally
will not recognize any gain or loss for United States federal income tax
purposes on the exchange of their Maker shares for shares of Conexant common
stock in the merger. However, some Maker stockholders may recognize gain or loss
in connection with the receipt of cash instead of a fractional share of Conexant
common stock.
Tax matters are very complicated, and the tax consequences of the merger to
each Maker stockholder will depend on the facts of that stockholder's situation.
You are urged to consult your tax advisor for a full understanding of the tax
consequences of the merger to you.
FAIRNESS OPINION OF FINANCIAL ADVISOR TO MAKER
Maker retained Deutsche Bank Securities, Inc. as its financial advisor and
agent in connection with the merger to render an opinion to the Maker board of
directors as to the financial fairness of the merger to Maker and its
stockholders.
In deciding to approve the merger, the Maker board considered this opinion,
which stated that as of its date and subject to the considerations described in
it, the consideration to be received in the merger by holders of Maker common
stock is fair from a financial point of view of those holders. We have attached
this opinion as Appendix B to this proxy statement/prospectus.
APPRAISAL RIGHTS
The holders of Maker common stock are not entitled to dissenters' or
appraisal rights in connection with the merger under applicable Delaware law.
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THE MERGER AGREEMENT
We have attached the merger agreement as Appendix A to this proxy
statement/prospectus. We encourage you to read the merger agreement because it
is the legal document that governs the merger.
CONDITIONS TO THE MERGER
We will complete the merger only if a number of conditions are satisfied or
waived including:
- the receipt of the approval of the Maker stockholders;
- approval for listing on the Nasdaq National Market of the shares of
Conexant common stock to be issued pursuant to the merger agreement;
- termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act;
- the absence of legal restraints or prohibitions preventing the
consummation of the merger;
- the effectiveness of the registration with the SEC of the shares of
Conexant common stock to be issued in connection with the merger;
- Conexant's receipt of any necessary consents, orders or approvals of, and
declarations and filings with, governmental entities;
- the material correctness of the representations and warranties of each
party contained in the merger agreement;
- the receipt of opinions of counsel to Maker and Conexant relating to the
U.S. federal income tax consequences of the merger;
- the absence of material adverse changes in the business operations,
assets, liabilities, financial condition or the results of operations of
either Conexant or Maker;
- members of senior management of Maker shall have entered into
non-competition agreements with Conexant; and
- the parties shall have performed and complied in all material respects
with all covenants and agreements required by the merger agreement.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the filing of the certificate of merger with the Delaware
Secretary of State as follows:
- by mutual written consent of Conexant and Maker;
- by either Conexant or Maker if:
1. the merger is not consummated on or before March 31, 2000, provided
that such date may be extended by up to three consecutive 30 day
periods permitted by the terms of the merger agreement;
2. any governmental entity prohibits the merger;
3. Maker stockholder approval is not obtained at the Maker special
meeting; or
4. the other party materially breaches a covenant, agreement,
representation or warranty contained in the merger agreement and such
breach remains uncured for 15 days following notice from the
nonbreaching party.
- by Conexant if the Maker board:
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1. withdraws or modifies its recommendation to the Maker stockholders to
approve the merger or recommends another proposal;
2. fails to recommend the approval of the merger to the Maker
stockholders;
3. fails to oppose, or recommends approval of, a tender offer or
exchange offer, by a party other than Conexant, that would result in
the party obtaining 20% or more of the Maker common stock; or
4. fails to hold the special meeting of Maker stockholders to vote on
the merger.
If Conexant terminates the merger agreement because one or more of the four
actions described in the immediately preceding paragraph has occurred or because
Maker materially breaches, and has not cured within 15 days of notice by
Conexant, a covenant, agreement, representation or warranty contained in the
merger agreement or if either Conexant or Maker terminates the merger agreement
because the Maker stockholders do not approve the merger agreement, then Maker
will pay a fee of $25,000,000 to Conexant if Maker enters into another
transaction for the acquisition by a third party of more than 20% of Maker's
business, assets, capital shares or voting securities within nine months of the
termination and any person or persons purchases 20% or more of the assets or
voting stock of Maker within nine months of the termination.
If Conexant or Maker terminates the merger agreement because of a material
breach by the other party of a covenant, agreement, representation or warranty,
then the breaching party will reimburse the terminating party for its
out-of-pocket expenses of up to $3,000,000.
LISTING OF CONEXANT COMMON STOCK
Conexant will use its reasonable best efforts to cause the Conexant common
stock that is to be issued in connection with the merger to be authorized for
listing on the Nasdaq National Market. The listing of the Conexant common stock
to be issued in connection with the merger is a condition to the merger's
completion.
FORWARD-LOOKING STATEMENTS
Some statements contained in this proxy statement/prospectus regarding
future financial performance and results and other statements that are not
historical facts are forward-looking statements. These statements relate to,
among other things, the merger, future capital expenditures, cost reduction,
cash flow and operating results. The words "expect," "project," "estimate,"
"predict," "anticipate," "believe," "plan," "intend," and similar expressions
are also intended to identify forward-looking statements. These statements are
subject to numerous risks, uncertainties and assumptions, including but not
limited to:
- general business and economic conditions in our operating region,
including the rate of inflation, population, employment and job growth in
our markets;
- pricing pressures and other competitive factors;
- results of our efforts to reduce costs;
- our ability to achieve operating improvements;
- conditions to the consummation of the merger, including regulatory
approval, which could affect the timing of the merger;
- our estimates of the fair value of the assets and liabilities acquired;
- legal proceedings; and
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- changes in state or federal legislation or regulations.
Other factors and assumptions not identified above could also cause the
actual results to differ materially from those set forth in the forward-looking
statements. Conexant and Maker do not undertake to update forward-looking
information contained in this proxy statement/prospectus to reflect actual
results, changes in assumptions or changes in other factors affecting the
forward-looking information. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those indicated in, contemplated by or implied by such
statements.
COMPARATIVE MARKET DATA
The following table presents trading information for Conexant common stock
and Maker common stock on December 17, 1999 and February 1, 2000. December 17,
1999 was the last full trading day prior to our announcement of the signing of
the merger agreement. February 1, 2000 was the last practicable trading day for
which information was available prior to the date of this proxy statement/
prospectus. You should read the information presented below in conjunction with
"Comparative Historical and Unaudited Pro Forma Per Share Data" on page 15.
<TABLE>
<CAPTION>
CONEXANT COMMON STOCK MAKER COMMON STOCK
------------------------------ ------------------------------
HIGH LOW CLOSING HIGH LOW CLOSING
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
December 17, 1999.................... $ 74.25 $ 68.75 $ 69.625 $37.125 $ 31.50 $34.25
February 1, 2000..................... $85.9844 $82.625 $84.3125 $ 55.00 $53.125 $53.75
</TABLE>
The market prices of shares of Conexant common stock and Maker common stock
fluctuate. As a result, you should obtain current market quotations.
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<PAGE>
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CONEXANT
The following table presents the summary selected historical consolidated
financial data of Conexant as of and for each of the five years in the period
ended September 30, 1999. This financial data was derived from the consolidated
financial statements of Conexant Systems, Inc. and subsidiaries and its
predecessor Semiconductor Systems, Inc., representing the semiconductor business
of Rockwell International Corporation and subsidiaries. The financial data as of
and for the year ended September 30, 1999 are derived from the audited
consolidated financial statements of Conexant Systems, Inc. The statement of
operations data for the years ended September 30, 1998, 1997 and 1996 have been
derived from the audited combined financial statements of Semiconductor Systems
as part of Rockwell. The following summary financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Conexant's financial statements and related notes
incorporated by reference into this proxy statement/prospectus. See "WHERE YOU
CAN FIND MORE INFORMATION" on page 104.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30(1),
-------------------------------------------------------------
1995 1996 1997 1998 1999
--------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................ $ 783,677 $1,470,455 $1,412,325 $1,200,231 $1,444,114
Gross margin........................ 300,348 621,461 678,477 312,380 580,862
Operating income (loss)(2)(3)(4).... 106,527 194,101 168,789 (440,158) (3,179)
Net income (loss)(2)(3)(4).......... 75,917 83,528 125,824 (262,216) 12,929
Pro forma net income (loss) per
share(5):
Basic............................. $ 0.35 $ 0.38 $ 0.59 $ (1.32) $ 0.07
Diluted........................... 0.35 0.38 0.59 (1.32) 0.06
Weighted average shares
outstanding(5):
Basic............................. 217,200 217,600 213,800 197,900 192,551
Diluted........................... 217,200 217,600 213,800 197,900 203,484
BALANCE SHEET DATA:
Working capital..................... $ 604,453
Total assets........................ 1,841,950
Long-term obligations............... 350,000
Shareholders' equity................ 1,035,153
</TABLE>
- ------------------------
(1) The fiscal 1999 financial statements include the operating results of
Conexant while it was part of Rockwell prior to January 1, 1999. Financial
data included in the summary selected historical consolidated financial data
of Conexant, for periods subsequent to January 1, 1999, have been prepared
on a basis that reflects the historical assets, liabilities, and operations
of the business contributed to Conexant by Rockwell. Financial data for
periods prior to January 1, 1999 are not necessarily indicative of what the
financial position, results of operations, or cash flows would have been had
Conexant been an independent public company during the periods presented.
(2) In fiscal 1997 and 1996, Conexant incurred charges of $30 million and $121
million for purchased in-process research and development relating to the
acquisitions of the Hi-Media broadband communication chipset business of
ComStream Corporation and Brooktree Corporation, respectively.
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(3) In September 1998, Conexant recorded special charges of approximately $147
million related to its decision to close and dispose of its wafer
fabrication facilities in Colorado Springs, Colorado, a worldwide workforce
reduction and certain other actions.
(4) In fiscal 1999, Conexant recorded an additional asset impairment charge of
$20 million for the Colorado Springs wafer fabrication facility as a result
of Rockwell's decision to further write-down the facility and additional
special charges of approximately $18 million related to other restructuring
actions initiated in the fourth quarter of fiscal 1998.
(5) Net income (loss) per share has not been presented as Conexant was not an
independent company during each of the full periods. Pro forma net income
(loss) per share has been presented as if the spin-off from Rockwell had
occurred as of October 1, 1994. Subsequent to the spin-off, pro forma net
income (loss) per share is based on Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). Pro forma net income
(loss) per share gives retroactive effect to the 2-for-1 stock split
effected in the form of a stock dividend on October 29, 1999 for
shareholders of record on September 24, 1999.
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SUMMARY CONSOLIDATED FINANCIAL DATA OF MAKER
The following table presents the summary selected consolidated financial
data of Maker as of September 30, 1999 and for each of the four years ended
December 31, 1998 and the period from inception (October 21, 1994) through
December 31, 1994. This financial data is derived from the consolidated
financial statements of Maker. The data shall be read in conjunction with the
Consolidated Financial Statements and the Notes thereto and with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing elsewhere in this proxy statement/ prospectus.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION NINE MONTHS
(OCTOBER 21, 1994) YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
TO DECEMBER 31, ----------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
--------------------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues........................ $ -- $ -- $ 342 $ 1,774 $ 7,694 $ 4,910 $10,813
Gross profit.................... -- -- 13 743 4,456 2,633 7,281
Income (loss) from operations... (14) (957) (1,890) (4,080) (4,210) (3,704) 42
Net income (loss)............... (14) (1,003) (1,971) (3,901) (3,754) (3,351) 1,318
Net income (loss) per share:
Basic......................... $ (0.00) $ (0.25) $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.11
======= ======= ======= ======= ======= ======= =======
Diluted....................... $ (0.00) $ (0.25) $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.07
======= ======= ======= ======= ======= ======= =======
Weighted average common shares
outstanding:
Basic......................... 4,020 4,020 1,516 5,383 5,647 5,568 12,513
======= ======= ======= ======= ======= ======= =======
Diluted....................... 4,020 4,020 1,516 5,383 5,647 5,568 18,541
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1999
--------------
(IN THOUSANDS)
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $55,845
Working capital............................................. 41,290
Total assets................................................ 60,911
Stockholders' equity........................................ 57,526
</TABLE>
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SUMMARY SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF CONEXANT
The summary selected unaudited pro forma combined financial information is
qualified in its entirety by reference to, and should be read in conjunction
with, the unaudited pro forma condensed combined financial statements and notes
thereto included elsewhere in this proxy statement/prospectus. The unaudited pro
forma combined statements of operations data combines Conexant's historical
consolidated statements of operations data for the year ended September 30, 1999
with Maker's historical consolidated statements of operations data for the
twelve month period ended September 30, 1999, giving effect to the merger as if
it had occurred as of October 1, 1998. The unaudited pro forma combined balance
sheet data combines Conexant's historical consolidated balance sheet data as of
September 30, 1999 with Maker's historical consolidated balance sheet data as of
September 30, 1999, giving effect to the merger as if it had occurred as of
September 30, 1999. The unaudited pro forma combined financial data set forth
below does not purport to represent what the consolidated results of operations
or financial position of Conexant would actually have been if the Maker
acquisition had in fact occurred on such date or to project the future
consolidated results of operations or financial condition of Conexant. See
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1999
----------------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS DATA:
Net revenues................................................ $1,457,711
Gross margin................................................ 589,966
Operating loss.............................................. (187,042)
Net loss.................................................... (168,841)
Net loss per share:
Basic..................................................... $ (0.82)
Diluted................................................... $ (0.82)
Number of shares used in per share computation:
Basic..................................................... 204,747
Diluted................................................... 204,747
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1999
--------------
(IN THOUSANDS)
<S> <C>
UNAUDITED PRO FORMA COMBINED BALANCE
SHEET DATA:
Working capital............................................. $ 634,143
Total assets................................................ 2,801,188
Long-term obligations....................................... 350,000
Total shareholders' equity.................................. 1,961,294
</TABLE>
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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table sets forth (i) pro forma historical net income (loss)
per share and historical book value per share data of Conexant; (ii) historical
net income per share and historical book value per share data of Maker;
(iii) unaudited pro forma combined net income (loss) per share and unaudited pro
forma combined book value per share data of Conexant after giving effect to the
merger; and (iv) unaudited equivalent pro forma combined net income (loss) per
share and unaudited equivalent pro forma combined book value per share data of
Maker based on the exchange ratio of 0.66 of a share of Conexant common stock
for each share of Maker common stock. The information in the table should be
read in conjunction with the audited and unaudited consolidated financial
statements of Conexant and Maker and the notes thereto included or incorporated
by reference in this proxy statement/prospectus and the unaudited pro forma
condensed combined financial information and notes thereto included elsewhere
herein. The unaudited pro forma condensed combined financial information is not
necessarily indicative of the net income (loss) per share or book value per
share that would have been achieved had the merger been consummated as of the
beginning of the periods presented and should not be construed as representative
of such amounts for any future dates or periods.
<TABLE>
<CAPTION>
PRO MAKER
FORMA EQUIVALENT
HISTORICAL PRO FORMA PRO FORMA
CONEXANT HISTORICAL COMBINED COMBINED
(1) MAKER (2)(3) (4)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Diluted net income (loss) per share:
For the year ended
September 30,
1999.............................................. $ 0.06 ($ 0.82) ($0.54)
1998.............................................. ($ 1.32)
1997.............................................. $ 0.59
For the year ended
December 31,
1998.............................................. ($ 0.66)
1997.............................................. ($ 0.72)
1996.............................................. ($ 1.30)
Book value per share at
September 30, 1999 (5) (6).......................... $ 5.27 $ 3.13 $ 9.40 $ 6.20
Dividends paid (7)
</TABLE>
- ------------------------
(1) Net income (loss) per share has not been presented for Conexant as Conexant
was not an independent company during each of the full periods. Pro forma
net income (loss) per share has been presented as if the spin-off from
Rockwell had occurred as of October 1, 1996. Subsequent to the spin-off from
Rockwell, pro forma net income (loss) per share is based on SFAS 128.
(2) See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION" included
elsewhere in this proxy statement/prospectus.
(3) Pro forma diluted net income (loss) per share is computed using the
weighted-average number of shares of common stock outstanding, after the
issuance of Conexant common stock to acquire the outstanding shares of Maker
common stock and also gives effect to any dilutive options and convertible
debt securities. Dilutive options and convertible debt securities are
excluded from the computation during loss periods as their effect is
antidilutive.
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<PAGE>
(4) The Maker equivalent pro forma condensed combined per share amounts are
calculated by multiplying the pro forma condensed combined per share amounts
by the exchange ratio of 0.66 of a share of Conexant common stock for each
share of Maker common stock.
(5) Historical book value per share is computed by dividing shareholders' equity
by the number of shares of common stock outstanding at the end of each
period.
(6) The pro forma combined book value per share is computed by dividing pro
forma shareholders' equity, including the effect of pro forma adjustments,
by the pro forma number of shares of Conexant common stock which would have
been outstanding had the merger been consummated as of September 30, 1999.
(7) The comparative historical and unaudited pro forma per share data does not
include cash dividends per share as neither Conexant nor Maker has declared
or paid cash dividends during any of the periods presented.
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<PAGE>
RISK FACTORS
RISKS RELATING TO THE MERGER
MAKER STOCKHOLDERS WILL RECEIVE A FIXED RATIO OF 0.66 OF A SHARE OF CONEXANT
COMMON STOCK PER MAKER SHARE EVEN IF THERE ARE CHANGES IN THE MARKET VALUE OF
MAKER COMMON STOCK OR CONEXANT COMMON STOCK BEFORE THE COMPLETION OF THE MERGER.
There will be no adjustment to the exchange ratio if the market price of
either Conexant common stock or Maker common stock fluctuates. Accordingly, the
specific value of the consideration you will receive in the merger will depend
on the market price of Conexant common stock at the effective time of the
merger. The share prices of both Conexant common stock and Maker common stock
are subject to price fluctuations in the market for publicly-traded equity
securities and have each experienced significant volatility. In addition, the
stock market in recent years has experienced significant price and volume
fluctuations which have affected the market prices of technology companies and
which have often been unrelated to or disproportionately impacted by the
operating performance of such companies. In the event that the market price of
Conexant common stock increases or decreases, the market value of the Conexant
common stock you receive in the merger would correspondingly increase or
decrease. In addition, future acquisitions by Conexant may result in dilutive
issuances of equity securities, the incurrence of additional debt, large
one-time write-offs and the creation of goodwill or other intangible assets that
could result in amortization expense. You are advised to obtain recent market
quotations for Conexant common stock and Maker common stock. Neither Conexant
nor Maker can assure you as to the market prices of Conexant common stock or
Maker common stock at any time before the merger or as to the market price of
Conexant common stock at any time after the merger.
THERE ARE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT
CONEXANT FROM SUCCESSFULLY INTEGRATING MAKER WITH CONEXANT.
The successful combination of Conexant and Maker will require substantial
effort from each company, including the coordination of sales, marketing and
research and development efforts. Conexant may encounter difficulties in the
transition process if Conexant fails to quickly and efficiently integrate the
two companies. These difficulties could include the interruption of, or a loss
of momentum in, Maker's activities, problems associated with integration of
management information and reporting systems, and delays in implementation of
consolidation plans. These difficulties may be increased by the geographical
separation of the two companies and their employees. In the event that Conexant
encounters any of these difficulties, or if the attention of Conexant's
management is diverted, Conexant's ability to realize the anticipated benefits
of the merger could be adversely affected. There is intense competition for
qualified personnel in the areas of Conexant's activities and we cannot assure
you that Conexant will be able to retain Maker's key management, technical,
sales and marketing personnel, or that Conexant will realize the anticipated
benefits of the merger. In addition, a number of Maker's suppliers and vendors
are competitors of Conexant and as a result may alter their business
relationship with Maker following the merger. These factors could have a
material adverse effect on Conexant's business, financial condition and results
of operations.
OFFICERS AND DIRECTORS OF MAKER HAVE DIFFERENT INTERESTS FROM YOURS AS A MAKER
STOCKHOLDER.
The directors and officers of Maker have interests in the merger that are
different from those stockholders who are not also directors or officers. These
include:
- some officers of Maker will become employees of Conexant and have received
new employment agreements in connection with the merger;
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- some officers of Maker will be granted options to purchase Conexant common
stock in exchange for waiving their rights to exercise their existing
Maker options; and
- Maker directors and executive officers have customary rights to
indemnification against liabilities which Conexant agrees to extend for a
period of 6 years.
As a result, officers and directors could be more likely to vote to approve
the merger agreement and the merger than if they did not have these interests.
For a more complete description of these interests see the section entitled
"INTERESTS OF CERTAIN PERSONS IN THE MERGER" on page 83.
RISKS RELATED TO CONEXANT'S BUSINESS
CONEXANT'S FUTURE SUCCESS DEPENDS LARGELY ON THE GROWTH OF ITS EXPANSION
PLATFORMS.
Conexant has diversified its business and expanded selected related product
platforms:
- Personal Imaging;
- Wireless Communications;
- Digital Infotainment and
- Network Access.
Conexant believes that these platforms offer higher growth prospects than
its dial-up PC modem business. Conexant's future financial performance and
overall success, particularly in the long term, will depend in large measure on
the rate of sales growth and margin contribution of Conexant's expansion
platforms and whether the contribution to its sales and operating income is
sufficient to offset the decline in sales of Conexant's dial-up PC modem chipset
products.
There are numerous risks inherent in Conexant's diversification and
expansion strategy, many of which are beyond Conexant's control. In certain of
its expansion platforms, Conexant currently has minimal market presence relative
to other more established competitors. Moreover, Conexant's success with its
expansion platforms will depend, in part, on the ability of Conexant's customers
to develop new and enhanced products and successfully introduce and market such
products to end users. There can be no assurance that Conexant will be
successful in its diversification and expansion program, and its failure to do
so would have a material adverse effect on Conexant's business, financial
condition and results of operations.
RESEARCH AND DEVELOPMENT EXPENSES ARE AN INTEGRAL PART OF CONEXANT'S BUSINESS.
The semiconductor industry requires substantial investment in research and
development. In order to remain competitive, Conexant must continue to make
substantial investments in research and development to develop new and enhanced
products. There can be no assurance that Conexant will have sufficient resources
to develop new and enhanced technologies and competitive products. Conexant's
failure to make sufficient investments in research and development programs
could have a material adverse effect on Conexant's business, financial condition
and results of operations.
CONEXANT'S SUCCESS IS DEPENDENT ON ITS ABILITY TO TIMELY DEVELOP NEW PRODUCTS
AND REDUCE COSTS.
Conexant's operating results will depend, to a significant extent, on its
ability to continue to introduce new and enhanced semiconductor products on a
timely basis. Successful product development and introduction depends on
numerous factors, including, among others, Conexant's ability to anticipate
customer and market requirements and changes in technology and industry
standards, Conexant's ability to accurately define new products, Conexant's
ability to timely complete new
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products and introduce its products to the market, Conexant's ability to
differentiate them from offerings of Conexant's competitors and market
acceptance of Conexant's products. Furthermore, Conexant is required to
continually evaluate planned product development expenditures and choose among
alternative technologies based upon its expectations of future market growth.
There can be no assurance that Conexant will be able to develop and introduce
new or enhanced products in a timely and cost-effective manner or that such
products will satisfy customer requirements, achieve market acceptance or
anticipate new industry standards and technological changes or that Conexant
will be able to respond to new product announcements and introductions by
competitors.
In addition, prices of established products may decline, sometimes
significantly, over time. Conexant believes that in order to remain competitive
it must continue to reduce the cost of producing and delivering existing
products at the same time it develops and introduces new or enhanced products.
There can be no assurance that Conexant will be able to continue to reduce the
cost of its products to remain competitive.
CAPITAL EXPENDITURES ARE AN INTEGRAL PART OF CONEXANT'S BUSINESS.
The semiconductor industry is capital intensive. Semiconductor manufacturing
requires a constant upgrading of process technology to remain competitive, as
new and enhanced semiconductor processes are developed which permit smaller,
more efficient and more powerful semiconductor devices. Conexant maintains its
own manufacturing, assembly and test facilities which have required and will
continue to require significant investments in manufacturing technology and
equipment. Conexant expects fiscal 2000 capital expenditures to be substantially
higher than the $214 million spent on capital expenditures in fiscal 1999. There
can be no assurance that Conexant will have sufficient capital resources to make
necessary investments in manufacturing technology and equipment.
ALTHOUGH CONEXANT BELIEVES THAT ITS SOURCES OF LIQUIDITY WILL BE SUFFICIENT, IT
IS DEPENDENT ON THE AVAILABILITY OF FUTURE CAPITAL.
Although Conexant believes that anticipated improved cash flows from
operations resulting in part from the merger, proceeds from its recent
convertible notes offering, existing cash reserves and available borrowings
under its credit facility will be sufficient to satisfy its future research and
development, capital expenditure, working capital and other financing
requirements, there can be no assurance that this will be the case or that
alternative sources of capital will be available to Conexant on favorable terms
or at all.
CONEXANT'S OPERATING RESULTS MAY BE IMPACTED BY FACTORS BEYOND ITS CONTROL.
Conexant's operating results are subject to substantial quarterly and annual
fluctuations due to a number of factors, many of which are beyond Conexant's
control. Such factors may include, among others:
- the effects of competitive pricing pressures;
- decreases in average selling prices of Conexant's products;
- production capacity levels and fluctuations in manufacturing yields;
- availability and cost of products from Conexant's suppliers;
- the gain or loss of significant customers;
- Conexant's ability to develop, introduce and market new products and
technologies on a timely basis;
- new product and technology introductions by Conexant's competitors;
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- changes in the mix of products produced and sold;
- market acceptance of Conexant's and its customers' products;
- intellectual property disputes;
- seasonal customer demand;
- the timing of significant orders; and
- the timing and extent of product development costs.
Operating results also could be adversely affected by general economic and
other conditions causing a downturn in the market for semiconductor products, or
otherwise affecting the timing of customer orders or causing order cancellations
or rescheduling. Conexant's customers may change delivery schedules or cancel or
reduce orders without significant penalty and generally are not subject to
minimum purchase requirements.
The foregoing factors are difficult to forecast, and these or other factors
could materially adversely affect Conexant's quarterly or annual operating
results. If Conexant's operating results fail to meet the expectations of
analysts or investors, the price of Conexant common stock could be materially
and adversely affected.
CONEXANT IS DEPENDENT ON ITS ABILITY TO INTEGRATE COMPANIES IT ACQUIRES.
Conexant has recently completed several acquisitions. From time to time
Conexant evaluates acquisitions and may make additional acquisitions in the
future. Integrating acquired organizations and their products and services may
be expensive, time-consuming and a strain on our resources. Risks Conexant could
face with respect to acquisitions include:
- the difficulty of integrating acquired technology into its product
offerings;
- the failure succesfully to integrate acquired technology, resulting in the
impairment of amounts currently capitalized as intangible assets;
- the impairment of relationships with employees and customers;
- the difficulty of coordinating and integrating geographically-dispersed
operations;
- the potential disruption of its ongoing business and distraction of
management;
- the maintenance of brand recognition of acquired businesses;
- the maintenance of corporate cultures, controls, procedures and policies;
and
- the potential unknown liabilities associated with acquired businesses.
Conexant's inability to address any of these risks successfully could harm its
business.
With respect to any future acquisitions, Conexant may be unable to identify
future acquisition targets and may be unable to complete future acquisitions on
reasonable terms. Even if Conexant completes an acquisition, it may have
difficulty in integrating it with Conexant's current organization, technology
and product and services offerings, and any acquired features, functions,
products or services may not achieve market acceptance.
CONEXANT IS A PARTY TO A CREDIT FACILITY THAT RESTRICTS ITS OPERATING AND
FINANCIAL FLEXIBILITY.
Conexant entered into a three-year $350 million secured revolving credit
facility in December 1998. This credit facility is guaranteed by each of
Conexant's domestic subsidiaries and includes covenants that may restrict
Conexant's operating and financial flexibility in the future. Substantially all
of Conexant's assets and the assets of Conexant's domestic subsidiaries and the
stock of Conexant's
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subsidiaries, subject to certain exceptions, have been pledged as collateral to
secure repayment of this credit facility. The credit facility includes
restrictions on capital expenditures, indebtedness, acquisitions, mergers, asset
sales and liens on assets that apply to Conexant and its subsidiaries. Conexant
also must meet certain financial tests and maintain certain financial ratios.
Although Conexant believes that it will be able to comply with these
requirements, compliance with these requirements may restrict its operating and
financial flexibility. Conexant cannot assure that it will in fact be able to
satisfy all of the requirements in the credit facility. If Conexant does not
satisfy the financial ratios or comply with the other covenants included in the
credit facility, the lenders under the credit facility could declare all amounts
owed to them due and payable and proceed against their collateral. Such a
foreclosure on the collateral would have a material adverse effect on Conexant's
business, financial condition and results of operations.
POTENTIAL LITIGATION WITH RESPECT TO INTELLECTUAL PROPERTY RIGHTS COULD HARM
CONEXANT'S BUSINESS.
Conexant's business faces risks of intellectual property infringement and
litigation. The semiconductor industry is characterized by vigorous protection
and pursuit of intellectual property rights. Litigation has been necessary in
the past and is expected to be necessary in the future to enforce Conexant's
intellectual property rights, to protect Conexant's trade secrets or to
determine the validity and scope of proprietary rights of others, including
Conexant's customers.
Conexant has received, and may continue to receive in the future, claims of
infringement of intellectual property rights of others. Conexant is a party to
certain pending proceedings involving such claims. There can be no assurance
that Conexant will prevail in pending actions, or that other actions alleging
infringement by Conexant of third-party patents or invalidity of the patents
held by Conexant will not be asserted or prosecuted against Conexant, or that
any assertions of infringement or prosecutions seeking to establish the
invalidity of patents held by Conexant will not materially and adversely affect
Conexant's business, financial condition and results of operations.
Even if Conexant is successful in such matters, the attempted enforcement of
intellectual property rights by or against Conexant could result in significant
costs and diversion of Conexant's resources and could have a material adverse
effect on Conexant's business, financial condition and results of operations. If
claims or actions are asserted or commenced against Conexant, Conexant in
certain situations may seek to obtain licenses under a third party's
intellectual property rights to avert or resolve a controversy. There can be no
assurance that under such circumstances a license would be available on
commercially reasonable terms, if at all.
Conexant relies primarily on patent, copyright, trademark and trade secret
laws, as well as nondisclosure and confidentiality agreements and other methods
to protect its proprietary technologies and processes. In addition, Conexant
often incorporates the intellectual property of its customers into its designs,
and Conexant has certain obligations with respect to the non-use and
non-disclosure of such intellectual property. There can be no assurance that the
steps taken by Conexant to prevent misappropriation or infringement of the
intellectual property of Conexant or its customers will be successful; that any
existing or future patents will not be challenged, invalidated or circumvented;
or that any of the protective measures described above would provide meaningful
protection to Conexant. The failure of any patents to provide protection to
Conexant's technology would make it easier for Conexant's competitors to offer
similar products. Moreover, despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use Conexant's technology without
authorization, develop similar technology independently or design around
Conexant's patents. In addition, effective copyright, trademark and trade secret
protection may be unavailable or limited in certain countries.
Conexant has historically indemnified its customers for certain of the costs
and damages of patent infringement in circumstances where Conexant's product is
the factor creating the customer's
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infringement exposure (generally excluding coverage where infringement arises
out of the combination of Conexant's products with products of others). This
policy could have a material adverse effect on the business, financial condition
and results of operations of Conexant, particularly with respect to Conexant's
products designed for use in devices manufactured by its customers that comply
with international standards. Such international standards are often covered by
patent rights held by competitors of Conexant or its customers and the combined
costs of obtaining licenses from all holders of patent rights essential to such
standards could be high and could have a material adverse effect on Conexant's
business, financial condition and results of operations.
CONEXANT OPERATES IN A HIGHLY CYCLICAL INDUSTRY.
The semiconductor industry is highly cyclical and is characterized by
constant and rapid technological change, rapid product obsolescence and price
erosion, evolving standards, short product life cycles and wide fluctuations in
product supply and demand.
The industry has experienced significant downturns, often in connection
with, or in anticipation of, maturing product cycles (of both semiconductor
companies' and their customers' products) and declines in general economic
conditions. These downturns have been characterized by diminished product
demand, production overcapacity, high inventory levels and accelerated erosion
of average selling prices.
Such conditions have affected Conexant's analog PC modem chipset business
and may affect this and other products platforms in the future. From time to
time the semiconductor industry has experienced periods of increased demand and
production capacity constraints. For example, in fiscal 1998, average selling
prices for Conexant's Personal Computing products fell by approximately 50%, the
annual growth rate for such products fell to approximately 20% and in the fourth
quarter, Conexant made a provision for excess and obsolete inventories of
approximately $66 million due to lower than anticipated demand, price declines
and obsolescence of certain products. Any future downturns of this nature could
have a material adverse effect on Conexant's business, financial condition and
results of operations. Conexant may experience substantial changes in future
operating results due to general semiconductor industry conditions, general
economic conditions and other factors.
CONEXANT OPERATES IN A HIGHLY COMPETITIVE INDUSTRY AND COULD LOSE BUSINESS TO
ITS COMPETITORS.
The semiconductor industry in general and the markets in which Conexant
competes in particular are intensely competitive. Conexant currently faces
significant competition in its markets and expects that intense price and
product competition will continue. Such competition has resulted, and is
expected to continue to result, in declining average selling prices for
Conexant's products. As a result of the trend toward global expansion by foreign
and domestic competitors, technological and public policy changes and relatively
low barriers to entry in certain segments of the industry, Conexant anticipates
that additional competitors will enter its markets. Although Conexant currently
enjoys substantial market shares in its V.90 and facsimile modem chipset product
lines, as Conexant pursues its diversification strategy and develops its
expansion platforms it is and will be competing in certain new markets in which
it has little or no market share and where existing competitors have dominant
market positions. Moreover, certain of Conexant's customers offer products that
compete with similar products offered by Conexant.
Conexant believes that the principal competitive factors for integrated
circuit ("IC") providers to Conexant's addressed markets are:
- product performance;
- level of integration;
- quality;
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- compliance with industry standards;
- price;
- time-to-market;
- system cost;
- design and engineering capabilities;
- new product innovation; and
- customer support.
Many of Conexant's current and potential competitors have certain advantages
including:
- longer operating histories and presence in key markets;
- greater name recognition;
- access to larger customer bases; and
- significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources than Conexant.
As a result, such competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than
Conexant.
Current and potential competitors also have established or may establish
financial or strategic relationships among themselves or with existing or
potential customers, resellers or other third parties, which may affect
customers' purchasing decisions. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire
significant market share. There can be no assurance that Conexant will be able
to compete successfully against current or potential competitors, or that
competition will not have a material adverse effect on Conexant's business,
financial condition and results of operations.
Many of Conexant's competitors have combined with each other and
consolidated their businesses, including the consolidation of competitors with
Conexant's customers. This is attributable to a number of factors, including the
high-growth nature of the communications electronic industry and the time-to-
market pressures on suppliers to decrease the time required for product
conception, research and development, sampling and production launch before
product reaches the market. This consolidation trend is expected to continue,
since investments, alliances and acquisitions may enable semiconductor suppliers
including Conexant and Conexant's competitors, to augment technical capabilities
or to achieve faster time-to-market for their products than would be possible
solely through internal development.
Consolidations by industry participants, including, in some cases,
acquisition of certain of Conexant's customers by competitors of Conexant, are
creating entities with increased market share, customer base, technology and
marketing expertise in markets in which Conexant competes. These developments
may significantly and adversely affect Conexant's current markets, the markets
Conexant is seeking to serve and Conexant's ability to compete successfully in
such markets.
THE MARKETS FOR CONEXANT'S PRODUCTS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE.
The markets for Conexant's products are generally characterized by:
- rapid technological developments;
- evolving industry standards;
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- changes in customer requirements;
- frequent new product introductions and enhancements; and
- short product life cycles with declining prices over the life cycle of the
product.
A faster than anticipated change in one or more of the technologies related
to its products or in market demand for products based on a particular
technology, in particular due to the introduction of new technology which
represents a substantial advance over current technology, could result in faster
than anticipated obsolescence of Conexant's products and could have a material
adverse effect on Conexant's business, financial condition and results of
operations. For example, increased market demand for sub-$1,000 PCs is causing
PC OEMs to require less expensive modem devices, such as software modems, which
require fewer semiconductor components than Conexant's traditional modem
chipsets. As a result, these devices, may render obsolete the traditional
hardware upgrade path for Conexant's modem products. Currently accepted industry
standards are also subject to change, which may contribute to the obsolescence
of Conexant's products.
CONEXANT'S MANUFACTURING PROCESS IS EXTREMELY COMPLEX AND SPECIALIZED.
Conexant's manufacturing operations are complex and subject to disruption
due to causes beyond Conexant's control. The fabrication of ICs is an extremely
complex and precise process consisting of hundreds of separate steps. It
requires production in a highly controlled, clean environment. Minute
impurities, errors in any step of the fabrication process, defects in the masks
used to print circuits on a wafer or a number of other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
not to function.
Conexant is exploring wafer manufacturing alternatives, including increased
use of outside foundries, entering into business relationships with respect to
wafer manufacturing or other actions related to Conexant's wafer manufacturing
facilities. Conexant cannot assure you that it will succeed in implementing any
such alternatives.
Conexant's operating results are highly dependent upon Conexant's ability to
produce large volumes of integrated circuits at acceptable manufacturing yields.
Lengthy or recurring disruptions of operations at any of Conexant's production
facilities or those of its subcontractors for any reason, including labor
strikes, work stoppages, fire, earthquake, flooding or other natural disasters,
could cause significant delays in shipments until Conexant could shift the
products from an affected facility or subcontractor to another facility or
subcontractor. In such event, Conexant cannot assure you that the required
alternate capacity, particularly wafer production capacity, would be available
on a timely basis or at all. Moreover even if alternate wafer production
capacity is available, Conexant may not be able to obtain it on favorable terms,
which would result in a loss of customers. Any inability to generate sufficient
manufacturing capacities to meet demand, either at Conexant's own facilities or
through foundry or similar arrangements with others, could have a material
adverse effect on Conexant's business, financial condition and results of
operations. Certain of Conexant's manufacturing facilities are located near
major earthquake fault lines, including its California and Mexico facilities.
Conexant maintains only minimal earthquake insurance coverage on these
facilities.
Due to the highly specialized nature of the Gallium Arsenide or GaAs
semiconductor manufacturing process, in the event of a disruption at Conexant's
Newbury Park, California wafer fabrication facility, alternate GaAs production
capacity would not be readily available from third party sources. Any disruption
of operations at Conexant's Newbury Park, California wafer fabrication facility
or the interruption in the supply of epitaxial wafers used in its GaAs process
could have a material adverse effect on Conexant's business, financial condition
and results of operations, particularly with respect to Conexant's Wireless
Communications products.
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Conexant's manufacturing processes involve numerous complex steps. Minor
deviations can cause substantial manufacturing yield loss, and in some cases,
cause production to be suspended. Manufacturing yields for new products
initially tend to be lower as Conexant completes product development and
commences volume manufacturing, and will typically increase as Conexant ramps to
full production. Conexant's forward product pricing includes this assumption of
improving manufacturing yields and, as a result, material variances between
projected and actual manufacturing yields have a direct effect on Conexant's
gross margin and profitability. The difficulty of forecasting manufacturing
yields accurately and maintaining cost competitiveness through improving
manufacturing yields will continue to be magnified by ever increasing process
complexity of manufacturing integrated circuit products. Conexant's
manufacturing operations also face pressures arising from the compression of
product life cycles which requires Conexant to bring new products on line faster
and for shorter periods while maintaining acceptable manufacturing yields and
quality without, in many cases, reaching the longer-term, high volume
manufacturing conducive to higher manufacturing yields and declining costs.
Conexant believes it has adequate sources for the supply of raw materials
and components for its manufacturing needs with suppliers located around the
world. Raw wafers and other raw materials used in the production of Conexant's
CMOS products are available from several suppliers. Conexant is currently
dependent on a single source supplier for epitaxial wafers used in the GaAs
semiconductor manufacturing processes at its Newbury Park, California facility.
However, Conexant is in the process of arranging alternative suppliers. The
number of qualified alternative suppliers for such wafers is limited and the
process of qualifying a new epitaxial wafer supplier could require a substantial
leadtime. Although Conexant historically has not experienced any significant
difficulties in obtaining an adequate supply of raw materials and components
necessary for Conexant's manufacturing operations, the loss of a significant
supplier or the inability of a supplier to meet performance and quality
specifications or delivery schedules could have a material adverse effect on
Conexant's business, financial condition and results of operations.
UNCERTAINTIES INVOLVING THE ORDERING AND SHIPMENT OF CONEXANT'S PRODUCTS COULD
ADVERSELY AFFECT ITS BUSINESS.
Conexant's sales are typically made pursuant to individual purchase orders
and it generally does not have long-term supply arrangements with its customers.
Conexant's customers may cancel orders until 30 days prior to the shipping date.
In addition, Conexant sells a portion of its products through distributors who
have certain rights to return unsold products to Conexant. Moreover,
semiconductor companies, including Conexant, routinely manufacture or purchase
inventory based on estimates of customer demand for their products, which is
difficult to predict. The cancellation or deferral of product orders, the return
of previously sold products or overproduction due to the failure of anticipated
orders to materialize could result in Conexant holding excess or obsolete
inventory which could have a material adverse effect on Conexant's business,
financial condition and results of operations. For example, in the fourth
quarter of fiscal 1998, Conexant made a provision for excess and obsolete
inventories of $66 million due to lower than anticipated demand, price declines
and the obsolescence of certain products.
CONEXANT IS SUBJECT TO THE RISKS OF DOING BUSINESS INTERNATIONALLY.
For the fiscal year ended September 30, 1999, approximately 61 percent of
Conexant's total sales were to customers located outside the United States,
primarily in the Asia-Pacific and European countries. In addition, Conexant has
facilities and suppliers located outside the United States, including its
assembly and test facility in Mexicali, Mexico and third-party foundries located
in the Asia-Pacific
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region. Conexant's international sales and operations are subject to a number of
risks inherent in selling and operating abroad, including, but not limited to,
risks with respect to:
- currency exchange rate fluctuations;
- local economic and political conditions;
- disruptions of capital and trading markets;
- restrictive governmental actions (such as restrictions on transfer of
funds and trade protection measures, including export duties and quotas
and customs duties and tariffs);
- changes in legal or regulatory requirements;
- import or export licensing requirements;
- limitations on the repatriation of funds;
- difficulty in obtaining distribution and support;
- nationalization;
- the laws and policies of the United States affecting trade, foreign
investment and loans and
- tax laws.
Because most of Conexant's international sales, other than sales to Japan
(which are denominated principally in Japanese yen), are currently denominated
in U.S. dollars, Conexant's products could become less competitive in
international markets if the value of the U.S. dollar increases relative to
foreign currencies.
Moreover, Conexant may be competitively disadvantaged relative to
competitors of Conexant located outside the United States who may benefit from a
devaluation of their local currency. Conexant is unable to assure that the
factors described above will not have a material adverse effect on Conexant's
ability to increase or maintain its foreign sales or on its business, financial
condition and results of operations.
Conexant's operating performance has been impacted by the current economic
situation in the Asia-Pacific region. This economic situation has increased the
uncertainty with respect to the long-term viability of certain of Conexant's
customers and suppliers in the region. Sales to customers in Japan and other
countries in the Asia-Pacific region, principally Taiwan, South Korea and Hong
Kong, represented approximately 52% of total revenues in fiscal 1999.
Conexant enters into foreign currency forward exchange contracts,
principally for the Japanese yen, to minimize risk of loss from currency
exchange rate fluctuations for foreign currency commitments entered into in the
ordinary course of business. Conexant has not experienced nor does it anticipate
any material adverse effect on its results of operations or financial condition
related to these foreign currency forward exchange contracts. Conexant has not
entered into foreign currency forward exchange contracts for other purposes and
Conexant's financial condition and results of operations could be affected
(negatively or positively) by currency fluctuations.
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CONEXANT'S SUCCESS DEPENDS ON ITS ABILITY TO EFFECT SUITABLE INVESTMENT,
ALLIANCE OR ACQUISITION TRANSACTIONS IN THE FUTURE.
Although Conexant invests significant resources in research and development
activities, the complexity and rapidity of technological changes make it
impractical for Conexant to pursue development of all technological solutions on
its own. As part of its goal to provide advanced semiconductor products and
systems, Conexant expects to review on an ongoing basis investment, alliance and
acquisition prospects that would complement its existing product offerings,
augment its market coverage or enhance its technological capabilities. However,
there can be no assurance that Conexant will be able to identify and consummate
suitable investment, alliance or acquisition transactions in the future.
Moreover, should Conexant consummate such transactions, they could result
in:
- in the diversion of management resources;
- dilutive issuances of equity securities;
- large one-time write-offs;
- the incurrence of debt and contingent liabilities;
- amortization of expenses related to goodwill; and
- other intangible assets and other acquisition related costs, any of which
could materially adversely affect Conexant's business, financial condition
and results of operations and the price of Conexant common stock.
The ultimate success of any such investments, alliances or acquisitions in
achieving the purposes for which they are undertaken will depend on the ability
of Conexant to integrate successfully any acquired business and to retain key
personnel, as well as a variety of other factors.
CONEXANT'S SUCCESS COULD BE NEGATIVELY AFFECTED IF ITS KEY PERSONNEL LEAVE.
Conexant's future success depends to a significant extent upon the continued
service of its executive officers and other key management and technical
personnel and on its ability to continue to attract, retain and motivate
qualified personnel. Conexant is dependent on key technical personnel, who
represent a significant asset of Conexant as the source of its technological and
product innovations. The competition for such personnel is intense in the
semiconductor industry. There can be no assurance that Conexant will be able to
continue to attract and retain qualified management and other personnel
necessary for the design, development, manufacture and sale of its products. The
ability of Conexant to attract and retain key personnel may be negatively
impacted during periods of poor operating performance by Conexant. The loss of
the services of one or more of Conexant's key employees or Conexant's failure to
attract, retain and motivate qualified personnel could have a material adverse
effect on Conexant's business, financial condition and results of operations. In
particular, the loss of the services of Dwight W. Decker, Chairman and Chief
Executive Officer of Conexant, or certain key design and technical personnel
could materially and adversely affect Conexant.
CONEXANT'S MANAGEMENT MAY BE SUBJECT TO A VARIETY OF DEMANDS FOR ITS ATTENTION.
Conexant's management currently faces a variety of challenges. These include
implementing Conexant's ongoing diversification and expansion strategy and
expanding the infrastructure and systems necessary for Conexant to operate as an
independent public company. While Conexant believes that it has sufficient
management resources to execute each of these initiatives, Conexant cannot
assure you
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that Conexant will have these resources or that such initiatives will be
successfully implemented. Failure to implement these initiatives successfully
could have a material adverse effect on Conexant's business, financial condition
and results of operations.
CONEXANT MAY BE LIABLE FOR PENALTIES UNDER ENVIRONMENTAL LAWS, RULES AND
REGULATIONS, WHICH COULD NEGATIVELY AFFECT ITS SUCCESS.
Conexant uses a variety of chemicals in its manufacturing operations and is
subject to a wide range of environmental protection regulations in the United
States and Mexico. While Conexant has not experienced any material adverse
effect on its operations as a result of such regulations, there can be no
assurance that current or future regulations would not have a material adverse
effect on Conexant's business, financial condition and results of operations. In
the United States, environmental regulations often require parties to fund
remedial action regardless of fault. As a consequence, it is often difficult to
estimate the future impact of environmental matters, including potential
liabilities. Conexant is unable to assure that the amount of expense and capital
expenditures which might be required to complete remedial actions and to
continue to comply with applicable environmental laws will not have a material
adverse effect on Conexant's business, financial condition and results of
operations.
Conexant has been designated as a potentially responsible party at one
Superfund site located at a former silicon water manufacturing facility and
steel fabrication plant in Parker Ford, Pennsylvania formerly occupied by
Conexant. This site was also formerly occupied by Recticon Corporation and
Allied Steel Products Corporation. Each former occupant was also named as a
potentially responsible party and is insolvent. The remediation plan for the
site includes installation of a public water supply line and a groundwater pump
and treatment system, as well as routine groundwater sampling. Conexant
estimates the total costs for the remediation of this Superfund site to be
approximately $4 million and has accrued for these costs as of September 30,
1999.
In addition, Conexant is engaged in two other remediations of groundwater
contamination at its Newport Beach and Newbury Park, California facilities.
Conexant currently estimates the total costs for these remediations to be
approximately $4 million and has also accrued for these costs as of September
30, 1999.
Pursuant to its agreement with Rockwell, Conexant has assumed all
liabilities in respect of environmental matters related to current and former
operations of Conexant.
CONEXANT HAS A LIMITED HISTORY AS AN INDEPENDENT COMPANY.
Conexant has a limited operating history as an independent company.
Accordingly, the financial information presented herein for periods prior to
January 1, 1999 may not necessarily reflect the results of the operations,
financial position and cash flows Conexant would have had if Conexant had
operated independently during the periods presented.
Conexant cannot assure you that it will be profitable on an ongoing basis as
a stand-alone company. Prior to the spin-off, Conexant relied on Rockwell for
cash investments and various financial and administrative services.
CERTAIN PROVISIONS IN CONEXANT'S ORGANIZATIONAL DOCUMENTS AND RIGHTS AGREEMENT
MAY MAKE IT MORE DIFFICULT FOR A PERSON OR ENTITY TO ACQUIRE CONTROL OF
CONEXANT.
Conexant has established certain anti-takeover measures that may affect its
common stock, its $500 million 4% convertible subordinated notes issued in
February 2000 and its $350 million 4 1/4% convertible subordinated notes issued
in May 1999. Conexant's restated certificate of incorporation, Conexant's
by-laws, and its rights agreement with ChaseMellon Stockholder Services, L.L.C.,
as rights
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agent, dated as of November 30, 1998, and the Delaware General Corporation Law
contain several provisions that would make more difficult an acquisition of
control of Conexant in a transaction not approved by Conexant's board of
directors. Conexant's restated certificate of incorporation and by-laws include
provisions such as:
- the ability of Conexant's board of directors to issue shares of Conexant
preferred stock in one or more series without further authorization of
Conexant's stockholders;
- a fair price provision;
- a prohibition on stockholder action by written consent;
- a requirement that stockholders provide advance notice of any stockholder
nominations of directors or any proposal of new business to be considered
at any annual meeting of stockholders;
- a requirement that a supermajority vote be obtained to remove a director
for cause or to amend or repeal certain provisions of Conexant's restated
certificate of incorporation or by-laws;
- elimination of the right of stockholders to call a special meeting of
stockholders; and
- the division of Conexant's board of directors into three classes to be
elected on a staggered basis, one class each year.
These provisions do not exist in the corresponding Maker documents other
than the right to issue preferred stock.
Conexant's Rights Agreement gives Conexant's stockholders certain rights
that would substantially increase the cost of acquiring Conexant in a
transaction not approved by Conexant's board of directors. Maker does not have a
corresponding rights agreement.
In addition to the Rights Agreement and the provisions in Conexant's
certificate and Conexant's by-laws, Section 203 of the Delaware General
Corporation Law provides that, subject to certain exceptions, a corporation
shall not engage in any business combination with any interested stockholder
during the three-year period following the time that such stockholder becomes an
interested stockholder. The restrictions of Section 203 of the Delaware General
Corporation Law, in certain circumstances, make it more difficult for a person
who would be an interested stockholder to effect various business combinations
with a corporation during the three-year period. The provisions of Section 203
of the Delaware General Corporation Law provide that the stockholder approval
requirement may be avoided if a majority of the directors then in office
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder.
THERE ARE CERTAIN FEDERAL INCOME TAX CONSIDERATIONS THAT RELATE TO THE SPIN-OFF
FROM ROCKWELL.
In connection with the spin-off from Rockwell, Rockwell received a tax
ruling from the Internal Revenue Service stating that the spin-off would qualify
as a tax-free reorganization within the meaning of Section 368(a)(1)(D) of the
Internal Revenue Code of 1986, as amended. While the tax ruling generally is
binding on the Internal Revenue Service, the continuing validity of the tax
ruling is subject to certain factual representations and assumptions. Conexant
is not aware of any facts or circumstances that would cause such representations
and assumptions to be untrue.
The Tax Allocation Agreement, dated as of December 31, 1998, between
Conexant and Rockwell provides, among other things, that neither Rockwell nor
Conexant is to take any action inconsistent with, nor fail to take any action
required by, the request for the tax ruling or the tax ruling unless
(1) required to do by law, or (2) the other party has given its prior written
consent or, in certain
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circumstances, (3) a supplemental ruling permitting such action is obtained.
Rockwell and Conexant have indemnified each other against any tax liability
resulting from each entity's failure to comply with such provisions.
The Tax Allocation Agreement also provides that Conexant will be responsible
for any taxes imposed on Rockwell, Conexant or Rockwell shareowners as a result
of (1) the failure of the spin-off from Rockwell to qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(D) of the Code or
(2) the subsequent disqualification of the spin-off from Rockwell as a tax-free
transaction to Rockwell under Section 361(c)(2) of the Code, if such failure or
disqualification is attributable to certain actions taken after the spin-off
from Rockwell by or in respect of Conexant (including its subsidiaries) or its
shareowners, such as the acquisition of Conexant by a third-party at a time and
in a manner that would cause such taxes to be incurred.
In addition, Conexant effected certain tax-free intragroup spin-offs as a
result of Rockwell's spin-off of Meritor Automotive, Inc. on September 30, 1997.
The Tax Allocation Agreement provides that Conexant will be responsible for any
taxes imposed on Rockwell, Conexant or Rockwell shareowners in respect of those
intragroup spin-offs if such taxes are attributable to certain actions taken
after the spin-off from Rockwell by or in respect of Conexant (including its
subsidiaries) or its shareowners, such as the acquisition of Conexant by a
third-party at a time and in a manner that would cause such taxes to be
incurred.
If Conexant were to pay any of the taxes described above, such payment would
have a material adverse effect on Conexant's financial position, results of the
operations and cash flow.
RISKS RELATED TO MAKER'S BUSINESS
MAKER HAS A LIMITED OPERATING HISTORY AND LIMITED PROFITABILITY.
Maker was incorporated in 1994 and did not begin shipping products in volume
until 1997. Maker has a limited operating history upon which you may evaluate it
and its prospects. Although Maker's revenues have increased in recent years and
revenues for recent quarters have exceeded revenues for the same quarter for the
prior year, Maker achieved profitability for the first time in the second
quarter of 1999. In 1998, Maker incurred a net loss of $3.8 million for the
year. Maker intends to increase its operating expenses significantly in 2000,
particularly in research and development and sales and marketing. Maker's
operating results will be adversely affected if its revenues do not increase
significantly over the same period. Maker may not be able to achieve
profitability on a quarterly or an annual basis.
MAKER EXPERIENCES FLUCTUATIONS IN ITS OPERATING RESULTS DUE TO A NUMBER OF
FREQUENTLY CHANGING BUSINESS CONDITIONS.
Maker has experienced fluctuations in its operating results in the past and
expects such fluctuations to occur in the future due to a variety of factors.
These factors include:
- changes in demand by the end user for Maker's customers' products;
- timing and amount of orders from Maker's customers, including
cancellations and reschedulings;
- the gain or loss of significant customers, including as a result of
industry consolidation;
- changes in the mix of products sold by Maker, including the mix between
processors and development tools and application software;
- timing of "design wins" with related software application and development
tool revenue, which have much greater average selling prices than
individual communications processors;
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- market acceptance of Maker's current and new products;
- new product introductions by Maker or its competitors;
- variability of Maker's customers' product life cycles;
- erosion of average selling prices due to a number of factors, including
Maker's customers reaching volume production, rapid technological change,
price/performance enhancements and product obsolescence;
- cancellations, changes or delays of deliveries to Maker by its suppliers,
including suppliers of foundry capacity;
- the cyclical nature of the semiconductor industry;
- significant increases in expenses associated with the expansion of
operations; and
- general economic conditions.
Revenue derived from communications processors is dependent upon design
wins, production ramp-up and the timing of orders due to customers' management
of inventory. Revenue from the licensing of application software and development
tools primarily coincides with design wins at new customers and in limited
instances at existing customers. Maker's gross margins are impacted by changes
in the mix of revenue between software and communications processors. As a
result of these factors, Maker's lengthy sales cycle and its dependence on
relatively few customers whose order cycles vary significantly, Maker expects
its revenue and gross margins to fluctuate significantly from period to period.
These and other factors could materially and adversely affect Maker. You
should be aware that Maker cannot accurately forecast all of the above factors.
Maker believes that period-to-period comparisons are not necessarily meaningful
and should not be relied upon as indicative of future operating results.
Maker's operating results in a future quarter or quarters may fall below the
expectations of public market analysts or investors. In such event, the price of
its common stock will likely be materially and adversely affected.
MAKER HAS A COSTLY AND LENGTHY SALES CYCLE WHICH MAY INCREASE ITS EXPOSURE TO
CUSTOMER CANCELLATIONS OR SIMILAR RISKS.
Maker's sales cycle typically includes a three to six month evaluation and
test period, a twelve to eighteen month development period by its customers and
an additional three to six month period before a customer commences volume
production of equipment incorporating its products. This lengthy sales cycle
creates risks related to customer decisions to cancel or change product plans,
which could result in the loss of anticipated sales. During Maker's sales cycle,
its engineers assist its customers in implementing Maker solutions into their
product. Maker incurs significant research and development, selling and general
and administrative expenses as part of this process before it generates the
related revenues from such customers. Maker derives revenue from this process
only if its design is selected. Achieving a "design win" with a communications
systems vendor provides no assurance that such communications systems vendor
will ultimately ship products incorporating Maker's communications processors.
It is possible a customer may cancel orders even after Maker has achieved a
design win. Maker could be materially and adversely affected if customers
curtail, reduce or delay orders during its sales cycle, choose not to use its
products or choose not to release products employing Maker's communications
processors.
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MAKER'S REVENUES COULD DECREASE IF THERE IS A SLOWDOWN IN THE GROWTH IN DEMAND
FOR COMMUNICATIONS SYSTEMS.
Maker derives all of its revenues from the sale of communications
processors, development tools and application software to communications
markets. These markets are characterized by intense competition and rapid
technological change. Although these markets have grown rapidly in the last few
years, they may not continue to grow and a significant slowdown in these markets
may occur.
In addition, a substantial majority of Maker's revenues has been, and is
expected to continue to be, derived from sales of products for Asynchronous
Transfer Mode equipment. Maker has announced new products directed at
communications systems that are based on other technologies. If these other
technologies were to quickly achieve widespread acceptance before Maker's new
products have achieved market acceptance, or if Maker's new products do not
achieve market acceptance, Maker will be materially and adversely affected.
MAKER'S FUTURE SUCCESS DEPENDS UPON ITS CUSTOMERS' ACCEPTANCE OF ITS PROCESSORS
AS AN ALTERNATIVE TO TRADITIONAL SOLUTIONS.
Maker's future prospects depend on the acceptance of programmable
communications processors as an alternative to fixed-function devices and
general purpose processors traditionally used by communications systems vendors.
Maker would be materially and adversely affected if:
- communications systems vendors do not accept programmable communications
processors;
- communications systems vendors develop or acquire the technology to
develop such components internally rather than purchase Maker's products;
or
- Maker is otherwise unable to develop strong relationships with
communications systems vendors.
Maker's future prospects also depend upon acceptance by its customers of
third party sourcing for communications processors as an alternative to in-house
development. Many of Maker's current and potential customers have substantial
technological capabilities and financial resources which enable them to develop
fixed-function components and to program general purpose processors used in
their products. In the future, these customers may continue to use
internally-developed fixed-function components and general purpose processors or
may decide to develop or acquire components, technologies or communications
processors that are similar to, or are substitutes for, Maker's products.
MAKER'S FAILURE TO INTRODUCE NEW PRODUCTS ON A TIMELY BASIS COULD DIMINISH ITS
ABILITY TO ATTRACT AND MAINTAIN CUSTOMERS.
The communications systems industry is characterized by rapidly changing
technology, frequent product introductions and evolving industry standards.
Maker's products are based on these continually evolving industry standards. New
standards and protocols could render Maker's existing products unmarketable or
obsolete. Maker may not be able to successfully design and manufacture new
products that comply with these standards and protocols. Specifically, Maker's
future performance depends on a number of factors, including its ability to:
- identify target markets and emerging technological trends in these
markets, including new standards and protocols;
- define new products accurately;
- develop and maintain competitive products by improving performance and
adding innovative features that differentiate Maker's products from those
of its competitors;
- bring products to market on a timely basis at competitive prices; and
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- respond effectively to new technological changes or new product
announcements by others.
Maker cannot assure you that the design and introduction schedules for any
additions and enhancements to its existing and future products will be met, that
these products will achieve market acceptance or that Maker will be able to sell
these products at average selling prices that are favorable to Maker.
MAKER IS SUSCEPTIBLE TO COMPETITIVE PRESSURES IN THE MARKETPLACE.
Several of the largest electronics and semiconductor suppliers have recently
entered or indicated an intent to enter the communications market for
semiconductor devices. Intel announced an intention to expand its presence in
the networking business, and acquired Level One Communications, one of Maker's
stockholders. Maker had an agreement with Level One that required Maker to
disclose to Level One's successors, early versions of technology incorporated
into its MXT3010 Cell Processor, MXT3020 Co-Processor and related software
applications. Maker's agreement with Level One did not permit this technology to
be incorporated in a product that competes with Maker.
In addition, many of Maker's existing and potential customers internally
develop processors and other devices that attempt to perform all or a portion of
the functions performed by Maker's products.
Maker's ability to compete successfully in the rapidly evolving area of
high-performance communications processors depends on factors both within and
outside Maker's control, including:
- performance;
- price;
- features and functionality;
- adaptability of products to specific applications;
- support of product differentiation by Maker's customers;
- length of development cycle;
- design wins with major communications systems vendors;
- support for new communications standards and protocols;
- reliability;
- technical service and support; and
- protection of products by effective utilization of intellectual property
laws.
Maker's failure to compete successfully as to any of these or other factors
could materially and adversely affect Maker. To the extent that Maker's
competitors offer sales representatives more favorable terms or a higher volume
of business, Maker's sales representatives may decline to carry, or discontinue
carrying, Maker's products.
THE LOSS OF ANY OF MAKER'S KEY PERSONNEL OR THE FAILURE TO HIRE ADDITIONAL
PERSONNEL COULD IMPACT MAKER'S ABILITY TO MEET CUSTOMER AND TECHNOLOGICAL
DEMANDS.
Maker's success depends to a significant degree upon the continued
contributions of its key management, engineering, sales and marketing and
manufacturing personnel, many of whom would be difficult to replace. The loss of
the services of any of Maker's key personnel, the inability to attract or retain
qualified personnel in the future or delays in hiring required personnel,
particularly engineers
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and sales personnel, could materially and adversely affect Maker. In particular,
the loss of either of Maker's founders, William N. Giudice, President and Chief
Executive Officer, or Paul Bergantino, Vice President and Chief Technology
Architect, could reduce its future success.
Competition for highly skilled managerial, engineering, sales and marketing,
finance and manufacturing personnel is intense and there can be no assurance
that Maker will be successful in attracting and retaining such personnel.
MAKER NEEDS TO PROTECT ITS INTELLECTUAL PROPERTY AND AVOID INFRINGEMENT OF THE
INTELLECTUAL PROPERTY OF OTHERS.
Maker's success depends in part on its ability to obtain patents and
licenses and to preserve other intellectual property rights covering its
products and development and testing tools. In particular, the rapidly evolving
nature of the semiconductor industry requires that companies continually seek
and maintain patent protection of their technology. To that end, Maker has
obtained several domestic patents and has several foreign patent applications on
file. Maker intends to continue to seek patents on its inventions when
appropriate. The process of seeking patent protection can be time consuming and
expensive. Maker cannot ensure that:
- patents will issue from currently pending or future applications;
- its existing patents or any new patents will be sufficient in scope or
strength to provide meaningful protection or any commercial advantage to
Maker;
- foreign intellectual property laws will protect its intellectual property
rights; or
- others will not independently develop similar products, duplicate its
products or design around any patents issued to Maker.
Intellectual property rights are uncertain and involve complex legal and
factual questions. Maker may be unknowingly infringing on the proprietary rights
of others and may be liable for that infringement, which could result in
significant liability for Maker. Maker has not been informed that it infringes
any third party intellectual property rights that would prevent its use and sale
of its products. If Maker does infringe the proprietary rights of others, it
could be forced to either seek a license to intellectual property rights of
others or alter its products so that they no longer infringe the proprietary
rights of others. A license could be very expensive to obtain or may not be
available at all. Similarly, changing Maker's products or processes to avoid
infringing the rights of others may be costly or impractical.
If Maker was to become involved in a dispute regarding intellectual
property, whether Maker's or that of another company, it may have to participate
in legal proceedings. These types of proceedings may be costly and time
consuming for Maker, even if it eventually prevails. If Maker does not prevail,
it might be forced to pay significant damages, obtain a license or stop making a
product.
Maker also relies on trade secrets, proprietary know-how and confidentiality
provisions in agreements with employees and consultants to protect its
intellectual property. Other parties may not comply with the terms of their
agreements with Maker, and Maker may not be able to adequately enforce its
rights against these parties.
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FORWARD-LOOKING STATEMENTS
Some statements contained in this proxy statement/prospectus regarding
future financial performance and results and other statements that are not
historical facts are forward-looking statements. These statements relate to,
among other things, the merger, future capital expenditures, cost reduction,
cash flow and operating results. The words "expect," "project," "estimate,"
"predict," "anticipate," "believe," "plan," "intend," and similar expressions
are also intended to identify forward-looking statements. These statements are
subject to numerous risks, uncertainties and assumptions, including but not
limited to:
- general business and economic conditions in our operating regions,
including the rate of inflation, population, employment and job growth in
our markets;
- pricing pressures and other competitive factors;
- results of our efforts to reduce costs;
- our ability to achieve operating improvements;
- conditions to the consummation of the merger, including regulatory
approval, which could affect the timing of the merger;
- our estimates of the fair value of the assets and liabilities acquired;
- legal proceedings; and
- changes in state or federal legislation or regulations.
Other factors and assumptions not identified above could also cause the
actual results to differ materially from those set forth in the forward-looking
statements. Conexant and Maker do not undertake to update forward-looking
information contained in this proxy statement/prospectus to reflect actual
results, changes in assumptions or changes in other factors affecting the
forward-looking information. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those indicated in, contemplated by or implied by such
statements.
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THE MERGER
BACKGROUND OF THE MERGER
Since its spin-off in December of 1998, Conexant has evaluated a number of
strategic alternatives including potential merger partners. In August 1999, Oleg
Khaykin, Vice President -- Strategy and Business Development of Conexant, called
William Giudice, Chairman, President and Chief Executive Officer of Maker, to
schedule a meeting at the Network + Interop Trade Show in Atlanta.
During their initial meeting on September 14, 1999, Mr. Khaykin and
Mr. Giudice were joined by Raouf Halim, Senior Vice President and General
Manager of the Network Access Division of Conexant. Messrs. Khaykin, Giudice and
Halim discussed potential opportunities for cooperation including the potential
for a strategic acquisition. Although Mr. Giudice agreed that the two companies
should pursue further discussions about potential synergies, he emphasized that
the management of Maker was not interested in selling the company. Mr. Khaykin
and Mr. Giudice agreed to follow their meeting with technical discussions,
subject to the execution of a confidentiality agreement.
On September 24, 1999, the board of directors of Maker held a meeting at
which Mr. Giudice informed the board of the recent discussions with Conexant
regarding a potential business relationship. Maker director Louis Tomasetta was
recused from this discussion and from participating during subsequent
discussions of potential strategic partnerships due to Dr. Tomasetta's position
as chief executive officer and director of Vitesse Semiconductor Corporation,
which the board knew was one potential strategic partner for Maker. After a
brief discussion of a potential business alliance with Conexant and other
business developments in the network processor and communication processor
market, the board of directors agreed that Maker should not actively pursue a
sale transaction. The Maker board, however, decided that Maker should hire an
investment banking firm to provide financial advisory services with respect to
any potential strategic transactions.
After interviewing prospective investment banks, Mr. Giudice and various
board members discussed the merits of each investment bank. Maker executed an
agreement for investment banking and advisory services with Deutsche Bank on
October 15, 1999.
During the period between October 15, 1999 and October 30, 1999, Deutsche
Bank met with management to review Maker's operations and its position in the
network processor and communications processor market and to discuss
developments in the market that might create attractive strategic opportunities
to combine Maker's products and technologies with products and technologies
offered by other companies in this industry. During that period, Deutsche Bank
conducted a broad survey of potential strategic partners and ultimately
contacted ten companies that Deutsche Bank believed might have interest in a
strategic transaction with Maker, including Conexant. The purpose of this survey
was to provide the Maker board of directors and management team with an updated
understanding of the level of interest among selected potential strategic
partners in pursuing discussions with Maker along with strengths and weaknesses
of such potential partners.
On October 31, 1999, Maker held a conference call with all Maker directors
except for Dr. Tomasetta. On the call, representatives of Deutsche Bank
presented the results of the Deutsche Bank survey to the board. The board of
directors and management discussed the potential benefits of a variety of
strategic alternatives and weighed those potential benefits against the risk of
any resulting disruptions to Maker's business. Maker's legal counsel reviewed
and commented on the duties of the board of directors. Maker's legal counsel
advised the board of directors on their responsibilities as board members with
regard to both the interests of Maker stockholders and Maker's long term
strategy and answered questions regarding the acquisition process and their
fiduciary duties to Maker stockholders. The board of directors concluded that
Maker should continue to explore strategic alternatives that would enhance
Maker's business, and directed Deutsche Bank to continue their contact with the
companies reviewed in the survey regarding a potential relationship.
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On November 4, 1999, Mr. Khaykin contacted Michael Rubino, Maker's Vice
President of Finance and Operations and Chief Financial Officer in order to
arrange a meeting for technical discussions pending the execution of a mutually
acceptable confidentiality agreement. At this time, Mr. Rubino informed
Mr. Khaykin that although Maker's board was not interested in selling the
company, Maker had engaged Deutsche Bank as a financial advisor with respect to
any potential strategic transactions. Mr. Rubino then communicated to
Mr. Khaykin that Mr. Khaykin should contact Deutsche Bank in order to pursue any
potential transaction with Maker.
On November 8, 1999, Deutsche Bank informed Maker that two companies,
Conexant and Company A had an interest in meeting with senior management of
Maker to discuss potential strategic relationships, subject to the execution of
a confidentiality agreement.
On November 16, 1999, management representatives from Maker and Conexant
presented overviews of the respective company's organizations, business and
product portfolios and market opportunities. The members of Maker's management
team included Mr. Giudice, Mr. Rubino, Paul Bergantino, Maker's Chief Technology
Officer, Thomas Medrek, Maker's Vice President of Marketing and Walter Jones,
Maker's Vice President of Engineering. The members of Conexant's evaluation team
present at the meeting included Mr. Khaykin, Mr. Halim, Sam Spencer, Warner
Andrews and Rick Burns. Also at this meeting were representatives of Deutsche
Bank. At the completion of this meeting, Conexant re-confirmed that they had a
strong interest in continuing discussions regarding a potential transaction with
Maker.
On November 17, 1999, management representatives from Maker and Company A
presented overviews of the respective company's organizations, business and
product portfolios and market opportunities. The members of Maker's senior
management team included Mr. Giudice, Mr. Rubino, Mr. Bergantino, Mr. Medrek and
Mr. Jones. Also at this meeting were representatives of Deutsche Bank and
financial advisors to Company A. At the completion of this meeting, Company A
did not indicate an interest in pursuing a potential strategic transaction with
Maker.
On November 21, 1999, Mr. Halim of Conexant telephoned Mr. Giudice to
reconfirm Conexant's interest in pursuing an acquisition of Maker, pending the
completion of due diligence on several technical issues. Mr. Halim did not
discuss any valuation of Maker, any financial terms of a potential transaction
or make any acquisition offer. Mr. Giudice responded that Conexant should
contact Deutsche Bank in order to pursue any potential transaction with Maker.
On November 23, 1999, a representative of Company B contacted Mr. Giudice to
propose a meeting with Mr. Giudice to discuss potential synergies between
Company B and Maker.
On November 30, 1999, Mr. Khaykin and Mr. Halim met telephonically with the
board of directors of Conexant during which meeting Mr. Khaykin and Mr. Halim
discussed the possibility of a business combination between Conexant and Maker.
The Conexant board authorized Mr. Khaykin and Mr. Halim to continue discussions
with Maker.
During the period between November 17, 1999 and December 1, 1999
representatives of Deutsche Bank and Mr. Khaykin had several discussions
regarding Conexant's interest in pursuing a potential transaction with Maker. On
December 1, 1999, representatives of Credit Suisse First Boston Corporation,
Conexant's financial advisor, and Deutsche Bank, on behalf of their clients,
engaged in discussions regarding the process, timing and financial aspects of a
potential combination of Conexant and Maker. On that same day, Mr. Giudice and
Mr. Rubino of Maker met with a representative of Company B to discuss market
consolidation, the network processor and communications processor market
generally and potential synergies between Maker and Company B. At the end of the
meeting, the Company B representative expressed a desire to continue discussions
concerning a potential acquisition of Maker by Company B and made a general
statement about the financial elements that
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<PAGE>
such a transaction might entail including a range of potential valuations.
Mr. Giudice advised Company B that any inquiries regarding a potential
transaction should be directed to Deutsche Bank.
On December 2, 1999, Conexant, through Credit Suisse First Boston, submitted
preliminary proposal terms for the potential acquisition of Maker, which
included merger consideration consisting of 0.57 of a share of Conexant common
stock for each share of Maker common stock. This offer was contingent on the
completion of due diligence. Mr. Giudice informed the Maker board of directors
of the preliminary terms from Conexant and the Maker board agreed to meet to
discuss the potential transaction.
The entire Maker board of directors other than Dr. Tomasetta met on December
3, 1999. Also present, at the invitation of the board, were Mr. Rubino,
representatives of Deutsche Bank, and telephonically Mr. Stein of Hutchins,
Wheeler & Dittmar, counsel to Maker. Representatives of Deutsche Bank presented
discussion materials, which reviewed the following points:
- an analysis of the Conexant proposal including a review of the preliminary
proposal, stock market valuation and trading data, analyst reviews of
Conexant, financial impact of the merger, and the strategic fit and
rationale for a combination;
- an analysis of the potential Company B proposal based on the range of
valuations covered in general discussions with Company B including stock
market valuation and trading data, analyst reviews of Company B, financial
impact of the merger, and the strategic fit and rationale for a
combination;
- a comparative analysis of the terms and benefits of each of the Conexant
and Company B proposals;
- a summary of discussions with other companies that Deutsche Bank reviewed
in its October market survey; and
- the fact that Company C had indicated a potential interest in discussions
but that after initial inquiries were made, Company C had not responded
further.
The board considered the materials presented by Deutsche Bank and engaged in
a full discussion about the benefits of a potential strategic acquisition of
Maker and the value that an acquisition would represent for Maker stockholders,
relative to other alternatives. The board concluded that Maker should continue
to explore the potential transactions and directed management and Deutsche Bank
to pursue further discussions and to seek clarifications regarding the
prospective transactions for formal review at the regularly scheduled board
meeting of December 8, 1999.
On the same day, Company B confirmed its continuing interest in Maker, and
informed Mr. Giudice that Company B would be hiring investment bankers in
connection with Company B's potential acquisition of Maker. Mr. Giudice then
informed Company B that the Maker board would be meeting to review proposals
formally on December 8, 1999.
Also on December 3, 1999, Mr. Giudice spoke with a representative of Company
C and several members of Company C's management team. Mr. Giudice reviewed the
status and prospects of Maker's business and products. The following day Company
C informed Mr. Giudice that they were not interested in pursuing a strategic
transaction with Maker at that time.
There were further discussions on December 3, 1999 between Credit Suisse
First Boston and Deutsche Bank, on behalf of their clients, regarding process
and the financial aspects of a potential transaction. Certain outstanding issues
relating to the preliminary term sheet of December 2, 1999 were clarified and
arrangements were made for technical and business due diligence presentations
and discussions to take place in Boston on December 6, 1999 and December 7,
1999. Prior to the
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<PAGE>
commencement of the due diligence investigation of Maker by Conexant, Maker and
Conexant finalized and executed a confidentiality agreement on December 4, 1999.
On December 6, 1999, Conexant's technical evaluation team discussed with
technical representatives of Maker the potential integration of Maker products
and plans. Company B's financial advisor also contacted Deutsche Bank to discuss
the process and timing for the review of proposals and other issues regarding
Company B's interest in pursing a transaction. Later that day, Maker received a
proposal from Company B that included its proposed financial terms and other
conditions including a requirement that the transaction would qualify as a
pooling of interests, a requirement for a limited period of exclusive
negotiation and a requirement that voting agreements be executed by several of
Maker's key executives and significant shareholders. Representatives of Deutsche
Bank then discussed certain terms of the Company B proposal with Company B's
financial advisors.
On December 7, 1999, Dwight Decker, Chairman and Chief Executive Officer of
Conexant and other executives of Conexant and other executives of Conexant
presented an overview of Conexant's business and financial statements and
outlook to representatives from Maker's senior management team. Representatives
of Credit Suisse First Boston and Deutsche Bank were present as well.
Also on December 7, 1999, Mr. Giudice and the CEO of Company B scheduled a
meeting between the management team of Maker and the CEO of Company B to review
the potential synergy of a combination for the morning of December 8, 1999.
On the morning of December 8, 1999, the CEO of Company B met with Maker's
senior management and representatives of Deutsche Bank to discuss Company B's
business prospects, market risks, potential synergies in connection with Maker
and reasons for a consolidation with Maker. After that meeting, the CEO of
Company B informed Mr. Giudice that Company B was raising the exchange ratio in
its offer.
Later that day, Conexant submitted a revised proposal to Maker with an
increased exchange ratio of 0.61 of a share of Conexant common stock for each
share of Maker common stock. Among other financial terms, the offer included a
requirement for a limited period of exclusive negotiation and voting agreements
from significant stockholders. A term of the Conexant proposal was that the
existing Maker stock option plans would be assumed.
On the afternoon of December 8, 1999, the Maker board, other than
Dr. Tomasetta, met and discussed the merger proposals from Conexant and Company
B. Present by invitation of the board were Mr. Rubino and representatives of
Deutsche Bank and Hutchins, Wheeler & Dittmar. The Maker board of directors
engaged in a broad discussion of the merits of pursuing a transaction and of the
relative merits of the proposals from Conexant and Company B including the
financial terms, operating fit, long term strategic value and the risks
associated with the alternative proposals.
The board of directors considered that the Conexant proposal represented a
2.5% premium over the Company B proposal based on the then current stock price.
The board also considered that the relative movements of the Conexant and
Company B shares over a longer period showed a range of results. At times the
value of Company B's proposal would have been higher than the Conexant proposal.
The board concluded that the values implied by the exchange ratios offered in
the two proposals represented a significant premium to Maker's recent valuation
but did not cause the board of directors to favor one proposal over the other.
The board of directors then considered the relative non-financial advantages of
each offer.
The board discussed factors that it considered favorable to the Conexant
proposal including:
- Fit of market vision and ability to realize potential synergies:
- The fact that Conexant is undertaking significant initiatives in both
network access and core product areas which Maker management also
believes may fulfill a substantial market
39
<PAGE>
opportunity. This better fit lowers Maker management's perceived risk of
being able to realize the available synergies.
- Technology synergies:
- Conexant was developing or had already developed a number of the
technologies that may be necessary to maximize Maker's market
opportunities, but were not yet available to Maker.
- Complementary initiatives with key customers:
- Conexant has long-established relationships and joint technology
developments with major OEM customers. These efforts provide Maker access
to highly complementary technology and afford Maker an opportunity to
participate in an emerging technology with the key developers.
- Benefits of scale:
- As the communications OEM vendors attempt to reduce the number of
suppliers they deal with, a combination with Conexant would reduce the
risks associated with Maker potentially being too small to be a strategic
supplier.
- Conexant also has significant investments in CMOS fabrication capacity
which can be expanded to ensure capacity to improve time-to-market; to
enhance performance characteristics by controlling the manufacturing
process; and to cut device cost of goods sold significantly.
- Financial resources:
- Conexant has a much larger sales and support organization, particularly
outside North America, while Maker is just beginning to build the
requisite sales and support infrastructure.
- Risk of closing the transaction:
- Conexant's proposal was to complete the transaction under accounting
rules as a purchase transaction. At the time Maker received the proposal
from Company B, it was unclear whether Maker could enter into a
transaction that would qualify as a pooling transaction.
The board also discussed certain factors that it considered favorable to
both proposals including:
- Liquidity:
- The daily trading volume of both Company B's shares and Conexant's shares
is significantly greater than Maker's, thereby affording Maker's
shareholders greater liquidity.
- Premium:
- Both proposals reflected a significant premium to Maker's recent trading
price.
- Enhanced research coverage:
- Both Company B and Conexant enjoy broad stock market research analyst
coverage and both were highly rated.
- Lower volatility:
- The volatility in Company B's shares and Conexant's shares was
significantly lower than the volatility observed for Maker.
The board discussed certain factors that it considered favorable to the
Company B proposal including a lower uncertainty with regard to cultural fit and
a potentially greater impact from the success of Maker's products on the
combined company's value based on Maker representing a larger share of combined
results in a combination with Company B.
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<PAGE>
At the conclusion of those discussions, the board of directors concluded
that because of the substantial premium over the current stock price represented
by both offers it was in the best interests of the Maker stockholders to
continue discussions, but that since both companies had required an exclusive
right of negotiation, Maker would be required to choose one offer to begin
negotiations.
Because of the above factors the Maker board authorized management to pursue
an acquisition by Conexant and to enter into an exclusivity agreement subject to
clarification with regard to certain terms of the proposal. Following the
meeting, representatives of Deutsche Bank and Credit Suisse First Boston
negotiated, on behalf of their clients, the conditions of the Conexant term
sheet and later that day Mr. Giudice executed the term sheet with Conexant
establishing exclusivity from December 8, 1999 through December 17, 1999. Later
on December 8, 1999, Mr. Giudice informed Company B that Maker would be
negotiating exclusively with another company.
On December 11, 1999, Conexant's counsel sent a draft merger agreement to
Maker and Maker's advisors. From December 11, 1999 through December 16, 1999 at
the offices of Hutchins, Wheeler & Dittmar, representatives of Conexant
conducted detailed business, legal and accounting due diligence.
During the period from December 13, 1999 through December 18, 1999,
Conexant, Maker and their representatives conducted further due diligence and
negotiated the terms of the merger agreement. There were phone calls and/or
meetings between the financial advisors during this period regarding the
financial aspects of a transaction and other open points. Negotiations
concerning the merger agreement and the related documents, including the
non-compete agreements and employment agreements to be executed by several
members of Maker senior management and the voting agreements to be signed by
several members of Maker senior management as well as several significant
shareholders of Maker, continued through December 18, 1999.
On December 16, 1999, the entire Maker board of directors met to review the
status of the negotiations of the terms of the Conexant acquisition proposal.
The Maker board discussed their fiduciary duties to Maker and to the
stockholders of Maker with respect to the acceptance of any acquisition
proposal. The Maker board discussed the terms of the proposed definitive
acquisition agreement with Conexant and expressed concern regarding several of
the conditions and terms. The board of directors authorized Mr. Giudice and
Maker's advisors to continue negotiations and scheduled a meeting to review the
possible definitive agreement with Conexant for the morning of December 18,
1999.
On December 16, 1999, Deutsche Bank was advised of an unsolicited revision
of the offer from Company B which included an increase in the proposed exchange
ratio. Mr. Giudice called each board member, other than Dr. Tomasetta, and
relayed the terms of the increased offer from Company B. Maker informed Company
B that Maker was subject to an exclusivity agreement with Conexant. Deutsche
Bank disclosed the terms of the revisions to Conexant as required by the
exclusivity agreement. On that same day, the Conexant board held a special
meeting to discuss the situation with Maker.
On December 17, 1999, Deutsche Bank received another unsolicited revision of
the offer from Company B that further increased the exchange ratio offered by
Company B. Mr. Giudice called each board member, other than Dr. Tomasetta, and
relayed the terms of the increased offer from Company B. Deutsche Bank disclosed
the terms of the revision to Conexant as required by the exclusivity agreement,
and confirmed that the Maker board of directors would meet to consider the
proposals on December 18, 1999.
In the morning of December 18, 1999, Conexant submitted a revised proposal
with an exchange ratio of 0.66 of a share of Conexant common stock for each
share of Maker common stock. Conexant also informed Maker that its proposal was
only valid until the conclusion of the December 18, 1999 Maker board of
directors meeting.
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<PAGE>
On the morning of December 18, 1999, the Maker board of directors other than
Dr. Tomasetta met to discuss the status of the acquisition proposals. Present by
invitation of the board were Mr. Rubino, representatives of DeutscheBank and
Hutchins, Wheeler & Dittmar. The meeting was held at the offices of Hutchins,
Wheeler & Dittmar.
The representatives of Deutsche Bank presented materials reviewing the two
acquisition offers. The board again engaged in a broad discussion of the merits
of pursuing a transaction and of the relative merits of the proposed definitive
agreement with Conexant and the term sheet from Company B, including the
financial terms, operating fit, long term strategic value and the risks
associated with the two proposals. The board noted that Company B's proposal now
represented a 4.4% premium over Conexant's proposal based on the market prices
of the shares of Conexant and Company B as of the close of trading on December
17, 1999.
The board also discussed and reconfirmed the non-financial factors (updated
to December 18, 1999) it had previously considered at its meeting on December 8,
1999. The board's review also highlighted the fact that Conexant's proposal was
now supported by extensive due diligence and negotiation while Company B's
proposal still remained subject to due diligence, negotiation of agreements and
the requirement that the transaction qualify as a pooling.
Deutsche Bank delivered its opinion to Maker that the exchange ratio of the
Conexant proposal was fair, from a financial point of view, to the stockholders
of Maker.
Based on the material presented and the discussion, the board concluded that
the proposal from Conexant was superior to that of Company B and was in the best
interests of Maker and its stockholders.
The board authorized Mr. Giudice to conduct final negotiations and to
execute the definitive agreement with Conexant. On December 18, 1999, the merger
agreement, including the disclosure schedules, the voting agreements and the
employment agreements, was executed following final negotiations.
Before the opening of trading on December 20, 1999, Conexant and Maker
publicly announced the transaction in a joint press release.
MAKER'S REASONS FOR THE MERGER; RECOMMENDATION OF THE MAKER BOARD
The Maker board of directors has determined unanimously, except with respect
to one director who abstained based on a conflict of interest, that the terms of
the merger agreement and the merger are fair to, and in the best interests of,
Maker and its stockholders. Accordingly, the Maker board of directors has
approved the merger agreement and recommends that you vote for approval of the
merger agreement and the transactions contemplated by the merger agreement,
including the merger.
In reaching its decision to approve the merger agreement and recommend the
merger, the Maker board of directors consulted with Maker's management, as well
as its legal counsel and financial advisor. Among the factors considered by the
Maker board of directors in its deliberations were the following:
(i) TERMS OF THE TRANSACTION. In reaching its decision, the Maker board
of directors reviewed Maker's business, results of operations, and near- and
longer-term prospects as an independent entity. Maker's board of directors
also considered Conexant's strategic position in the industry, its
management, and its near- and longer-term prospects. The Maker board of
directors viewed Conexant as having a track record which demonstrates a
clear ability to compete effectively in the semiconductor industry and the
board looked upon the historical trading range of Conexant common stock as
reflecting the market's favorable view of Conexant's historical operating
performance. In analyzing the terms of the proposed transaction with
Conexant, the Maker board
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<PAGE>
of directors took into account the volatile trading environment then
prevailing; the number of shares of Conexant common stock to be delivered to
Maker stockholders in the merger; and the resulting relative interests of
Maker and Conexant stockholders in the equity of the combined company.
(ii) SYNERGIES. The Maker board of directors also took into account the
expectation that the merger would result in certain cost synergies which, if
achieved, might improve the operating results of Conexant.
(iii) ADVICE AND OPINION OF FINANCIAL ADVISOR. The Maker board of
directors considered the advice of its financial advisor, Deutsche Bank, and
reviewed the detailed financial analyses and other information presented by
Deutsche Bank. The Maker board of directors considered the opinion of
Deutsche Bank that, as of December 18, 1999, and based on the matters set
forth in its written opinion as of that date, the exchange ratio was fair,
from a financial point of view, to the stockholders of Maker.
(iv) STRATEGIC ALTERNATIVES. The Maker board of directors' deliberations
included consideration of the likelihood of effecting an alternative
transaction and the Maker board of directors considered an unsolicited
alternative acquisition proposal received by it. The Maker board of
directors took into account the views expressed by Maker management that
Conexant occupied a premier position in the industry as the world's largest
independent company focused exclusively on providing semiconductor products
for communications electronics, and that Conexant appeared to be a good
strategic fit. Specifically, the Maker board of directors believed that
Conexant would be a good strategic fit based on:
- similar market vision and product groups between Conexant and
Maker;
- technological developments made or planned by Conexant which are
necessary to the success of Maker's products;
- initiatives and relationships between Conexant and major OEM
customers which are complementary to Maker's technology;
- influence of size in the industry and the large size of Conexant;
- financial resources of Conexant;
- low risk of closing the transaction due to its treatment under the
purchase method of accounting;
- increased liquidity available to Maker stockholders after the
proposed merger; and
- lower volatility of the Conexant stock to be received by Maker
stockholders in the transaction.
The board was conscious of the fact that the merger agreement permits Maker
to furnish to third parties, pursuant to confidentiality agreements,
non-public information with respect to Maker in response to requests that
are unsolicited or that do not otherwise result from a breach of the merger
agreement, to participate in discussions and negotiations with potential
third party acquirers under certain circumstances and to terminate the
merger agreement in order to accept third party offers. The Maker board of
directors nevertheless recognized that the terms of the voting agreements
executed by holders of approximately 36% of the outstanding shares of Maker
common stock and the termination fee in the amount of $25,000,000, which
would be required to be paid by Maker under the merger agreement were Maker
to accept an offer from a third party, might discourage any such third party
from seeking to acquire Maker. In addition, Maker would be required to pay
Conexant's reasonable out-of-pocket expenses, up to $3,000,000, in the event
of such a termination of the merger agreement.
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(v) TAX AND ACCOUNTING TREATMENT OF THE TRANSACTION.The Maker board of
directors considered that the merger is expected to be tax-free for federal
income tax purposes to Maker stockholders receiving Conexant common stock
and to be accounted for under the purchase method of accounting for business
combinations.
(vi) INDUSTRY TRENDS.The Maker board of directors was cognizant of
industry trends toward consolidation and the advantages that might be
expected to accrue to the combined company in terms of greater size and
financial strength in competing in the marketplace. The Maker board of
directors recognized that the combination might broaden the customer base,
facilitate geographic expansion and make possible economies of scale which
would enhance the ability of the combined company to penetrate its market.
In the light of the foregoing factors, the Maker board of directors decided
that it is in the best interests of Maker and its stockholders to combine Maker
with Conexant at this time so that the combined enterprise can embark upon an
effort to capitalize upon the opportunity afforded by the combination to compete
more effectively in the industry. The Maker board of directors did not assign
relative weights to the foregoing factors or determine that any factor was of
particular importance. Rather, the Maker board of directors viewed its position
and recommendations as being based on the totality of the information presented
to and considered by it.
OPINION OF DEUTSCHE BANK, FINANCIAL ADVISOR TO MAKER
Deutsche Bank has acted as financial advisor to Maker in connection with the
merger. At the December 18, 1999 meeting of the Maker board of directors,
Deutsche Bank delivered its oral opinion, subsequently confirmed in writing as
of the same date, to the effect that, as of the date of such opinion, based upon
and subject to the assumptions made, matters considered and limits of the review
undertaken by Deutsche Bank, the exchange ratio between Maker and Conexant was
fair, from a financial point of view, to Maker stockholders.
THE FULL TEXT OF DEUTSCHE BANK'S WRITTEN OPINION, DATED DECEMBER 18, 1999,
WHICH INCLUDES THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN BY DEUTSCHE BANK IN CONNECTION WITH THE OPINION, IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED BY REFERENCE.
MAKER STOCKHOLDERS ARE URGED TO READ THE DEUTSCHE BANK OPINION IN ITS ENTIRETY.
THE SUMMARY OF THE DEUTSCHE BANK OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE DEUTSCHE BANK OPINION.
In connection with Deutsche Bank's role as financial advisor to Maker, and
in arriving at its opinion, Deutsche Bank has, among other things:
- reviewed certain publicly available financial information and other
information concerning Maker and Conexant and certain internal analyses
and other information furnished to it by Maker and Conexant;
- held discussions with members of the senior management of Maker and
Conexant regarding the businesses and prospects of their respective
companies and the joint prospects of a combined enterprise;
- reviewed the reported prices and trading activity for the common stock of
both Maker and Conexant;
- compared certain financial and stock market information for Maker and
Conexant with similar information for selected companies whose securities
are publicly traded;
- reviewed the financial terms of selected recent business combinations
which it deemed comparable in whole or in part;
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<PAGE>
- reviewed the terms of the merger agreement and certain related documents;
and
- performed such other studies and analyses and considered such other
factors as it deemed appropriate.
In preparing its opinion, Deutsche Bank did not independently verify any
information concerning Maker or Conexant, including any financial information,
forecasts or projections considered in connection with the rendering of its
opinion. Accordingly, for purposes of its opinion, Deutsche Bank assumed and
relied upon the accuracy and completeness of all such information. Deutsche Bank
did not conduct a physical inspection of any of the properties or assets of
Maker or Conexant, and did not prepare or obtain any independent evaluation or
appraisal of any of the assets or liabilities of Maker or Conexant.
With respect to the financial forecasts and projections made available to
Deutsche Bank and used in its analysis, including analyses and forecasts of
certain cost savings, operating efficiencies, revenue effects and financial
synergies expected by Maker and Conexant to be achieved as a result of the
merger, Deutsche Bank assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management's of Maker or Conexant. In rendering its opinion, Deutsche Bank
expressed no view as to the reasonableness of such forecasts and projections,
including the expected financial synergies, or the assumptions on which they are
based.
The Deutsche Bank opinion was necessarily based upon economic, market and
other conditions in effect on, and the information made available to Deutsche
Bank as of, the date of such opinion.
For purposes of rendering its opinion, Deutsche Bank assumed that, in all
respects material to its analysis:
- the representations and warranties of Maker and Conexant contained in the
merger agreement were and are true and correct;
- Maker and Conexant will each perform all of the covenants and agreements
to be performed by it under the merger agreement and all conditions to the
obligations of each of Maker and Conexant to consummate the merger will be
satisfied without any waiver thereof;
- all material governmental, regulatory or other approvals and consents
required in connection with the consummation of the transactions
contemplated by the merger agreement will be obtained; and
- in connection with obtaining any necessary governmental, regulatory or
other approvals and consents, or any amendments, modifications or waivers
to any agreements, instruments or orders to which either Maker or Conexant
is a party, no limitations, restrictions or conditions will be imposed or
amendments, modifications or waivers made that would have a material
adverse effect on Maker or Conexant or materially reduce the contemplated
benefits of the merger.
In addition, Deutsche Bank was advised by Maker, and accordingly assumed for
purposes of its opinion, that the merger will be tax-free to each of Maker and
Conexant and their respective stockholders and that the merger will be accounted
for under the purchase method of accounting.
Set forth below is a brief summary of certain financial analyses performed
by Deutsche Bank in connection with its opinion and reviewed with the Maker
board of directors at its meeting on December 18, 1999.
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HISTORICAL STOCK PERFORMANCE. Deutsche Bank reviewed and analyzed recent
and historical market prices and trading volume for Conexant common stock and
Maker common stock and compared such market prices to certain stock market and
industry indices. On the basis of this analysis, Deutsche Bank calculated that
the per share price of Conexant common stock appreciated 760.2% in the year
prior to, and traded an average of 3,394,190 shares each day in the 30 trading
days prior to, the December 20, 1999 announcement of the merger. Deutsche Bank
compared the performance of Conexant common stock with Maker common stock, which
appreciated 163.5% between its May 10, 1999 initial public offering and the
announcement and which traded an average of 269,844 shares each day for the 30
days prior to the announcement.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Deutsche Bank compared
certain financial information and commonly used valuation measurements for
Conexant and Maker to corresponding information and measurements for a group of
17 publicly traded companies with operations in the communications integrated
circuits market. Those companies included:
<TABLE>
<S> <C>
- Applied Micro Circuits Corp.; - MMC Networks, Inc.;
- Analog Devices, Inc.; - PMC-Sierra, Inc.;
- Atmel Corp.; - Qualcomm Inc.;
- Broadcom Corp.; - STMicroelectronics N.V.;
- DSP Communications Inc.; - Terayon Communications Systems;
- Galileo Technology Ltd.; - Texas Instruments Inc.;
- HI/FN Inc.; - Transwitch Corp.; and
- Intel Corp.; - Vitesse Semiconductor Corp.
- LSI Logic Corp.;
</TABLE>
These companies are referred to below collectively as the Selected
Companies.
The financial information and valuation measurements analyzed by Deutsche
Bank included:
- common equity market valuation;
- operating performance;
- ratios of common equity market value as adjusted for debt and cash
(Enterprise Value) to revenues and earnings before interest expense and
income taxes (EBIT) as adjusted to exclude non-recurring items; and
- ratios of common equity market prices per share (Equity Value) to earnings
per share (EPS).
To calculate the trading multiples for Conexant, Maker and the Selected
Companies, Deutsche Bank used publicly available information concerning
historical and projected financial performance, including earnings estimates
reported by the Institutional Brokers Estimate System (IBES) or by individual
securities firms' equity research departments, including in certain cases
research from Deutsche Bank. IBES is a data service that monitors and publishes
compilations of earnings estimate by selected research analysts regarding
companies of interest to institutional investors.
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The following table summarizes the Enterprise Value to Revenue and EBIT
multiples that Deutsche Bank calculated for Maker, Conexant and the Selected
Companies:
<TABLE>
<CAPTION>
ENTERPRISE VALUE TO:
-----------------------------------------------------------------
TRAILING REVENUES 1999 REVENUES 2000 REVENUES TRAILING EBIT
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Selected Companies
High........................... 64.4x 53.0x 35.5x 224.0x
Mean........................... 20.0x 17.9x 12.8x 80.8x
Median......................... 11.7x 11.3x 8.0x 62.1x
Low............................ 4.4x 4.2x 3.2x 23.2x
Maker.................................. 49.6x 44.3x 27.4x *
Conexant............................... 11.5x 10.2x 8.1x 177.4x
</TABLE>
- ------------------------
* Indicates a negative, or not meaningful, value.
The following table summarizes the Equity Value to EPS multiples that
Deutsche Bank calculated for Maker, Conexant and the Selected Companies:
<TABLE>
<CAPTION>
EQUITY VALUE TO:
----------------------------------
TRAILING EPS 1999 EPS 2000 EPS
------------ -------- --------
<S> <C> <C> <C>
Selected Companies
High................................... 271.3x 262.0x 2331.3x
Mean................................... 106.9x 94.6x 201.1x
Median................................. 78.8x 76.1x 56.0x
Low.................................... 38.0x 36.2x 27.3x
Maker.......................................... 1333.8x 570.8x 244.6x
Conexant....................................... 217.6x 127.8x 81.9x
</TABLE>
None of the Selected Companies is identical to Conexant or Maker.
Accordingly, Deutsche Bank believes the analysis of publicly traded comparable
companies is not simply mathematical. Rather, it involves complex considerations
and qualitative judgments, reflected in Deutsche Bank's opinion, concerning
differences in financial and operating characteristics of the comparable
companies and other factors that could affect the public trading value of the
comparable companies.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Deutsche Bank reviewed the
financial terms, to the extent publicly available, of:
- 46 proposed, pending or completed mergers and acquisition transactions
since January 2, 1998 involving publicly traded target companies in the
communications equipment industry (the Communications Transactions); and
- 24 proposed, pending or completed mergers and acquisition transactions
since January 2, 1998 involving target companies in the communications
integrated circuit (IC) industry (the Communications IC Transactions).
For both the Communications Transactions and the Communications IC
Transactions (collectively, the Selected Transactions), Deutsche Bank calculated
various financial multiples and premiums over market value based on publicly
available information for each of the Selected Transactions. Deutsche Bank then
compared these financial multiples and premiums to the corresponding financial
multiples and premiums for the merger (based on the per share market price 30
days prior to the December 20, 1999 announcement of the merger and as of
December 17, the last trading day prior to the announcement), based on the 0.66
exchange ratio for Conexant shares to be received in the merger.
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Of the 24 Communications IC Transactions considered, four were with publicly
traded target companies and seven had publicly available financial data. With
respect to the Communications Transactions and the seven Communications IC
Transactions with publicly available financial data, Deutsche Bank calculated
the following multiples, and with respect to the Communications Transactions and
the four Communications IC Transactions with publicly traded target companies,
Deutsche Bank calculated the following premiums:
<TABLE>
<CAPTION>
ENTERPRISE VALUE TO:
---------------------
TRAILING TRAILING 30-DAY ONE-DAY
REVENUES EBIT PREMIUM PREMIUM
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Communications
Transactions
High............................. 33.8x 112.7x 99.7% 83.3%
Mean............................. 5.6x 46.0x 40.6% 29.1%
Median........................... 3.2x 41.1x 38.5% 28.6%
Low.............................. 0.8x 7.6x (15.8%) (21.7%)
</TABLE>
<TABLE>
<CAPTION>
ENTERPRISE VALUE TO:
---------------------
TRAILING TRAILING 30-DAY ONE-DAY
REVENUES EBIT PREMIUM PREMIUM
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Communications IC
Transactions
High.............................. 24.0x 282.3x 50.9% 79.7%
Mean.............................. 9.7x 109.6x 37.9% 38.6%
Median............................ 8.6x 55.0x 36.9% 36.4%
Low............................... 2.4x 46.0x 26.9% 1.8%
Merger.................................... 67.7x * 92.0% 34.2%
</TABLE>
- ------------------------
* Indicates a negative, or not meaningful, value.
As part of its review of the Communications IC Transactions, Deutsche Bank
calculated that the ratio of Enterprise Value to total headcount for 22 of the
24 transactions where such information was available ranged from a low of $0.6
million to a high of $13.9 million, with a median of $4.0 million and a mean of
$3.2 million, compared to $11.5 million for the merger.
All multiples for the Selected Transactions were based on public information
available at the time of announcement of such transaction, without taking into
account differing market and other conditions during the two-year period during
which the Selected Transactions occurred.
Because the reasons for, and circumstances surrounding, each of the
precedent transactions analyzed were so diverse, and due to the inherent
differences between the operations and financial conditions of Conexant and
Maker and the companies involved in the Selected Transactions, Deutsche Bank
believes that a comparable transaction analysis is not simply mathematical.
Rather, such analysis involves complex considerations and qualitative judgments,
reflected in Deutsche Bank's opinion, concerning differences between the
characteristics of these transactions and the merger that could affect the value
of the subject companies and businesses and Conexant and Maker.
HISTORICAL EXCHANGE RATIO ANALYSIS. Deutsche Bank reviewed the historical
ratio of the daily per share market closing prices of Conexant common stock
divided by the corresponding prices of Maker common stock for:
- the period from Maker's initial public offering on May 10, 1999 to
December 17, 1999;
- over the 90-day, 60-day and 30-day periods prior to December 17, 1999; and
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- as of December 17, 1999, which was the last business day prior to
announcement of the merger.
Deutsche Bank then calculated the respective premiums over such average
daily exchange ratios represented by the exchange ratio. These calculations are
summarized in the following table:
<TABLE>
<CAPTION>
EXCHANGE
RATIO PREMIUM
-------- --------
<S> <C> <C>
One-day........................... .492 34.2%
30-day............................ .412 60.2%
60-day............................ .494 33.6%
90-day............................ .577 14.4%
Since Maker's IPO................. .790 (16.5%)
</TABLE>
CONTRIBUTION ANALYSIS. Deutsche Bank analyzed the relative contributions of
Conexant and Maker, as compared to Maker's relative ownership of approximately
5.4% of the outstanding capital stock of the combined company based on the
publicly available data as of December 18, 1999, to the pro forma income
statement of the combined company, based on managements' projections for their
respective companies. This analysis showed that on a pro forma combined basis
(excluding the effect of any synergies that may be realized as a result of the
merger and any non-recurring expenses or goodwill amortization relating to the
merger), based on the 12-month period ending September 30, 2000:
- Conexant would account for approximately 98.9%, and Maker would account
for approximately 1.1%, of the combined company's pro forma revenue; and
- Conexant would account for approximately 98.7%, and Maker would account
for approximately 1.3%, of the combined company's pro forma net income.
PRO FORMA COMBINED EARNINGS ANALYSIS. Deutsche Bank analyzed certain pro
forma effects of the merger. Based on such analysis, Deutsche Bank computed the
resulting dilution/accretion to Conexant's EPS estimate for the fiscal years
ending September 30, 2000 and September 30, 2001, before taking into account any
potential cost savings and other synergies identified by management that
Conexant and Maker could achieve if the merger were consummated, and before
non-recurring costs relating to the merger. On such basis, Deutsche Bank noted
that the Merger would be approximately:
- 19.4% dilutive to Conexant's estimated EPS for the fiscal year ending
September 30, 2000; and
- 27.3% dilutive to Conexant's estimated EPS for the fiscal year ending
September 30, 2001.
Deutsche Bank also noted that after excluding amortization of goodwill for
the fiscal years ending September 30, 2000 and September 30, 2001, and before
such non-recurring costs, the merger would be approximately:
- 1.9% dilutive to Conexant's estimated EPS for the fiscal year ending
September 30, 2000; and
- 3.8% dilutive to Conexant's estimated EPS for the fiscal year ending
September 31, 2001.
Finally, Deutsche Bank noted that, excluding the effects of goodwill
amortization and non-recurring costs, the merger would not be dilutive to
Conexant's estimated EPS for the fiscal years ending September 30, 2000 and
September 30, 2001 if synergies and cost savings realized during those periods
generated $5.6 million and $16.0 million of pretax profit, respectively.
The foregoing summary describes all analyses and factors that DeutscheBank
deemed material in its presentation to Maker board of directors, but is not a
comprehensive description of all analyses performed and factors considered by
Deutsche Bank in connection with preparing its opinion. The preparation of a
fairness opinion is a complex process involving the application of subjective
business judgment in determining the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to
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<PAGE>
summary description. Deutsche Bank believes that its analyses must be considered
as a whole and that considering any portion of such analyses and of the factors
considered without considering all analyses and factors could create a
misleading view of the process underlying the opinion. In arriving at its
fairness determination, Deutsche Bank did not assign specific weights to any
particular analyses.
In conducting its analyses and arriving at its opinions, Deutsche Bank
utilized a variety of generally accepted valuation methods. The analyses were
prepared solely for the purpose of enabling Deutsche Bank to provide its opinion
to the Maker board of directors as to the fairness to Maker of the exchange
ratio. The analyses do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold, which are
inherently subject to uncertainty. In connection with its analyses, Deutsche
Bank made, and was provided by Maker management with, numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond Maker's or Conexant's control. Analyses
based on estimates or forecasts of future results are not necessarily indicative
of actual past or future values or results, which may be significantly more or
less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of Maker, Conexant or their respective advisors, neither
Maker nor Deutsche Bank nor any other person assumes responsibility if future
results or actual values are materially different from these forecasts or
assumptions.
The terms of the merger were determined through negotiations between Maker
and Conexant and were approved by the Maker board of directors. Although
Deutsche Bank provided advice to Maker during the course of these negotiations,
the decision to enter into the merger was solely that of the Maker board of
directors. As described above, the opinion and presentation of Deutsche Bank to
the Maker board of directors were only one of a number of factors taken into
consideration by the Maker board of directors in making its determination to
approve the transaction. Deutsche Bank's opinion was provided to the Maker board
of directors to assist it in connection with its consideration of the merger and
does not constitute a recommendation to any holder of Maker common stock as to
how to vote with respect to the merger.
Maker selected Deutsche Bank as financial advisor in connection with the
merger based on Deutsche Bank's qualifications, expertise, reputation and
experience in mergers and acquisitions. Maker has retained Deutsche Bank
pursuant to a letter agreement dated October 15, 1999. As compensation for
Deutsche Bank's services in connection with the merger, Maker has agreed to pay
Deutsche Bank a cash fee of $1,250,000 upon the delivery of its opinion and an
additional cash fee that would total $8,633,178 if the merger were consummated
at the value implied by the exchange ratio on the announcement date. Regardless
of whether the merger is consummated, Maker has agreed to reimburse Deutsche
Bank for reasonable fees and disbursements of its counsel and all of its
reasonable travel and other out-of-pocket expenses. Maker has also agreed to
indemnify Deutsche Bank and certain related persons to the full extent lawful
against certain liabilities, including certain liabilities under the federal
securities laws arising out of its engagement or the merger.
Deutsche Bank is an internationally recognized investment banking firm
experienced in providing advice in connection with mergers and acquisitions and
related transactions. Deutsche Bank acted as an underwriter on Maker's initial
public offering of May 10, 1999. Deutsche Bank and its affiliates may actively
trade securities of Maker or Conexant for their own account or the account of
their customers and, accordingly, may from time to time hold a long or short
position in such securities.
ACCOUNTING TREATMENT
The merger will be accounted for as a "purchase" transaction for accounting
and financial reporting purposes, in accordance with generally accepted
accounting principles. Accordingly, a determination of the fair value of Maker's
assets and liabilities will be made in order to allocate the
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purchase price to the assets acquired and the liabilities assumed. In connection
with the merger, it is anticipated that Conexant will take a one-time charge
consisting of a write-off of the value of in-process research and development,
estimated to be approximately $31 million. The purchase price allocation,
including the one-time charge for write-off of the value of in-process research
and development, is subject to revision when additional information concerning
asset and liability valuation is obtained.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material U.S. federal income
tax consequences of the merger. This summary is not a comprehensive description
of all of the tax consequences that may be relevant to you. For example, we have
not described tax consequences that arise from rules that apply to some classes
of taxpayers. We have also not described tax consequences that are generally
assumed to be known by investors. This discussion is based upon the Internal
Revenue Code, the regulations of the U.S. Treasury Department, and court and
administrative rulings and decisions in effect on the date of this proxy
statement/prospectus. These laws may change, possibly retroactively, and any
change could affect the continuing validity of this discussion.
This discussion also is based upon certain representations made by Maker and
Conexant. It is a condition to the closing of the merger that Latham & Watkins
and Hutchins, Wheeler & Dittmar render certain tax opinions described below
based on such representations. The representations made by Maker and Conexant
are attached as exhibits to the merger agreement included in Conexant's
registration statement of which this proxy statement/prospectus forms a part.
This discussion also assumes that the merger will be effected pursuant to
applicable state law and otherwise completed according to the terms of the
merger agreement. You should not rely upon this discussion if any of these
factual assumptions or representations is, or later becomes, inaccurate.
This discussion also assumes that stockholders hold their shares of Maker
common stock as a capital asset and does not address the tax consequences that
may be relevant to a particular stockholder in special situations under some
federal income tax laws, including:
- banks and other financial institutions;
- tax-exempt organizations and pension funds;
- insurance companies;
- dealers or traders in securities;
- Maker stockholders who received their Maker common stock through the
exercise of employee stock options or otherwise as compensation;
- Maker stockholders whose functional currency is not the U.S. dollar;
- Maker stockholders who are not U.S. persons; and
- Maker stockholders who held Maker common stock as part of a hedge,
straddle or conversion transaction.
The discussion also does not address any consequences arising under the laws
of any state, locality or foreign jurisdiction. No rulings have been or will be
sought from the Internal Revenue Service regarding any matters relating to the
merger.
The discussion does not discuss the tax consequences of an exchange or
conversion of options or warrants for Maker common stock into stock options or
warrants for Conexant common stock.
Completion of the merger is conditioned on the receipt by Conexant of an
opinion of Latham & Watkins, Conexant's tax counsel, and the receipt by Maker of
an opinion from Hutchins, Wheeler &
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Dittmar, Maker's tax counsel, that the merger will be a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and that no gain or
loss will be recognized by the stockholders of Maker who exchange their Maker
common stock solely for Conexant common stock (except with respect to cash
received instead of a fractional share of Conexant common stock). These opinions
will be based upon the continuing truth and accuracy of the representations of
Maker and Conexant described above and will be subject to certain assumptions
and qualifications, including the assumption that the merger will be effected
pursuant to applicable state law and otherwise completed according to the terms
of the merger agreement. The tax opinions are not binding upon the Internal
Revenue Service or the courts.
Assuming that the merger is a reorganization within the meaning of Section
368(a) of the Internal Revenue Code:
- no gain or loss will be recognized for federal income tax purposes by the
stockholders of Maker who exchange their Maker common stock solely for
Conexant common stock (except with respect to cash received instead of a
fractional share of Conexant common stock).
Counsel to Conexant and Maker have stated in writing to Conexant and Maker,
respectively, their respective views that the discussion in the four bullet
points below fairly presents the current federal income taxes consequences to
Conexant, Maker and the Stockholders of Maker as a result of the Merger. In
addition, based upon the opinions of counsel described above and the foregoing
assumptions, the merger will generally result in the following federal income
taxes consequences:
- no gain or loss will be recognized by Conexant or Maker as a result of the
merger;
- the aggregate tax basis of Conexant common stock received by Maker
stockholders who exchange all of their Maker common stock for Conexant
common stock in the merger will be the same as the aggregate tax basis of
Maker common stock surrendered in exchange (reduced by any amount of tax
basis allocable to a fractional share of Conexant common stock for which
cash is received);
- the holding period of Conexant common stock received will include the
holding period of shares of Maker common stock surrendered in exchange;
and
- a holder of Maker common stock that receives cash instead of a fractional
share of Conexant common stock will, in general, recognize capital gain or
loss equal to the difference, if any, between the cash amount received and
the portion of the holder's tax basis in shares of Maker common stock
allocable to the fractional share; this gain or loss will be long-term
capital gain or loss for federal income tax purposes if the holder's
holding period in the Maker common stock exchanged for the fractional
share of Conexant common stock is more than one year at the time the
merger is completed.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON YOUR PARTICULAR SITUATION. YOU ARE ENCOURAGED TO CONSULT YOUR
OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING
TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL
AND FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGE IN THE TAX LAWS.
DELISTING AND DEREGISTRATION OF MAKER COMMON STOCK
If the merger is completed, the shares of Maker common stock will be
delisted from the Nasdaq National Market and will be deregistered under the
Securities Exchange Act. The stockholders of Maker will become stockholders of
Conexant, and their rights as stockholders will be governed by Conexant's
restated certificate of incorporation, Conexant's by-laws and the laws of the
State of Delaware. See "COMPARISON OF RIGHTS OF STOCKHOLDERS OF MAKER AND
CONEXANT" on page 92 of this proxy statement/prospectus.
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CONDUCT OF THE BUSINESS IF THE MERGER IS NOT COMPLETED
If the Merger is not consummated, Maker will carry on its business in the
usual, regular and ordinary course, consistent with past practice.
REGULATORY COMPLIANCE
A certificate of merger must be filed on behalf of Conexant, Merlot
Acquisition Corp. and Maker with the Secretary of State of the State of Delaware
in order to effect the merger.
Under the Hart-Scott-Rodino Antitrust Improvements Act and the rules that
have been promulgated under the act, acquisitions of a sufficient size may not
be consummated unless information has been furnished to the Antitrust Division
of the U.S. Department of Justice and to the FTC and applicable waiting period
requirements have been satisfied or early termination of the waiting period has
been granted. The acquisition of shares of our common stock pursuant to the
merger is subject to the provisions of that act.
Conexant and Maker have each filed with the Antitrust Division of the U.S.
Department of Justice and the FTC, a Hart-Scott-Rodino Notification and Report
Form with respect to the acquisition of the shares of Maker common stock by
Conexant. Conexant and certain members of Maker senior management have also
filed Hart-Scott-Rodino Notification and Report Forms relating to common stock
of Maker held by such members of Maker senior management. Under the applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act, the acquisition
of the shares of Maker common stock cannot be consummated until the expiration
of early termination of the waiting period following the filing of such Report
Forms by Conexant, Maker and certain members of Maker management.
APPRAISAL RIGHTS
Maker is incorporated under Delaware law. Under applicable Delaware law, the
holders of Maker common stock are not entitled to dissenters' or appraisal
rights in connection with the merger.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTIONS
This proxy statement/prospectus does not cover any resales of the Conexant
common stock you will receive in the merger, and no person is authorized to make
any use of this proxy statement/prospectus in connection with any such resale.
All shares of Conexant common stock you will receive in the merger will be
freely transferable, except that if you are deemed to be an "affiliate" of Maker
under the Securities Act of 1933 at the time of the special stockholders
meeting, you may resell those shares only in transactions permitted by Rule 145
under the Securities Act or as otherwise permitted under the Securities Act.
Persons who may be affiliates of Maker for those purposes generally include
individuals or entities that control, are controlled by, or are under common
control with, Maker, and would not include stockholders who are not officers,
directors or principal stockholders of Maker.
The merger agreement requires Maker prior to the closing date to deliver to
Conexant a letter identifying all persons who may be, as of the date the merger
agreement is submitted for approval by Maker stockholders, an affiliate of Maker
and to use reasonable best efforts to cause each person who is identified as an
affiliate in the letter described above to deliver to Conexant prior to the
merger, an executed letter agreement from each affiliate to the effect that the
affiliate will not offer, sell or otherwise dispose of any of the shares of
Conexant common stock issued to that affiliate in the merger or otherwise owned
or acquired by that affiliate in violation of the Securities Act.
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THE MERGER AGREEMENT
GENERAL
THE FOLLOWING SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT IS
SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, THE COMPLETE TEXT OF THE MERGER
AGREEMENT. A COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED IN THIS PROXY
STATEMENT/PROSPECTUS BY REFERENCE. YOU SHOULD READ THE FULL TEXT OF THE MERGER
AGREEMENT, BECAUSE IT, AND NOT THIS PROXY STATEMENT/ PROSPECTUS, IS THE LEGAL
DOCUMENT THAT GOVERNS THE MERGER.
THE MERGER
When the merger contemplated by the merger agreement occurs, Maker will
merge with Merlot Acquisition Corp., a wholly-owned subsidiary of Conexant. As a
result, Merlot Acquisition Corp. will cease to exist as a separate corporate
entity and Maker will continue as the surviving corporation and retain its name.
Maker will become a wholly-owned subsidiary of Conexant. The merger will be
effective at the time the certificate of merger is filed with the Secretary of
State of the state of Delaware.
Each share of Maker common stock, par value of $0.01 per share, issued and
outstanding immediately before the merger, other than those held in the treasury
of Maker and those owned by Conexant or Merlot Acquisition Corp. will be
exchanged for 0.66 of a share of Conexant common stock.
The merger agreement provides that at the time the certificate of merger is
filed, Merlot Acquisition Corp.'s certificate of incorporation will be the
certificate of incorporation of the surviving entity except that it will be
amended to reflect "Maker Communications, Inc." as the name of the surviving
corporation. The merger agreement further provides that the bylaws of Merlot
Acquisition Corp., as in effect when the certificate of merger is filed, will be
the bylaws of Maker immediately after the certificate of merger is filed. The
merger agreement further provides that those persons who are the directors and
officers of Merlot Acquisition Corp. when the certificate of merger is filed
will be the directors and officers of Maker immediately after the certificate of
merger is filed.
EFFECTIVE TIME AND CLOSING OF THE MERGER
Promptly after the satisfaction of the terms and conditions of the merger
agreement, the parties shall file a certificate of merger with the Secretary of
State of the state of Delaware as required by the Delaware General Corporation
Law. The merger will be effective when the certificate of merger is filed. We
expect to complete the merger as soon as practicable after March 10, 2000, the
date scheduled for the special meeting of Maker stockholders to approve and
adopt the merger agreement and the merger.
PROCEDURE TO EXCHANGE CERTIFICATES
The parties will authorize a commercial bank to act as exchange agent. The
exchange agent will mail letters of transmittal and instructions regarding the
exchange process to each record holder of shares of Maker common stock promptly
following the merger. Upon surrender of Maker common stock certificates,
together with the letter of transmittal duly executed, the Maker record
stockholders will receive certificates representing Conexant common stock. Once
the holders of certificates previously representing Maker common stock surrender
these certificates, they will receive any dividends or other distributions on
the Conexant common stock that have a record date after the merger and a payment
date before the holder surrenders the Maker common share certificate. However,
Conexant will not pay any dividends until the holder of the Maker share
certificate surrenders that certificate. The holder will also receive any
dividends or other distributions with a
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record date after the merger but before the surrender, and a payment date after
the surrender. In each case, taxes will be withheld as required. No interest
will be paid or accrued on unpaid dividends or distributions, if any, which will
be paid on surrender of Maker common share certificates.
No certificates or scrip representing fractional shares of Conexant common
stock will be issued upon the surrender of Maker common share certificates. Each
holder of a Maker common share certificate, at the time of merger, who would
otherwise be entitled to receive a fractional share of Conexant common stock
will receive cash. The amount of cash paid in lieu of fractional shares will be
the fraction of a share of Conexant common stock that would be otherwise issued
multiplied by the closing price per share of Conexant common stock on the Nasdaq
National Market on the last full trading day prior to the merger. The exchange
agent will pay this amount without interest.
Any shares of Conexant common stock issued in the merger together with any
dividends or distributions or cash in lieu of fractional shares deposited by
Conexant with the exchange agent that remain undistributed to holders of Maker
common stock certificates six (6) months after the merger will be delivered to
Conexant. Any holders of Maker common stock certificates who have not complied
with the exchange procedures before the six-month anniversary of the merger may
only look to Conexant for payment of Conexant common stock, cash in lieu of
fractional shares and any unpaid dividends and distributions on Conexant common
stock. Neither Conexant, Merlot Acquisition Corp., Maker, nor the exchange agent
will be liable to you for any amount properly delivered to a public official
under applicable abandoned property, escheat or similar law.
The exchange agent will deliver Conexant common stock, any cash in lieu of
fractional shares and any unpaid dividends or distribution with respect to
Conexant common stock in exchange for lost, stolen, or destroyed certificates if
the record holder of such Maker common stock certificates signs an affidavit of
loss, theft or destruction. Conexant may also, in its discretion, require the
holder of a lost, stolen or destroyed certificate to deliver a bond in
reasonable sum as indemnity against any claim that might be made against
Conexant regarding the alleged lost, stolen or destroyed certificate.
REPRESENTATIONS AND WARRANTIES
Except as discussed in the paragraphs below, the merger agreement contains
essentially reciprocal representations and warranties made by each of Conexant
and Maker to the other. The representations and warranties relate to the
following matters:
- due organization, power and standing, and other corporate matters;
- capital structure;
- authority to enter into and enforce the merger agreement;
- required consents and approvals, and absence of violations of law;
- financial statements;
- the accuracy of the information contained in the registration statement of
which this proxy statement/prospectus forms a part;
- absence of any material adverse change;
- permits and licenses;
- tax matters;
- actions and proceedings;
- agreements relating to employee benefits that will be affected by the
merger and ERISA matters;
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- compliance with applicable laws, including laws relating to the
environment;
- liabilities;
- labor matters;
- ownership of shares;
- brokers' fees and expenses with respect to the merger;
- state takeover statutes; and
- interests in other entities.
Maker also made additional representations and warranties to Conexant
relating to the following matters:
- ownership of real property;
- year 2000 compliance;
- intellectual property;
- opinion of financial advisor; and
- required vote of stockholders with respect to the merger.
Conexant and Merlot Acquisition Corp. also made additional representations
and warranties to Maker relating to the corporate power and organization of
Merlot Acquisition Corp.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Maker has agreed that, during the period from the date of the merger
agreement through the merger, Maker and each of its subsidiaries will, in all
material respects:
- carry on its business in the ordinary course as currently conducted;
- not enter into any hedging contracts or arrangements other than in the
ordinary course of business and consistent with prior practice;
- use all reasonable efforts to preserve intact its present business
organizations; and
- use all reasonable efforts to preserve its relationships with customers,
suppliers and others having business dealings with it.
In addition, unless Conexant consents in writing or the merger agreement
provides otherwise, Maker has agreed that, during the period from the date of
the merger agreement through the merger, it and each of its subsidiaries will
not and will not propose to:
- declare or pay any dividends or make distributions on any of its capital
stock;
- split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock;
- other than pursuant to any existing stockholder purchase agreement,
repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its
capital stock;
- issue, grant, deliver or sell, or authorize or propose the issuance,
grant, delivery or sale of any shares of its capital stock or voting debt,
warrants or options to acquire any of these shares, securities convertible
into or exercisable for these shares other than (a) the issuance of shares
upon the exercise of stock options in the ordinary course of business
consistent with past
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practice and (b) the issuance of options, rights or other awards prior to
the date of the merger agreement in the ordinary course of business
consistent with past practice pursuant to Maker's stock option plans;
- amend its certificate of incorporation or by-laws;
- incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or right to
acquire any debt securities of Maker or its subsidiary other than in the
indebtedness from Maker to its subsidiary or from Maker's subsidiary to
Maker and other than in the ordinary course of business;
- make any loans, advances or capital contributions to, or investments in,
any other person other than by Maker or its subsidiary to or in Maker or
its subsidiary;
- pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) other
than in the ordinary course of business;
- enter into any derivative contracts, other than hedging contracts in the
ordinary course of business and consistent with past practice;
- increase the compensation payable or to become payable to any of its
executive officers or employees;
- take any action with respect to the grant of any severance or termination
pay, or stay, bonus or other incentive arrangement, other than pursuant to
benefit plans and policies in effect on the date of the merger agreement;
- adopt any new benefit plan or amend or modify any benefit plan except as
required by law or by the merger agreement;
- acquire or agree to acquire (a) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business, corporation, partnership, limited liability company, joint
venture, association or other business organization or division or
(b) assets that are individually or in the aggregate material;
- sell, lease, license, mortgage, encumber, subject to any lien or dispose
of property other than (a) sales and dispositions of inventories in the
ordinary course of business and (b) encumbrances and liens that are
incurred in the ordinary course of business;
- terminate or amend on terms materially less favorable to Maker any
agreement filed as an exhibit to any SEC Report or Form 10-K;
- make new capital expenditures, other than capital expenditures of up to
$1.25 million in connection with Maker's move to new facilities in the
first calendar quarter of 2000, that exceed $600,000 in the aggregate
provided that Conexant's consent to capital expenditures in excess of
$600,000 will not be unreasonably withheld;
- make any material tax election or settle or compromise any material tax
liability, provided that Conexant's consent to any tax election,
settlement or compromise will not be unreasonably withheld;
- amend any stock option plan or option agreement as a result of the merger
agreement;
- grant or issue options or stock awards under any stock option plan except
to new employees in connection with their hiring, in the ordinary course
of business, and to directors in accordance with Maker's 1999 Director
Option Plan in effect on the date of the merger agreement;
- accelerate the vesting or exercisability of any options under any stock
option plan, other than as required by any automatic acceleration
provisions contained in such plan;
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- enter into any contract, agreement, commitment or arrangement to take any
action prohibited by the merger agreement; or
- take any action that would, or that could be reasonably expected to, make
any of the representations and warranties of Maker in the merger agreement
to become untrue.
Conexant and Merlot Acquisition Corp. have agreed that, during the period
from the date of the merger agreement through the merger, neither party will:
- amend its certificate of incorporation or by-laws, or
- take any action that would, or that could reasonably be expected to, make
any of the representations and warranties of Maker become untrue or any
merger condition set forth in the conditions precedent section of merger
agreement not be satisfied.
Conexant and Maker agree to confer on a regular and frequent business with
each other to report on operational matters and to advise each other, orally and
in writing, of any representation or warranty.
ADDITIONAL AGREEMENTS
PREPARATION OF THE FORM S-4 AND PROXY STATEMENT/PROSPECTUS. Conexant and
Maker have agreed to cooperate in the prompt preparation and filing of documents
under federal and state securities laws and with applicable governmental
authorities.
STOCKHOLDER MEETING. Maker has agreed to call a meeting of its stockholders
for the purposes of considering the approval and adoption of the merger
agreement and approval of the merger as promptly as practicable following the
date of the merger agreement. The board of directors of Maker has agreed to
recommend to its stockholders that they approve the merger agreement and the
merger; provided, however, that the board of directors of Maker may withdraw,
modify or change its approval or recommendation where failure to do so could
result in breach of its fiduciary duties. Conexant has agreed to vote all of its
shares of Maker common stock in favor of the approval and adoption of the merger
agreement and the approval of the merger. Conexant and Maker will both use their
commercially reasonable efforts to hold the special meeting for Maker
stockholders on or before March 31, 2000.
ACCESS TO INFORMATION. Conexant and Maker have agreed to provide to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the other company reasonable access to all properties, books,
contracts, commitments and records during the period between the date of the
merger agreement and the merger. In addition, Conexant and Maker have agreed to
furnish to each other a copy of each report, schedule, registration statement
and other documents filed, published, announced or received by it during such
period pursuant to the requirements of Federal or state securities laws as well
as all other information concerning its business, properties and personnel as
the other party may reasonably request, including any information requested with
respect to Maker stockholder approval at the special meeting for Maker
stockholders and the status of efforts to obtain such approval.
REASONABLE EFFORTS. Conexant and Maker have each agreed to use its
reasonable efforts to take all actions, and do all things, necessary, proper or
advisable to conclude and make effective the merger and any transactions
contemplated by the merger agreement, including, among other things:
- obtaining all consents, waivers, licenses, approvals and actions by
governmental entities;
- obtaining all necessary consents, waivers or approvals from third parties;
and
- defending any lawsuits or legal proceedings that challenge the merger
agreement.
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ACQUISITION PROPOSALS. Maker has agreed to not, and has agreed to cause its
officers, directors, employees, agents, investment bankers, advisors and
representatives to not solicit, encourage, initiate, participate in or
facilitate or consent to any negotiations or discussions with respect to any
acquisition proposal or disclose to any Person any information that will lead
to, any acquisition proposal.
An acquisition proposal is defined in the merger agreement as any offer,
indication or proposal to acquire all or more than 20% of Maker's business,
assets or capital shares or voting securities whether by merger, consolidation,
other business combination, purchase of assets, tender offer, exchange offer or
otherwise.
The "acquisition proposal" provision in the merger agreement does not
prohibit Maker or the board of directors of Maker from:
- complying with Rule 14e-2 under the Exchange Act with regard to any
acquisition proposal,
- exercising their fiduciary duties by providing information about Maker to
third parties or conducting negotiations with respect to an acquisition
proposal that would, if consummated, result in a transaction more
favorable to Maker stockholders than the merger with Conexant, or
- making any disclosure required by applicable law.
Maker has agreed to notify Conexant immediately in the event Maker receives
any acquisition proposal or any inquiry that could lead to any acquisition
proposal. Maker will provide Conexant at least two business days advance notice
of its intention to present to its board or accept any acquisition proposal and
will provide Conexant with a summary of the terms and conditions of such
acquisition proposal.
EMPLOYEE BENEFITS. Conexant and Maker have agreed that employees of Maker
and its subsidiary will receive full credit for their length of service to Maker
for purposes of determining their eligibility and vesting under any employee
benefit plan. The surviving company following the merger will assume and honor
all written employment, severance and termination plans and agreements
(including change of control provisions) of employees of Maker and its
subsidiary provided to Conexant on or prior to the date of the merger agreement.
FEES AND EXPENSES. Conexant and Maker have agreed that each party incurring
costs and expenses in connection with the merger agreement will pay for those
costs and expenses. However, all filing fees and printing expenses related to
this proxy statement/prospectus will be shared equally by Conexant and Maker.
INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE. Under the terms of the
merger agreement the current provisions regarding indemnification of current
officers and directors of Maker and its subsidiary will be maintained for a
period of six years after the merger. Furthermore, for a period of six years
after the merger, Conexant will maintain an insurance and indemnification policy
for the benefit of Maker's and its subsidiary's current directors and officers
that provides coverage for events occurring at or prior to the merger that is no
less favorable than the existing policies.
PUBLIC ANNOUNCEMENTS. Conexant and Maker will use reasonable efforts to
develop a joint communications plan and each will make sure that all press
releases and public statements relating to the merger are consistent with the
joint communications plan.
TAX TREATMENT. Conexant and Maker have agreed to use their efforts to have
the merger qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code.
AFFILIATES. Maker agrees to deliver a letter to Conexant identifying all
Persons who are "affiliates" of Maker for purposes of Rule 145 under the
Securities Act. Affiliates are persons that directly or indirectly control or
are controlled by or are under common control with Maker. This would include
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officers, directors and five percent stockholders of Maker as of the record
date. Maker will use reasonable efforts to have each such Person deliver to
Conexant a written agreement substantially in the form of Exhibit A to the
merger agreement.
LISTING ON THE NASDAQ NATIONAL MARKET. Conexant has agreed to use its
reasonable best efforts to list the Conexant common stock to be issued in the
merger and pursuant to the Maker stock option plans on the Nasdaq National
Market. The listing of the Conexant common stock to be received in the merger is
a precondition to the consummation of the merger.
TAKEOVER STATUTES. If Section 203 of the Delaware General Corporation Law,
which provides generally that a corporation shall not engage in any business
combination with any interested stockholder for a period of three years
following the time that the stockholder became an interested stockholder, or any
other takeover statute becomes applicable to the merger and related
transactions, Maker and the board of directors of Maker will grant the approvals
and take the necessary action to eliminate and minimize the effects of such
statutes.
RIGHTS AGREEMENTS. Prior to the merger, Conexant will cause the dilution
provisions of the Conexant Rights Agreement to be inapplicable to the merger and
related transactions.
EMPLOYEE STOCK OPTIONS AND EQUITY INCENTIVES. Upon the merger, each
outstanding option under any Maker stock option plan and Maker's 1999 Employee
Stock Purchase Plan that is not exercised will be converted into an option to
purchase the number of shares of Conexant common stock equal to 0.66 multiplied
by the number of shares of Maker common stock which could have been obtained
prior to the merger upon exercise of such option at an exercise price per share
equal to the exercise price for each share of Maker common stock being so
converted divided by 0.66. Conexant will assume all obligations under the Maker
stock option plans and Maker's 1999 Employee Stock Purchase Plan and Maker
agrees not to accelerate any stock options that do not require acceleration by
their terms. Except for options held by current employees of Maker who are
parties to employment agreements with Conexant (other than Michael Rubino whose
Maker options will fully vest upon consummation of the merger), options issued
and outstanding under the Maker stock option plans will receive twelve months of
accelerated vesting in accordance with the terms of the plans.
Conexant will reserve for issuance the number of shares of Conexant common
stock that will become subject to the Maker stock options plans and Maker's 1999
Employee Stock Purchase Plan and issue those shares when appropriate.
Subject to any limitations under the Securities Act, Conexant will file a
registration statement on Form S-8 with respect to shares of Conexant common
stock issuable upon the exercise of options to purchase Conexant common stock
which were previously options to purchase Maker common stock. Conexant will
cause such registration statement to be effective as soon as practicable
following the merger.
Maker will amend the Maker stock option plans and its 1999 Employee Stock
Purchase Plan to provide that no further options will be granted under such
plans after the effective time of the merger. Maker will terminate its 1999
Employee Stock Purchase Plan on the effective time of the merger.
CONDITIONS PRECEDENT TO THE MERGER
Conexant, Merlot Acquisition Corp. and Maker are required to complete the
merger only if each of the following conditions is met:
- STOCKHOLDER APPROVAL. The holders of a majority of the outstanding shares
Maker common stock have approved and adopted the merger agreement and
approved the merger.
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- HART-SCOTT-RODINO ACT. The waiting period applicable to the consummation
of the merger under the Hart-Scott-Rodino Antitrust Improvements Act has
expired or terminated.
- REGISTRATION STATEMENT. The registration statement on Form S-4 of which
this proxy statement/ prospectus is a part has been declared effective
under the Securities Act. No stop order suspending the effectiveness of
the Form S-4 has been issued by the SEC. All necessary "blue sky"
authorizations have been received.
- NO GOVERNMENT ACTION/ORDER; REGULATORY APPROVAL. There is no action,
order, suit or proceeding by any governmental entity that challenges or
enjoins the merger. All required regulatory approvals have been obtained
and will be in full force and effect.
- LISTING ON THE NASDAQ NATIONAL MARKET. The Conexant common stock to be
issued in the merger has been approved for listing on the Nasdaq National
Market.
Additionally, the merger agreement obligates Conexant and Merlot Acquisition
Corp., on one hand, and Maker on the other hand, to complete the merger only if,
before the merger, the following additional conditions are satisfied or waived:
- Each of the representations and warranties of the other party in the
merger agreement that is qualified by materiality is true and correct as
of the effective time of the merger as if made on and as of the effective
time of the merger, except for those representations and warranties made
as of an earlier date, and each of the representations and warranties of
the other party that is not so qualified is true and correct in all
material respects when made and is true and correct in all material
respects as of the effective time of the merger as if made on and as of
the effective time of the merger, with the same force and effect as if
made on and as of the effective time of the merger except for those
representations and warranties made as of an earlier date.
- The other party has performed in all material respects its agreements and
covenants contained in the merger agreement and required to be performed
before completion of the merger.
- Each party has received an opinion of tax counsel to the effect that the
merger will qualify for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and no
gain or loss will be recognized by the Maker stockholders for federal
income tax purposes upon the consummation of the merger except with
respect to any cash received in lieu of fractional shares.
- There has not been any adverse material effect on business, operations,
assets, liabilities, financial condition or results of operations of
either party since the date of the merger agreement.
In addition, Conexant and Merlot Acquisition Corp. are obligated to complete
the merger only if certain specified senior executives of Maker have entered
into non-compete agreements with Conexant.
TERMINATION; AMENDMENT AND WAIVER
CONDITIONS TO TERMINATION. Conexant and Maker may terminate the merger
agreement at any time prior to the merger, even if the stockholders of Maker
approve matters related to the merger, by their mutual written consent. Either
Conexant or Maker may terminate the merger agreement if:
- the merger has not been effected on or prior to March 31, 2000 or within
the three consecutive 30 day extension periods provided for in the merger
agreement; however, this right to terminate will not be available to any
party whose failure to fulfill any obligations contained in the merger
agreement has been the cause of the failure of the merger to have occurred
on or prior to March 31, 2000 or prior to the close of the three
consecutive 30 day extension periods provided for in the merger agreement;
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- any governmental entity issues an order, decree or ruling or takes any
action to permanently restrain, enjoin or prohibit the merger, and this
order, decree or ruling has become final and nonappealable;
- the stockholders of Maker do not approve the merger agreement at the
special meeting or any adjournment or postponement of the special meeting;
- there has been a material breach by Maker of any covenant or agreement
contained in the merger agreement, and the breach has not been cured
within fifteen (15) days following a written notice; however, if this
breach is curable by the breaching party through the exercise of its best
efforts, and so long as the breaching party uses its best efforts to cure
the breach, the non-breaching party may not terminate the merger
agreement; or
- there has been a breach by the other party of any representation or
warranty that is (a) qualified as to materiality or (b) not qualified as
to materiality which has the effect of making this representation or
warranty not true and correct in all material respect and in each case,
and the breach has not been cured within fifteen (15) days following a
written notice; however, if this breach is curable by the breaching party
through the exercise of its best efforts, and so long as the breaching
party uses its best efforts to cure the breach, the non-breaching party
may not terminate the merger agreement.
Conexant may also terminate this agreement if:
- there is a material breach of any covenant or agreement on the part of any
party to a voting agreement other than Conexant;
- the board of directors of Maker withdraws or modifies its recommendation
of the merger or the merger agreement;
- the board of directors of Maker fails to recommend the merger or the
merger agreement or recommends that the Maker stockholders approve another
acquisition proposal;
- the board of directors of Maker does not oppose a tender offer or exchange
offer that would result in any Person or group owning more than 20% of the
outstanding shares of Maker common stock or recommends that the Maker
stockholders tender their shares in such an offer; or
- Maker fails to call and hold the special meeting of Maker stockholders by
June 30, 2000.
EFFECT OF TERMINATION. In the event of termination of the merger agreement
by either Conexant or Maker, the merger agreement will become void and there
will be no liability thereunder on the part of Conexant or Maker or their
respective officers or directors; provided, however, that nothing will relieve
the parties from any liability for any willful breach of any covenant or
agreement contained in the merger agreement.
Maker has also agreed to pay $25,000,000 to Conexant by wire transfer of
immediately available funds on the date of termination in the event that the
merger agreement is terminated:
- By Conexant or Maker if the stockholders of Maker do not approve the
merger agreement at the special meeting or any adjournment or postponement
of the special meeting;
- By Conexant if:
- there is a material breach of any covenant or agreement on the part of
any party to a voting agreement other than Conexant;
- the board of directors of Maker withdraws or modifies its
recommendation of the merger or the merger agreement;
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- the board of directors of Maker fails to recommend the merger or the
merger agreement or recommends that the Maker stockholders approve
another acquisition proposal;
- the board of directors of Maker does not oppose a tender offer or
exchange offer that would result in any Person or group owning more
than 20% of the outstanding shares of Maker common stock or recommends
that the Maker stockholders tender their shares in such an offer; or
- Maker fails to call and hold the special meeting of Maker stockholders
by June 30, 2000;
- there has been a material breach by the other party of any covenant or
agreement contained in the merger agreement, and the breach has not
been cured within fifteen (15) days following a written notice;
however, if this breach is curable by the breaching party through the
exercise of its best efforts, and so long as the breaching party uses
its best efforts to cure the breach, the non-breaching party may not
terminate the merger agreement; or
- there has been a breach by Maker of any representation or warranty that
is (a) qualified as to materiality or (b) not qualified as to
materiality which has the effect of making this representation or
warranty not true and correct in all material respect and in each case,
and the breach has not been cured within fifteen (15) days following a
written notice; however, if this breach is curable by the breaching
party through the exercise of its best efforts, and so long as the
breaching party uses its best efforts to cure the breach, the
non-breaching party may not terminate the merger agreement;
provided, that Maker will not be required to pay the $25,000,000 unless Maker
enters into an acquisition proposal or an agreement for an acquisition proposal
within nine (9) months of termination of the merger agreement and any person or
entity purchases 20% or more of the assets or voting stock of Maker, within nine
(9) months of termination of the merger agreement.
Each party will pay its own costs and expenses. However, all filing fees and
printing expenses related to this proxy statement/prospectus and the related
registration statement on Form S-4 will be shared equally by Conexant and Maker.
If the merger agreement is terminated as a result of a breach, the breaching
party will reimburse the non-breaching party for all out-of-pocket expenses, up
to $3,000,000.
AMENDMENT. The merger agreement may be amended by the parties at any time
before or after the approval of the merger by the stockholders of Maker.
However, after stockholder approval, no amendment will be made which by law or
the Nasdaq National Market rules requires further approval by the stockholders
of Maker, without this further stockholder approval. The merger agreement may
not be amended except by a written instrument signed on behalf of each of the
parties to the merger agreement.
EXTENSION; WAIVER. At any time prior to the merger, Conexant and Maker may,
in writing:
- extend the time for performance for any obligations of the parties under
the merger agreement;
- waive any inaccuracies in the representations and warranties in the merger
agreement; and
- waive compliance with any of the agreements or conditions of the merger
agreement.
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ADDITIONAL AGREEMENTS
VOTING AGREEMENTS
VOTING AND PROXIES.
In order to induce Conexant to enter into the merger agreement, ten
(10) Maker stockholders (including one director of Maker in his capacity as a
stockholder and without limiting or affecting his obligations as a director)
have entered into a voting agreement at Conexant's request. These stockholders
are: William N. Giudice, Tecumseh Limited Partnership I, Paul Bergantino,
Bergantino 1999 Grantor Retained Annuity Trust DTD 4/5/99, Bergantino 1999
Irrevocable Trust DTD 4/5/99, Michael Rubino, Thomas Medrek, Bessemer Venture
Partners IV L.P., Bessec Ventures IV L.P. and Greylock Equity Limited
Partnership. Pursuant to and during the terms of the voting agreements, each
stockholder party to a voting agreement has agreed to vote or cause to be voted,
all of the Maker common stock owned by the stockholder and all shares of Maker
common stock subsequently acquired by the stockholder:
(1) to adopt and approve the merger agreement and each of the other actions
contemplated by the merger agreement or the stockholder's voting
agreement; and
(2) against any acquisition proposal other than the merger and against any
proposed action or transaction that would prevent or intentionally delay
consummation of the merger unless such vote would be contrary to his
duties as a director.
In addition, each of the Maker stockholders party to a voting agreement has
agreed to grant Conexant an irrevocable proxy upon request by Conexant to vote
shares of the Maker common stock held by the stockholder in the manner described
above. Each Maker stockholder party to a voting agreement agrees to use his best
efforts to take all action and cause to be done all things necessary in order to
consummate and make effective the transactions contemplated by the voting
agreement and the merger agreement. The voting agreements terminate upon the
earliest to occur of the effective time of the merger or six months after the
termination of the merger agreement (except in the case of termination by mutual
consent, by reason of legal prohibition of the merger or breach of the merger
agreement by Conexant, in which case the voting agreements will terminate
immediately).
The aggregate number of shares of Maker common stock that is subject to the
voting agreements is 6,850,476, or approximately 36% of all Maker common stock
outstanding on February 1, 2000.
PROHIBITED ACTIONS.
Each of the Maker stockholders party to a voting agreement has also agreed
with respect to the shares of Maker common stock subject to the voting agreement
that the stockholder will not:
- deposit the shares into a voting trust or enter into a voting agreement or
arrangement with respect to the shares,
- encumber the shares nor subject them to any lien, claim or security
interest, except as contemplated by the voting agreement,
- transfer or enter into a contract to transfer any of the shares without
Conexant's prior written consent,
- solicit, encourage, initiate, participate in or facilitate any
negotiations or discussions with respect to any acquisition proposal, or
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- provide any confidential information to any person or participate in any
negotiations or discussions with respect to any acquisition proposal
except in its capacity as officer or director.
In addition, each of the Maker stockholders party to a voting agreement has
agreed to:
- promptly deliver to Conexant upon request by Conexant an irrevocable proxy
for any additional shares of Maker common stock acquired after signing the
voting agreement, and
- notify Conexant immediately upon receipt of any inquiry, proposal or offer
with respect to any acquisition proposal or notice of any discussions or
negotiations regarding an acquisition proposal, indicating the name of the
Person making the acquisition proposal and the material terms and
conditions thereof.
The voting agreements are attached as Annex A to the merger agreement, which
is attached as Appendix A to this proxy statement/prospectus.
NON-COMPETITION AGREEMENTS
In order to induce Conexant to enter in to the merger agreement and to
continue the employee's employment after the merger, William N. Giudice, Paul
Bergantino, Thomas Medrek, Michael Rodensky and Walter Jones have each agreed to
enter into non-competition agreements with Conexant and Maker prior to
consummation of the merger. Each of the Maker employees party to a non-
competition agreement will agree, for a period of two years following the
merger, to not:
- engage in any business or activity or render any services or provide any
advice to any competing business,
- solicit or divert any business, clients or customers away from Conexant,
Maker or their affiliates,
- induce customers, clients, suppliers, agents or other persons under
contract or otherwise associated or doing business with Conexant, Maker or
their affiliates, to reduce or alter any such association or business with
Conexant, Maker or their affiliates, and
- solicit any person who is at the time or has been within the past 12
months an employee of Conexant, Maker or their affiliates, to terminate
such employment and/or accept employment or enter into a consulting
agreement with any person other than Conexant, Maker or their affiliates.
A "competing business" is defined in the non-competition agreement as any
person or entity that develops and markets high-performance programmable
processors, development tools and application software for use in communication
systems equipment or deals with matters similar to those included in Maker's
operating plan or present product plans.
The non-competition agreements will be null and void if the merger is not
consummated and the merger agreement is terminated. For more information on the
non-competition agreements, see "INTERESTS OF CERTAIN PERSONS IN THE MERGER" on
page 83.
EMPLOYMENT AGREEMENTS
On December 18, 1999, Conexant and Maker entered into employment agreements
with five (5) of Maker's key employees: William N. Giudice, Paul Bergantino,
Thomas Medrek, Michael Rodensky and Walter Jones. The employment agreements
govern each employee's employment for two years following the merger, after
which each employee's employment will be at-will. Pursuant to the employment
agreements, if the employee waives the right to accelerate the vesting of his
stock options in Maker upon and in connection with the merger, he will be
eligible to receive a retention and a performance
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bonus. The retention bonus, for each employee signing an employment agreement,
is two times base salary. The bonus will be paid to the employee promptly
following the merger; provided that if his employment terminates for cause or if
he resigns without good reason within a year of the merger, he agrees to return
the entire retention bonus to Maker and if his employment is terminated for
cause or if he resigns without good reason at any time from 12 months following
to merger and prior to the second anniversary of the merger, he agrees to return
half of the retention bonus to Maker. Each employee will receive a performance
bonus equal to his base salary if Maker's revenues are at least $30,000,000 for
the twelve-month period commencing on the effective time of the merger; however,
if the employee's employment is terminated for reasons other than cause or good
reason, within 24 months of the effective time of the merger, the employee must
return the performance bonus to Maker. In addition, Michael Rubino signed a
letter agreement, dated December 18, 1999, regarding Mr. Rubino's employment by
Conexant. For more information on the employment agreements, see "INTERESTS OF
CERTAIN PERSONS IN THE MERGER" on page 83.
THE MAKER SPECIAL MEETING
DATE, TIME AND PLACE
Maker's board of directors is soliciting the enclosed proxy to be used at a
special meeting of stockholders to be held on March 10, 2000, at 10:00 a.m.
local time, or at any adjournment or postponement of the meeting. The proxy will
be used for the purposes described in this proxy statement/prospectus and in the
accompanying notice of special meeting. The meeting will be held at the offices
of Hutchins Wheeler & Dittmar, 101 Federal Street, Boston, Massachusetts 02110.
Maker intends to mail this proxy statement/prospectus and accompanying notice of
special meeting and proxy card on or about February 9, 2000 to all stockholders
entitled to vote at the meeting. The costs of soliciting proxies will be borne
by Maker, subject to the provisions of the merger agreement relating to the
payment of expenses.
PURPOSE
The purpose of the meeting is to vote upon a proposal to approve and adopt
the merger agreement and to approve the merger.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Maker common stock at the close of business on
February 1, 2000 will be entitled to notice of and to vote at the meeting. At
the close of business on that date, Maker had outstanding and entitled to vote
19,074,128 shares of common stock. Each record holder of common stock will be
entitled to one vote for each share held.
VOTE REQUIRED
Approval and adoption of the merger agreement and approval of the merger
agreement will require the affirmative vote of the holders of a majority of the
outstanding Maker common stock. The persons named as proxy holders on the proxy
card will vote your shares as you indicate on the card. If you do not specify on
the proxy card how to vote your shares, the proxy holders will vote your shares
in favor of the merger agreement and the merger. The inspector of election
appointed for the meeting will separately tabulate affirmative and negative
votes and abstentions. Abstentions will have the same effect as negative votes.
Certain directors, executive officers and certain significant stockholders
of Maker, who together own a total of approximately 36% of the outstanding
shares of Maker common stock, have entered into
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voting agreements and have agreed to vote in favor of the merger. In order to
receive the required number of votes to approve and adopt the merger agreement
and approve the merger, holders of approximately 14.1% of Maker common stock,
who are not parties to the voting agreements, must vote their shares in favor of
the merger agreement and the merger.
RECOMMENDATION OF MAKER BOARD OF DIRECTORS
The Maker board of directors has approved the merger agreement and the
transactions contemplated by the merger agreement and has determined that the
merger is fair to, and in the best interests of, Maker and its stockholders.
AFTER CAREFUL CONSIDERATION, THE MAKER BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF
THE MERGER.
PROXIES
You may revoke your proxy before it is voted by filing with Maker's
corporate secretary a written notice of revocation or a duly executed proxy
bearing a later date. You may also revoke your proxy by attending the meeting
and voting in person. Attending the meeting will not, by itself, revoke a proxy.
SOLICITATION OF PROXIES; EXPENSES
All expenses of Maker's solicitation of proxies will be borne by Maker. In
addition to solicitation by use of the mails, proxies may be solicited from
Maker stockholders by directors, officers and employees of Maker in person or by
telephone, facsimile or other means of communication. Such directors, officers
and employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. Maker
has retained MacKenzie Partners, Inc., a proxy solicitation firm, for assistance
in connection with the solicitation of proxies for the Maker special meeting at
an estimated cost of $6,000 plus expenses. Arrangements will also be made with
brokerage houses, custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
brokerage houses, custodians, nominees and fiduciaries, and Maker will reimburse
such brokerage houses, custodians, nominees and fiduciaries for their reasonable
expenses incurred in forwarding such materials.
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<PAGE>
THE COMPANIES
CONEXANT
Conexant is the world's largest independent company focused exclusively on
providing semiconductor products for communications electronics. With more than
30 years of experience in developing dial-up modem technology, Conexant draws
upon its expertise in mixed-signal processing and communications technology to
deliver semiconductor integrated circuit products and system-level solutions for
a broad range of communications applications. These products facilitate
communications worldwide through wireline voice and data communications
networks, cordless and cellular wireless telephony systems and emerging cable
and wireless broadband communications networks. Conexant has aligned its
business into five platforms: personal computing, network access, wireless
communications, digital infotainment, and personal imaging.
On December 31, 1998, Rockwell International, Inc. distributed to its
shareowners all the outstanding shares of the common stock of its wholly-owned
subsidiary, Conexant, by means of a tax-free spin-off. Each Rockwell shareowner
received one share of Conexant common stock (including an associated preferred
share purchase right) for every two shares of Rockwell common stock owned on
December 11, 1998. Prior to the distribution, Conexant, a Delaware corporation
formerly named Rockwell Semiconductor Systems, Inc., was a wholly-owned
subsidiary of Rockwell which, together with certain other subsidiaries of
Rockwell, operated Rockwell's semiconductor systems business (Semiconductor
Systems). Rockwell transferred to Conexant, assets and liabilities of
Semiconductor Systems not already owned by Conexant, which included the stock of
certain subsidiaries, and Conexant transferred to Rockwell all assets and
liabilities not constituting part of Semiconductor Systems, including all assets
and liabilities of Rockwell's electronic commerce business.
Conexant was incorporated as Rockwell Semiconductor Systems, Inc. in
Delaware on September 16, 1996, and changed its name to Conexant Systems, Inc.,
on October 14, 1998. Conexant has its principal executive offices at 4311
Jamboree Road, Newport Beach, California 92660-3095, and its telephone number is
(949) 483-4600. Internet users can obtain information about Conexant at
HTTP://WWW.CONEXANT.COM. None of the information on Conexant's web site is
incorporated by reference in this document.
RECENT DEVELOPMENTS
On February 2, 2000, Conexant completed a private offering of $500 million
in aggregate principal amount of its 4% Convertible Subordinated Notes due 2007
pursuant to Rule 144A under the Securities Act of 1933. Pursuant to the terms of
that offering, the initial purchaser of the notes has the right to purchase an
additional $150 million in aggregate principal amount of the notes. The notes
are convertible, at the option of the holders thereof, into common stock of
Conexant at any time on or before February 1, 2007, at a conversion price of
$108.00 per share, subject to adjustment in certain events. The notes may be
redeemed by Conexant on or after February 6, 2003, at certain specified
redemption prices, plus accrued and unpaid interest.
In January 2000, Conexant completed the acquisition of the wireless
broadband business unit of Oak Technology, Inc. located in Bristol, England. The
purchase price was approximately $25 million, paid in a combination of shares of
Conexant common stock and cash. Conexant also completed the acquisition of
Microcosm Communications Limited, a leading supplier of high-speed integrated
circuits for fiber optic communications located in Bristol, England in January
2000. The purchase price was approximately $129 million, paid in shares of
Conexant common stock.
Conexant had revenues of $510.0 million in the quarter ended December 31,
1999, the first quarter of its fiscal year 2000. This compared to revenues of
$294.7 million in the first quarter of fiscal 1999 and $452.2 million in the
fourth quarter of fiscal 1999. Net income in the first quarter of fiscal 2000
68
<PAGE>
was $51.8 million compared to a net loss of $57.1 million in the first quarter
of fiscal 1999 (which included special charges aggregating $37.9 million) and
net income of $38.0 million in the fourth quarter of fiscal 1999.
MAKER
Maker is a fabless semiconductor company that develops and markets
high-performance programmable communications processors, development tools and
application software for use in communications systems equipment. Maker's
processors have a proprietary architecture and instruction set optimized for
processing and switching data, voice and video in broadband networks. They
perform high-bandwidth or compute-intensive functions such as traffic management
and internetworking in Asynchronous Transfer Mode, or ATM, and Internet
Protocol, or IP, Packet Switching Networks.
Maker focuses on emerging high growth segments of communications systems
equipment markets that require sophisticated traffic management and
internetworking functions. Maker's MXT3010 Cell Processor and related software
target the high-performance segment of the ATM equipment market. Maker is a
leading provider of ATM Segmentation and Reassembly, or SAR, devices that
operate at OC-12 (622Mbps) rates. In 1999, Maker introduced the MXT4000 Traffic
Stream Processor family and related software to target IP-based services in
addition to ATM. Maker has also announced and shipped prototype samples of its
new MXT5000 family of edge stream processors. This product family is targeted at
WAN edge equipment where the equipment integrates voice and data over a variety
of networks including xDSL, frame relay, IP and ATM. These devices support
sophisticated traffic management and internetworking at rates up to OC-48 (2.5
Gbps). Maker offers complete production-tested application software that runs on
all of their processor families. Customers may use this software as is,
customize it or write their own custom software to address specific applications
using our development tools.
Maker was incorporated in California in 1994 and reincorporated in Delaware
in 1996. Maker's principal executive offices are located at 73 Mount Wayte
Avenue, Framingham, Massachusetts 01702, and its telephone number is (508)
628-0622. Internet users can obtain information about Maker at
HTTP://WWW.MAKER.COM. None of the information on Maker's web site is
incorporated by reference in this document.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF MAKER
The selected consolidated financial data of Maker set forth below as of
December 31, 1997 and 1998 and for each of the years ended December 31, 1996,
1997 and 1998 are derived from consolidated financial statements of Maker
audited by Arthur Andersen LLP, independent public accountants, which are
included elsewhere in this proxy statement/prospectus. The selected consolidated
financial data as of December 31, 1994, 1995 and 1996 and for the period from
inception (October 21, 1994) through December 31, 1994 and the year ended
December 31, 1995 are derived from audited consolidated financial statements of
Maker which are not included in this proxy statement/prospectus. The selected
financial data as of September 30, 1999 and for the nine months ended September
30, 1998 and 1999 are derived from Maker's unaudited Consolidated Financial
Statements which are included elsewhere in this proxy statement/prospectus and
which include in the opinion of Maker, all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of its
financial position and the results of its operations for those periods.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999. The data should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto and with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing elsewhere in this proxy statement/ prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(OCTOBER 21, NINE MONTHS
1994) YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
TO DECEMBER 31, ----------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
---------------- -------- -------- -------- -------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Product......................... $ -- $ -- $ 101 $ 1,231 $ 6,309 $ 3,935 $ 9,424
Software and maintenance........ -- -- 241 543 1,385 975 1,389
------- ------- ------- ------- ------- --------- --------
Total revenues.............. -- -- 342 1,774 7,694 4,910 10,813
Cost of revenues.................. -- -- 329 1,031 3,238 2,277 3,532
------- ------- ------- ------- ------- --------- --------
Gross profit...................... -- -- 13 743 4,456 2,633 7,281
------- ------- ------- ------- ------- --------- --------
Operating expenses:
Research and development........ 4 644 1,198 2,727 4,171 2,802 4220
Selling and marketing........... -- 86 332 883 2,078 1,471 1,882
General and administrative...... 10 227 373 751 1,299 946 1,137
Litigation...................... -- -- -- 462 1,118 1,118 --
------- ------- ------- ------- ------- --------- --------
Total operating expenses.... 14 957 1,903 4,823 8,666 6,337 7,239
------- ------- ------- ------- ------- --------- --------
Income (loss) from operations..... (14) (957) (1,890) (4,080) (4,210) (3,704) 42
Interest income................... -- -- 51 212 538 407 1,389
Other expenses, net............... -- (46) (132) (33) (82) (54) (67)
------- ------- ------- ------- ------- --------- --------
Income (loss) before income
taxes........................... (14) (1,003) (1,971) (3,901) (3,754) (3,351) 1,364
Provision for income taxes........ -- -- -- -- -- -- 46
------- ------- ------- ------- ------- --------- --------
Net income (loss)................. $ (14) $(1,003) $(1,971) $(3,901) $(3,754) $ (3,351) $ 1,318
======= ======= ======= ======= ======= ========= ========
Net income (loss) per share:
Basic........................... $ (0.00) $ (0.25) $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.11
======= ======= ======= ======= ======= ========= ========
Diluted......................... $ (0.00) $ (0.25) $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.07
======= ======= ======= ======= ======= ========= ========
Weighted average common shares
outstanding:
Basic........................... 4,020 4,020 1,516 5,383 5,647 5,568 12,513
======= ======= ======= ======= ======= ========= ========
Diluted......................... 4,020 4,020 1,516 5,383 5,647 5,568 18,541
======= ======= ======= ======= ======= ========= ========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities.... $ 3 $ 93 $ 4,591 $10,865 $ 13,615 $55,845
Working capital (deficit)........................... (4) (16) 4,631 10,649 12,228 41,290
Total assets........................................ 25 363 5,204 12,397 15,957 60,911
Long-term debt, less current portion................ 26 1,260 35 290 1,142 --
Redeemable preferred stock.......................... -- -- 8,601 18,795 23,440 --
Stockholders' equity (deficit)...................... (13) (1,016) (3,671) (7,634) (11,346) 57,526
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MAKER
The following discussion should be read in conjunction with our "Selected
Consolidated Financial Data" presented elsewhere in this proxy
statement/prospectus. For a similar discussion regarding Conexant, see
Conexant's Annual Report on Form 10-K filed with the SEC and incorporated in
this proxy statement/prospectus by reference.
GENERAL
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS. MAKER'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM
THOSE DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROXY STATEMENT/PROSPECTUS.
RESULTS OF OPERATIONS
The table below sets forth, for the periods indicated, the percentage of
total revenue of certain items in Maker's Condensed Consolidated Statement of
Operations.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Product........................................ 30% 69% 82% 80% 87%
Software and maintenance....................... 70 31 18 20 13
------ ------ ----- ----- ----
Total revenues............................. 100% 100% 100% 100% 100%
Cost of revenues................................... 96 58 42 46 33
------ ------ ----- ----- ----
Gross margin....................................... 4 42 58 54 67
Operating expenses:
Selling and marketing.......................... 97 50 27 30 17
Research and development....................... 350 154 54 57 39
General and administrative..................... 109 42 17 19 11
Litigation..................................... -- 26 15 23 --
------ ------ ----- ----- ----
Total operating expenses................... 556 272 113 129 67
------ ------ ----- ----- ----
Operating income (loss):........................... (552) (230) (55) (75) --
Interest income................................ 15 12 7 8 13
Other expenses, net............................ (39) (2) (1) (1) --
------ ------ ----- ----- ----
Income (loss) before income taxes.................. (576) (220) (49) (68) 13
Provision for income taxes......................... -- -- -- -- (1)
------ ------ ----- ----- ----
Net income (loss).................................. (576)% (220)% (49)% (68)% 12%
------ ------ ----- ----- ----
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
TOTAL REVENUES. Total revenues increased from $4.9 million for the nine
months ended September 30, 1998 to $10.8 million for the same period in 1999.
The increase in total revenues primarily reflects increased shipments of
products to new and existing customers and an increase in the number of
customers reaching volume production. Revenue from the licensing of software and
development tools primarily coincides with design wins at new customers and in
limited instances at existing customers, therefore the amount of software
revenue may fluctuate from period to period.
72
<PAGE>
COST OF REVENUES: Cost of revenues increased from $2.3 million for the nine
months ended September 30, 1998 to $3.5 million for the same period in 1999. The
increase was primarily due to an increase in direct product costs which are
associated with the increase in product revenues. The remainder of the increase
was due to an increase in personnel and related overhead costs to support
Maker's customers. The gross margin increased from 54% to 67% for the nine
months ended September 30, 1998 and 1999, respectively. The increase in gross
margin reflects lower product costs as a result of Maker meeting volume purchase
commitments and the absorption of fixed costs over higher revenues.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development costs increased
from $2.8 million for the nine months ended September 30, 1998 to $4.2 million
for the same period in 1999. Approximately 76% of the increase was due to an
increase in personnel and related costs and the remainder was primarily due to
an increase in recruiting, outside consulting costs, and hardware and software
license fees.
SELLING AND MARKETING EXPENSES: Selling and marketing expenses increased
from $1.5 million for the nine months ended September 30, 1998 to $1.9 million
for the same period in 1999. Substantially all of the increase was due to an
increase in personnel and related costs, as well as minor increases in product
marketing and recruiting costs.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
increased from $946,000 for the nine months ended September 30, 1998 to $1.1
million for the same period in 1999. Approximately 48% of the increase is due to
increased insurance and accounting costs. The remainder is primarily due to
increased personnel and related costs incurred in expanding the human resource,
information technology and accounting functions, offset by decreased outside
consulting costs.
LITIGATION: In July 1998, Maker settled a lawsuit with LSI Logic
Corporation. Costs associated with the litigation and settlement of the lawsuit
were $1.1 million for the nine-month period ended September 30, 1998.
INTEREST INCOME: Interest income increased from $407,000 for the nine-month
period ended September 30, 1998 to $1.4 million for the same period in 1999. The
increase is the result of higher average balances of cash, cash equivalents and
marketable securities primarily due to the proceeds received from Maker's
initial public offering in May 1999 and more favorable interest rates in 1999.
OTHER EXPENSES, NET: Other expenses, net, which consist primarily of
interest expense, increased from $54,000 for the nine months ended September 30,
1998 to $67,000 for the same period in 1999. The increase was due to increased
borrowings in the first two quarters of 1999 under Maker's equipment line of
credit to finance the purchase of capital equipment.
PROVISION FOR INCOME TAXES: Maker has substantial net operating loss
carryforwards available to reduce future federal and state income taxes, if any.
Maker recorded a provision for income taxes in the amount of $46,000 for the
nine month period ended September 30, 1999 for minimum federal and state tax
liabilities.
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
TOTAL REVENUES: Total revenues increased from $342,000 in 1996 to $1.8
million in 1997 to $7.7 million in 1998. Maker commenced sales of its products
in late 1996 and substantially increased shipments to its new and existing
customers in 1997 and 1998. The increase in revenues reflects certain customers
reaching volume production and increased software revenues from new customer
design wins.
73
<PAGE>
COST OF REVENUES: Cost of revenues increased from $329,000 in 1996 to $1.0
million in 1997 to $3.2 million in 1998. Approximately 60% of the increase in
cost of revenues in 1997 and 1998 was due to increases in direct product costs
and the remainder of the increase was due to increases in pre-production costs
and support and documentation costs associated with the increase in revenues.
The gross margin increased from 4% in 1996 to 42% in 1997 to 58% in 1998. The
increase in gross margin reflects the absorption of fixed costs such as
production related expenses and personnel costs associated with supporting
Maker's customers due to a greater sales volume.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses
increased from $1.2 million in 1996 to $2.7 million in 1997 to $4.2 million in
1998. Approximately 70% of the increase in 1997 was due to increases in
personnel and related costs and the remainder was primarily due to increases in
engineering supplies and prototype costs. The increase in 1997 reflects the
continued development of the MXT3010 Cell Processor and related development
tools and application software and the development of the MXT3020 Circuit
Co-processor and related development tools and application software.
Approximately 50% of the increase in 1998 was due to increases in personnel and
related costs and the remainder was primarily due to increases in outside
consulting services and depreciation of computer equipment. The increase in 1998
primarily reflects the development of the MXT4400 Traffic Stream Processor and
related development tools and application software and the continued development
of development tools and application software for the MXT3010 Cell Processor.
SELLING AND MARKETING EXPENSES: Selling and marketing expenses increased
from $332,000 in 1996 to $883,000 in 1997 to $2.1 million in 1998. The increases
were primarily due to additional personnel, including senior level management,
increased product marketing costs associated with new products, increased
commissions as a result of higher sales and costs associated with the
establishment of a sales office in Santa Clara, California in 1998.
Approximately 80% and 70% of the increases in 1997 and 1998, respectively, were
due to increases in salaries and related costs. The remainder of the increases
in both 1997 and 1998 were due to increased public relation costs and marketing
materials.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
increased from $373,000 in 1996 to $751,000 in 1997 to $1.3 million in 1998.
Approximately 60% and 35% of the increases in 1997 and 1998, respectively, were
primarily due to the hiring of additional personnel, including senior level
management. The remainder of the increase was due to increases in costs
associated with supporting the business including increases in legal and
professional fees and human resource activities of approximately 35% and 50% in
1997 and 1998, respectively.
LITIGATION EXPENSE: In July 1998, Maker settled a lawsuit with LSI Logic
Corporation. Costs associated with the litigation and settlement of the lawsuit
were $462,000 in 1997 and $1.1 million in 1998.
INTEREST INCOME: Interest income increased from $51,000 in 1996 to $212,000
in 1997 to $538,000 in 1998. The increase reflects interest earned on higher
balances of cash and cash equivalents resulting from sales of preferred stock in
September 1996, October 1997 and December 1998.
OTHER EXPENSES, NET: Other expenses, net were $132,000, $33,000 and $82,000
in 1996, 1997 and 1998, respectively and consisted primarily of interest
expense. The decrease in interest expense in 1997 was primarily the result of
the repayment of a note payable to one of Maker's stockholders. The increase in
interest expense in 1998 was due to increased borrowing under Maker's equipment
line of credit to finance the purchase of capital equipment.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain statement of operations data for each
quarter of 1998 and the first three quarters of 1999, as well as such data
expressed as a percentage of Maker's revenues for
74
<PAGE>
each quarter. This information has been presented on the same basis as the
audited Consolidated Financial Statements appearing elsewhere in this prospectus
and, in the opinion of management, includes all adjustments, consisting only of
normal recurring adjustments, that Maker considers necessary to present fairly
the unaudited quarterly results. This information should be read in conjunction
with Maker's audited Consolidated Financial Statements and Notes thereto
appearing elsewhere in this proxy statement/prospectus. The operating results
for any quarter are not necessarily indicative of results for any future period.
See "RISK FACTORS--Maker experiences fluctuations in its operating results due
to a number of frequently changing business conditions."
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product.......................... $ 758 $ 1,463 $ 1,714 $2,374 $2,723 $3,061 $3,640
Software and maintenance......... 261 212 502 410 439 529 422
-------- -------- -------- ------ ------ ------ ------
Total revenues................. 1,019 1,675 2,216 2,784 3,162 3,590 4,062
Cost of revenues................... 486 845 946 961 1,043 1,169 1,321
-------- -------- -------- ------ ------ ------ ------
Gross profit....................... 533 830 1,270 1,823 2,119 2,421 2,741
Operating expenses:
Research and development......... 894 976 932 1,369 1,341 1,368 1,511
Selling and marketing............ 443 548 480 607 515 653 714
General and administrative....... 341 330 275 353 394 345 398
Litigation....................... 171 232 715 -- -- -- --
-------- -------- -------- ------ ------ ------ ------
Total operating expenses....... 1,849 2,086 2,402 2,329 2,250 2,366 2,623
-------- -------- -------- ------ ------ ------ ------
Income (loss) from operations...... (1,316) (1,256) (1,132) (506) (131) 55 118
Interest income.................... 133 138 136 131 160 490 738
Other expenses, net................ (10) (15) (29) (28) (41) (25) --
-------- -------- -------- ------ ------ ------ ------
Income (loss) before income
taxes.............................. (1,193) (1,133) (1,025) (403) (12) 520 856
Provision for income taxes......... -- -- -- -- -- 20 26
-------- -------- -------- ------ ------ ------ ------
Net income (loss).................. $ (1,193) $(1,133) $ (1,025) $ (403) $ (12) $ 500 $ 830
======== ======== ======== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product.......................... 74% 87% 77% 85% 86% 85% 90%
Software and maintenance......... 26 13 23 15 14 15 10
---- ---- --- --- --- --- ---
Total revenues................. 100 100 100 100 100 100 100
Cost of revenues................... 48 50 43 35 33 33 33
---- ---- --- --- --- --- ---
Gross margin....................... 52 50 57 65 67 67 67
---- ---- --- --- --- --- ---
Operating expenses:
Research and development......... 88 58 42 49 43 38 37
Selling and marketing............ 43 33 22 22 16 18 17
General and administrative....... 33 20 12 12 12 10 10
Litigation....................... 17 14 32 -- -- -- --
---- ---- --- --- --- --- ---
Total operating expenses....... 181 125 108 83 71 66 64
---- ---- --- --- --- --- ---
Income (loss) from operations...... (129) (75) (51) (18) (4) 1 3
Interest income.................... 13 8 6 5 5 14 18
Other expenses, net................ (1) (1) (1) (1) (1) (1) --
---- ---- --- --- --- --- ---
Income (loss) before income
taxes.............................. (117) (68) (46) (14) -- 14 21
Provision for income taxes......... -- -- -- -- -- -- (1)
---- ---- --- --- --- --- ---
Net income (loss).................. (117%) (68%) (46%) (14%) 0% 14% 20%
==== ==== === === === === ===
</TABLE>
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1994, Maker has financed its operations and capital
requirements from the sale of $51.6 million in common stock and $23.9 million of
preferred stock, borrowings under an equipment line of credit of $1.6 million,
and revenue. At September 30, 1999, Maker had $41.3 million in working capital
and $55.8 million in cash, cash equivalents and marketable securities. At
December 31, 1998, Maker had $12.2 million in working capital and $13.6 million
in cash and cash equivalents.
Maker completed its initial public offering (the "Offering") of 3,852,500
shares of its common stock in May 1999, including 502,500 shares issued in
connection with the exercise of the underwriters' over-allotment option on the
Offering date. These shares were offered to the public at $13 per share, which
net of Offering expenses and the $0.91 per share underwriting discount, resulted
in net proceeds of $45.6 million. In addition, Maker sold 500,000 shares of
common stock in a concurrent private placement that was not underwritten at a
price of $12.09 per share, resulting in net proceeds of $6.0 million. Concurrent
with the Offering, all of the Class A Redeemable Preferred Stock was redeemed
resulting in cash payments totaling $8.6 million. Proceeds from the Offering
were used to repay bank debt of $1.2 million in May 1999. Also, portions of the
Offering proceeds were used to purchase $23.5 million in short-term marketable
securities and $14.2 million in long-term marketable securities as of September
30, 1999.
Net cash used in operating activities for the years ended December 31, 1996,
1997 and 1998 was $2.0 million, $3.6 million and $1.8 million, respectively.
Cash used in operating activities consisted primarily of cash utilized to fund
operating losses and for working capital. Maker's operating activities provided
cash in the amount of $1.0 million for the nine month period ended September 30,
1999 and used $1.7 million in cash for the same period in 1998. The cash
provided by operating activities for the nine month period ended September 30,
1999 was primarily attributable to net income for the period and increases in
accounts payable and accrued expenses, partially offset by an increase in
accounts receivable, inventory, prepaid expenses and other current assets.
Maker has a $2.5 million revolving line of credit facility and a $1.0
million equipment line of credit facility with a bank. Borrowings under both
facilities bear interest at the bank's prime rate plus .25% and expire in
February 2000. As of September 30, 1999 Maker had no borrowings under either
facility.
From inception through September 30, 1999, Maker acquired $3.1 million in
capital assets. Maker intends to continue investing in capital expenditures
which will include enhancing and expanding Maker's operational infrastructure,
research and development tools and financial and management information systems.
Maker expects such expenditures to be funded out of the Offering proceeds,
working capital or Maker's bank facilities.
Maker currently uses independent suppliers to manufacture all of its
products. These arrangements allow Maker to avoid utilizing its capital
resources for manufacturing facilities and work-in-process inventory and focus
substantially all of its resources on the design, development and marketing of
its products. Maker expects to assume more responsibility for managing product
manufacturing in the future, which may require additional expenditures. Maker
anticipates that any such expenditures will be funded by working capital.
Maker requires substantial working capital to fund its business,
particularly to finance accounts receivable and inventory, and for investments
in property and equipment. Maker believes its existing capital resources and
cash generated from operations will be sufficient to meet Maker's needs for at
least the next 12 months. Thereafter, Maker's future capital requirements will
depend on many factors, including the level of investment Maker makes in new
technologies and improvements to existing technologies, the production levels
Maker maintains and the level of monthly expenses required to launch new
products. To the extent that the existing resources and future earnings are
insufficient to fund Maker's future activities, Maker may need to raise
additional funds through public or private
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<PAGE>
financing. Additional funds may not be available, or, if available, Maker may
not be able to obtain them on terms favorable to it and its stockholders. In
addition, Maker could seek to raise additional capital if it identified
acquisitions or investments in complementary business, technologies or product
lines.
INCOME TAXES
At December 31, 1998, Maker had available net operating loss carryforwards
of approximately $8.7 million for federal and state income tax purposes, which
expire at various dates through 2018. Maker also has available federal tax
credits of approximately $330,000 expiring through 2010. Maker has recorded a
full valuation allowance against its deferred tax asset due to uncertainties
surrounding the realization of these assets.
The Internal Revenue Code of 1986, as amended, contains provisions that may
limit the net operating loss and tax credit carryforwards available to be used
in any given year upon the occurrence of certain events, including changes in
the ownership interests of significant stockholders. In the event of a
cumulative change in ownership in excess of 50% over a three-year period, the
amount of the net operating loss carryfowards that Maker can utilize in any one
year may be limited. In the event of a change in ownership the annual limitation
on the use of the existing net operating loss carryforwards is equal to an
amount determined by multiplying the value of Maker at the time of the ownership
change by the federal applicable rate of interest as determined by the Internal
Revenue Service. Maker has completed several financings since its inception and
has incurred an ownership charge as defined under the Code. Maker does not
believe that this change in ownership will have a material impact on its ability
to utilize its net operating loss and tax credit carryforwards.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As of September 30, 1999, Maker did not participate in any derivative
financial instruments or other financial and commodity instruments for which
fair value disclosure would be required under SFAS No. 107. All of Maker's
investments are in money market accounts, short-term investment grade commercial
paper, corporate bonds, and government securities, carried on Maker's books at
amortized cost, which approximates fair market value. Accordingly, Maker has no
quantitative information concerning the market risk of participating in such
investments.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Financial Information
for Conexant set forth below gives effect to the merger with Maker. The
historical financial information set forth below has been derived from, and is
qualified by reference to, the consolidated financial statements of Conexant and
Maker and should be read in conjunction with those financial statements and
notes thereto included or incorporated by reference herein. The Unaudited Pro
Forma Condensed Combined Statement of Operations for the fiscal year ended
September 30, 1999 gives effect to the acquisition as if it had occurred on
October 1, 1998. The Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1999 gives effect to acquisition as if it had occurred on
September 30, 1999.
The merger will be accounted for under the purchase method of accounting.
Under the terms of the merger, each share of Maker will be exchanged for 0.66
shares of Conexant common stock. Accordingly, the value of the Conexant shares
issued as consideration for the acquisition will be allocated to the assets
acquired and the liabilities assumed based on their estimated fair values. The
excess of the value of such consideration over the estimated fair value of such
assets and liabilities has been preliminarily allocated to certain identifiable
intangible assets, in process research and development, and goodwill. Based upon
the market price of Conexant's common stock on December 17, 1999, the total
value of the merger consideration is approximately $957.1 million. The purchase
price allocation will be adjusted upon completion of the final valuation of the
assets and liabilities acquired. The Unaudited Pro Forma Condensed Combined
Financial Statements do not give effect to any synergies which may be realized
as a result of the merger. Additionally, except as indicated in the notes
hereto, the Unaudited Pro Forma Condensed Combined Statement of Operations does
not reflect any nonrecurring charges that may be incurred as a result of the
merger with Maker.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with (i) Management's Discussion and Analysis of Financial
Condition and Results of Operations and the historical financial statements and
notes to financial statements of Conexant and Maker, which are included or
incorporated by reference in this proxy statement/prospectus; (ii) the selected
historical financial data appearing elsewhere in this proxy
statement/prospectus; and (iii) the unaudited selected pro forma financial
information and unaudited comparative per share data, including the notes
thereto, appearing elsewhere in this proxy statement/prospectus. The Unaudited
Pro Forma Condensed Combined Financial Statements are provided for informational
purposes only and do not purport to present the combined financial position or
results of operations of Conexant and Maker had the acquisition assumed therein
occurred on the dates specified, nor are they necessarily indicative of the
results of operations that may be expected in the future.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
CONEXANT(1) MAKER ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 398,516 $ 18,123 $(11,600)(2) $ 405,039
Marketable securities....................... -- 23,487 -- 23,487
Receivables, net............................ 238,940 1,776 -- 240,716
Inventories, net............................ 224,477 554 -- 225,031
Deferred income taxes....................... 81,860 -- -- 81,860
Other current assets........................ 35,381 735 -- 36,116
---------- -------- -------- ----------
Total current assets........................ 979,174 44,675 (11,600) 1,012,249
Marketable securities, noncurrent........... -- 14,235 (14,235)(8) --
Property, plant and equipment, net.......... 723,013 1,739 -- 724,752
Intangible assets, net...................... 47,824 -- 907,645 (2) 955,469
Other assets................................ 91,939 262 14,235 (8) 108,718
2,282 (3)
---------- -------- -------- ----------
Total assets................................ $1,841,950 $ 60,911 $898,327 $2,801,188
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ $ 265,151 $ 752 $ -- $ 265,903
Deferred revenue............................ 21,027 634 -- 21,661
Accrued compensation and benefits........... 48,530 753 -- 49,283
Other current liabilities................... 40,013 1,246 -- 41,259
---------- -------- -------- ----------
Total current liabilities................... 374,721 3,385 -- 378,106
Convertible subordinated notes.............. 350,000 -- -- 350,000
Other long-term liabilities................. 82,076 -- 29,712 (3) 111,788
---------- -------- -------- ----------
Total liabilities........................... 806,797 3,385 29,712 839,894
Commitments and contingencies............... -- -- -- --
Shareholders' equity:
Preferred and junior preferred stock........ -- -- -- --
Common stock................................ 196,387 184 (184)(4) 208,583
12,196 (4)
Additional paid-in-capital.................. 769,563 67,529 (67,529)(4) 1,714,508
944,945 (4)
Unearned compensation....................... (998) -- -- (998)
Retained earnings (deficit)................. 70,052 (10,187) 10,187 (4) 39,052
(31,000)(2)
Accumulated other comprehensive income...... 149 -- -- 149
---------- -------- -------- ----------
Total shareholders' equity.................. 1,035,153 57,526 868,615 1,961,294
---------- -------- -------- ----------
Total liabilities and shareholders'
equity...................................... $1,841,950 $ 60,911 $898,327 $2,801,188
========== ======== ======== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
CONEXANT(1) MAKER(1) ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues............................... $1,444,114 $13,597 $ -- $1,457,711
Cost of goods sold......................... 863,252 4,493 -- 867,745
---------- ------- ---------- ----------
Gross margin............................... 580,862 9,104 -- 589,966
Operating expenses:
Research and development................. 310,042 5,589 -- 315,631
Selling, general and administrative...... 227,729 3,979 1,870 (9) 233,578
Amortization of intangibles.............. 8,364 -- 181,529 (2)(7) 189,893
Purchased research and development....... -- -- -- --
Special charges -- Rockwell retained
assets................................. 20,000 -- -- 20,000
Special charges - Other.................. 17,906 -- -- 17,906
---------- ------- ---------- ----------
Total operating expenses................. 584,041 9,568 183,399 777,008
---------- ------- ---------- ----------
Operating loss............................. (3,179) (464) (183,399) (187,042)
Other income, net.......................... 5,935 1,425 -- 7,360
---------- ------- ---------- ----------
Income (loss) before (benefit) provision
for income taxes......................... 2,756 961 (183,399) (179,682)
(Benefit) provision for income taxes....... (10,173) 46 (714 )(10) (10,841)
---------- ------- ---------- ----------
Net income (loss).......................... $ 12,929 $ 915 $ (182,685) $ (168,841)
========== ======= ========== ==========
Basic net income (loss) per share (5)...... $ 0.07 $ 0.08 (6) $ (0.82)
========== ======= ==========
Diluted net income (loss) per share (5).... $ 0.06 $ 0.05 (6) $ (0.82)
========== ======= ==========
Number of shares used in per share
computation (5):
Basic.................................... 192,551 10,842 (6) 204,747
========== ======= ==========
Diluted.................................. 203,484 17,576 (6) 204,747
========== ======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
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<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Pro forma adjustments for the unaudited pro forma condensed combined balance
sheet as of September 30, 1999 and statement of operations for the year ended
September 30, 1999 are as follows:
(1) Conexant reports its financial information on the basis of a
September 30 fiscal year. Maker currently reports its financial information on
the basis of a December 31 fiscal year. The Unaudited Pro Forma Condensed
Combined Financial Statements for the fiscal year ended September 30, 1999
include Conexant's historical results of operations for the fiscal year ended
September 30, 1999 and Maker's historical results of operations for the
12 month period ended September 30, 1999. The Unaudited Pro Forma Condensed
Combined Balance Sheet includes the historical balance sheets of Conexant and
Maker as of September 30, 1999.
(2) Reflects the preliminary allocation of the purchase price based upon an
estimated total value of the merger consideration of $957.1 million. The total
value of the consideration is based upon the closing market price of Conexant
common stock on December 17, 1999 of $69.625. In addition, the total cost of the
merger includes estimated transaction costs of approximately $11.6 million. The
preliminary allocation has resulted in a charge for purchased in-process
research and development of $31.0 million and identifiable intangible assets of
$77.8 million and goodwill of $829.8 million which are being amortized over an
average period of five years. Due to the nature of the non-recurring charge and
the rules governing the pro forma financial information, the charge for
purchased in-process research and development has been reflected as a reduction
of shareholders' equity and is excluded from the unaudited pro forma condensed
combined statement of operations.
The total consideration for the Maker acquisition has been allocated on a
preliminary basis to the tangible and intangible assets and liabilities acquired
based on management's best estimates of their fair value, with the excess of
cost over the net assets acquired allocated to goodwill as discussed above. This
allocation is subject to change, and will be adjusted upon completion of the
final valuation of the assets acquired and liabilities assumed.
(3) A deferred tax asset is recorded for the tax benefit which Conexant
expects to realize from the net operating loss carryforwards of Maker. A
deferred tax liability arises from the difference in the book and tax bases of
certain identifiable intangible assets acquired in the merger.
(4) Reflects the conversion of all of the outstanding stock of Maker into
approximately 12,196,000 shares of Conexant, based upon the conversion ratio of
0.66 as provided for in the merger agreement and the elimination of Maker's
deficit. In addition, the value of the merger consideration includes the fair
value of Conexant stock options which will be granted to replace outstanding
Maker stock options, estimated using the Black-Scholes option pricing model.
(5) On November 4, 1998, the board of directors of Rockwell approved the
distribution to its shareowners of all the outstanding shares of the common
stock of its wholly-owned subsidiary, Conexant, by means of a tax-free spin-off.
The distribution occurred at the close of business on December 31, 1998. The
fiscal 1999 financial statements include the operating results of Conexant while
it was part of Rockwell prior to the distribution. Because Conexant was not an
independent company during all of its fiscal year ended September 30, 1999, the
Conexant historical net income per share represents a pro forma net income per
share presented as if the distribution had occurred as of October 1, 1998.
(6) Pro forma net income (loss) reflects the impact of the adjustments
above. Pro forma basic and diluted net income (loss) per share is computed using
the weighted-average number of shares of common stock outstanding after the
issuance of an estimated 12,196,000 shares of Conexant common stock to acquire
the outstanding shares of Maker common stock. Pro forma diluted net income
(loss) per share does not include the effect of potentially dilutive options or
convertible debt securities as such securities are antidilutive.
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<PAGE>
(7) Reflects the amortization of identifiable intangible assets and goodwill
associated with the merger over an average period of five years.
(8) Pro forma reclassifications are made to conform the Maker presentation
to the Conexant presentation.
(9) Reflects retention bonuses earned by officers of Maker in the twelve
month period subsequent to the closing of the merger.
(10) Reflects the estimated tax effect of the pro forma adjustments based
upon Conexant's estimated incremental tax rate of approximately 38.2%. The pro
forma adjustment for the amortization of identifiable intangibles and goodwill
are excluded from such computation as Conexant does not expect to realize any
tax benefit from these items.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Maker board of directors with
respect to the approval and adoption of the merger agreement and approval of the
merger, you should be aware that certain members of the management of Maker and
the Maker board of directors may have interests in the merger that are different
from, or in addition to, your interests. Other than the merger agreement and the
transactions contemplated thereby, there are no past, present or proposed
contracts, arrangements, understandings, relationships or transactions between
Maker and its affiliates and Conexant and its affiliates.
Maker will be the surviving corporation in the merger and, following the
merger, will be a wholly-owned subsidiary of Conexant. As of the record date,
directors and executive officers of Maker owned (i) 8,951,402 shares or 44.7% of
Maker common stock for which they will receive the same consideration in
connection with the merger as you will receive and (ii) 1,317,500 unexercised
options to purchase Maker common stock which will be treated as described below.
Members of Maker management hold approximately 53% of the options to purchase
shares of Maker common stock. See "THE MERGER AGREEMENT."
EMPLOYMENT AGREEMENTS. Conexant will enter into employment agreements
with William N. Giudice, Paul Bergantino, Thomas Medrek, Michael Rodensky and
Walter Jones containing the following material terms:
(i) WILLIAM N. GIUDICE. Mr. Giudice will receive an annual base salary
of $200,000 per year and a continuation of his current benefits for a period
of two years commencing at the effective time of merger. In addition, in
exchange for Mr. Giudice waiving his right to have his existing Maker stock
options accelerate, Mr. Giudice will receive a retention bonus equal to two
times his base salary payable immediately following the effective time of
the merger, a performance bonus equal to one and one-half times his base
salary payable within 60 days of the first anniversary of the effective time
of the merger, and options to purchase 50,000 shares of Conexant common
stock in accordance with the terms and conditions of Conexant's applicable
long term incentive plan;
(ii) PAUL BERGANTINO. Mr. Bergantino will receive an annual base
salary of $175,000 per year and a continuation of his current benefits for a
period of two years commencing at the effective time of the merger. In
addition, in exchange for Mr. Bergantino waiving his right to have his
existing Maker stock options accelerate, Mr. Bergantino will receive a
retention bonus equal to two times his base salary payable immediately
following the effective time of the merger, a performance bonus equal to one
times his base salary payable within 60 days of the first anniversary of the
effective time of the merger, and stock options to purchase 45,000 shares of
Conexant common stock in accordance with the terms and conditions of
Conexant's applicable long term incentive plan;
(iii) THOMAS MEDREK. Mr. Medrek will receive an annual base salary of
$170,000 per year and a continuation of his current benefits for a period of
two years commencing at the effective time of the merger. In addition, in
exchange for Mr. Medrek waiving his right to have his existing Maker stock
options accelerate, Mr. Medrek will receive a retention bonus equal to two
times his base salary payable immediately following the effective time of
the merger agreement, a performance bonus equal to one times his base salary
payable within 60 days of the first anniversary of the effective time of the
merger, and options to purchase 40,000 shares of Conexant common stock in
accordance with the terms and conditions of Conexant's applicable long term
incentive plan;
(iv) MICHAEL RODENSKY. Mr. Rodensky will receive a base salary of
$170,000 per year and a continuation of his current benefits for a period of
two years commencing at the effective time of the merger. In addition, in
exchange for Mr. Rodensky waiving his right to have his existing Maker
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<PAGE>
stock options accelerate, Mr. Rodensky will receive a retention bonus equal
to two times his base salary payable immediately following the effective
time of the merger, a performance bonus equal to one times his base salary
payable within 60 days of the first anniversary of the effective time of the
merger, and options to purchase 20,000 shares of Conexant common stock in
accordance with Conexant's applicable long term incentive plan; and
(v) WALTER JONES. Mr. Jones will receive a base salary of $170,000 per
year and a continuation of his current benefits for a period of two years
commencing at the effective time of the merger. In addition, in exchange for
Mr. Jones waiving his right to have his existing Maker stock options
accelerate, Mr. Jones will receive a retention bonus equal to two times his
base salary payable immediately following the effective time of the merger,
a performance bonus equal to one times his base salary payable within
60 days of the first anniversary of the effective time of the merger, and
options to purchase 40,000 shares of common stock of Conexant in accordance
with the terms and conditions of Conexant's applicable long term incentive
plan.
The performance bonuses provided for in the employment agreements of
Messrs. Giudice, Bergantino, Medrek, Rodensky and Jones are contingent upon
Maker meeting certain performance goals and the retention bonuses provided for
in each of their employment agreements may be subject to repayment upon the
occurrence of certain events.
In the event that Messrs. Giudice, Bergantino, Medrek, Rodensky or Jones are
terminated other than "for cause" or they resign for "good reason," they will
receive salary and benefits at their then current rates until the end of the two
year period under their employment agreements and full vesting of all of their
outstanding options. For purposes of the employment agreements the term "for
cause" means (i) the employee's material failure, refusal or neglect to perform
and discharge his duties and responsibilities as an employee of Maker following
notice and reasonable opportunity to cure such failure, refusal or neglect to
perform and discharge his duties and responsibilities, (ii) material breach of
the employee's fiduciary duties as an officer of Conexant, or (iii) conviction
or plea of nolo contendere with respect to a non-vehicular felony. For purposes
of the employment agreements the term "good reason" means that Conexant has
(i) required the employee to have principal place of business at a location more
than fifty miles from his location of work immediately prior to the effective
time of the merger, (ii) significantly reduced the level or nature of the
employee's responsibilities or position, or (iii) reduced the base salary or
materially reduced the overall level of benefits available to the employee not
in connection with an overall reduction of benefits and salaries for executives
of Conexant in general.
Mr. Rubino's employment letter provides for payment of the sum of $75,000 to
Mr. Rubino in monthly installments and a continuation of his current benefits
for the six month period immediately following the effective time of the merger,
and a $100,000 bonus and a severance payment of $75,000 at the conclusion of
such six month period. In addition, all of Mr. Rubino's options to purchase
Maker common stock shall fully vest.
NONCOMPETITION AGREEMENTS. Messrs. Giudice, Bergantino, Medrek, Rodensky
and Jones will also enter into noncompetition agreements prior to completion of
the merger in favor of Conexant. Under the noncompetition agreements,
Messrs. Giudice, Bergatino, Medrek, Rodensky and Jones agree that, commencing at
the effective time of the merger and for a period of two years thereafter, they
will not (a) anywhere in the world, directly or indirectly, engage, without the
express prior written consent of Conexant, in any business or activity, whether
as an employee, consultant, partner, principal, agent, representative, equity
holder or in any other individual, corporate or representative capacity (without
limitation by specific enumeration of the foregoing), or render any services or
provide any advice to any business, activity or person conducting the business
conducted by Maker at the effective time of the merger or as contemplated to be
conducted by Maker as of the effective time of the merger or
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<PAGE>
(b) directly or indirectly, solicit or divert any business, clients, or
customers away from Maker or Conexant for a period of two years following the
effective time of the merger.
VOTING AGREEMENTS. Messrs. Giudice, Bergantino, Rubino and Medrek and
certain other significant stockholders of Maker have entered into voting
agreements relating to the merger. At the record date, the persons signing
voting agreements held approximately 36% of the outstanding Maker common stock.
Pursuant to the voting agreements these stockholders have agreed, among other
things, to vote (or cause to be voted) their shares of Maker common stock in
favor of approval of the merger agreement and approval of the merger at the
special meeting. The general effect of the voting agreements is to increase the
likelihood that Stockholder Approval will be obtained. See "ADDITIONAL
AGREEMENTS--Voting Agreements."
OWNERSHIP OF MAKER COMMON STOCK BY CERTAIN OWNERS AND MANAGEMENT OF MAKER
The following table sets forth certain information regarding beneficial
ownership of Maker common stock as of January 1, 2000 (except as otherwise
noted) by the following persons and entities:
- each director of Maker;
- certain of Maker's executive officers;
- all directors and executive officers of Maker as a group, and
- all those known by Maker to be beneficial owners of more than
five percent of the outstanding shares of Maker common stock.
The table is based on information provided to Maker or filed with the SEC by
Maker's directors, executive officers and principal stockholders. Unless
otherwise indicated in the footnotes below, each of the named persons has sole
voting and investment power with respect to shares shown as beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OWNERSHIP (1) PERCENT OF CLASS
- ------------------------------------------------- ------------- ----------------
<S> <C> <C>
William N. Giudice (2)........................... 1,816,997 9.4%
Paul Bergantino (3).............................. 1,372,619 7.2
Michael Rubino (4)............................... 230,000 1.2
Thomas J. Medrek (5)............................. 372,000 2.0
Walter Jones (6)................................. 265,000 1.4
Louis Tomasetta (7).............................. 112,531 *
Greylock Equity Limited Partnership.............. 2,643,378 14.0
Roger Evans (8).................................. 2,666,878 14.1
Bessemer Venture Partners (9).................... 2,091,877 11.0
Rob Soni (10).................................... 2,115,377 11.2
Level One Communications (11).................... 1,209,103 6.4
All directors and officers as a group
(8 persons (2)(3)(4)(5)(6)(7)(8)(10)).......... 8,951,402 44.7%
</TABLE>
- ------------------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with rules of the SEC and
includes general voting power or investment power with respect to
securities. Shares of Maker common stock subject to options and warrants
currently exercisable or exercisable within sixty (60) days of January 1,
2000, are deemed outstanding for computing the percentage of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person. Except
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<PAGE>
as otherwise specified below, the persons named in the table above have sole
voting and investment power with respect to all shares of Maker common stock
shown as beneficially owned by them. Unless otherwise indicated, the address
of each of the beneficial owners identified is 73 Mount Wayte Avenue,
Framingham, Massachusetts 01702.
(2) Includes 390,500 shares of common stock issuable upon exercise of
immediately exercisable options which are subject to repurchase by Maker as
well as 102,000 shares of common stock which are subject to repurchase by
Maker. Also includes 131,490 shares owned by Tecumseh Limited Partnership I
of which Mr. Giudice is the general partner. Also includes 150,000 shares
held by the Piedmont 1999 Trust and 137,469 shares held by the Acadia 1999
Trust.
(3) Includes 52,000 shares exercised by Mr. Bergantino which are subject to
repurchase by Maker and 183,000 shares of common stock issuable upon
exercise of immediately exercisable options which are subject to repurchase
by Maker.
(4) Includes 177,000 shares of common stock issuable upon exercise of
immediately exercisable options which are subject to repurchase by Maker.
(5) Includes 163,250 shares exercised by Mr. Medrek which are subject to
repurchase by Maker. Also includes 55,000 shares of common stock issuable
upon exercise of immediately exercisable options which are subject to
repurchase by Maker.
(6) Includes 265,000 shares of common stock issuable upon exercise of
immediately exercisable options of which 205,000 shares are subject to
repurchase by Maker.
(7) Includes 9,400 shares exercised by Dr. Tomasetta which are subject to
repurchase by Maker. The address for Mr. Tomasetta is 12707 High Bluff
Drive, Suite 200, San Diego, California 92130
(8) Includes shares owned by Greylock Equity Limited Partnership as indicated
above. Also includes 23,500 shares of common stock issuable to Mr. Evans
upon exercise of immediately exercisable options of which 2,800 shares are
subject to repurchase by Maker. Mr. Evans, a general partner of Greylock
Equity GP Limited Partnership, the General Partner of Greylock Equity
Limited Partnership, is a director of Maker. Mr. Evans, together with the
other general partners of Greylock Equity Limited Partnership, shares voting
and investment power with respect to the shares owned by Greylock Equity
Limited Partnership. Mr. Evans disclaims any beneficial ownership of the
shares held by Greylock Equity Limited Partnership except as to his
proportionate partnership interest therein. The address for Mr. Evans and
Greylock Equity Limited Partnership is Greylock Management Corporation,
755 Page Hill Road, Suite A-100, Palo Alto, California 94304.
(9) Shares attributed to Bessemer Venture Partners include holdings of two major
partnerships--Bessemer Venture Partners IV L.P. (851,990 shares) and Bessec
Ventures IV L.P. (851,992 shares), whose general partner is Deer IV &
Co. LLC. The sole limited partner of Bessemer Venture Partners IV L.P. and
Bessec Ventures IV L.P. is Bessemer Securities, LLC, or its subsidiaries.
Also reflected in the Bessemer Venture Partner shares are 340,398 shares
owned by members of Deer IV and employees or former employees of Deer
II & Co. LLC, a general partner of a predecessor fund similar to BVP IV.
Also reflected in the Bessemer Venture Partner Shares are 47,497 shares
owned by senior employees, former employees, or family partnerships of such
persons, of Bessemer Securities Corporation. Under certain circumstances,
Bessemer Venture Partners IV L.P. can direct their voting on corporate
matters. The address for Bessemer Venture Partners is 1400 Old Country Road,
Suite 407, Westbury, New York 11590.
(10) Includes 23,500 shares of common stock issuable to Mr. Soni upon exercise
of immediately exercisable options of which 2,800 shares are subject to
repurchase by Maker. Also includes 2,091,877 shares attributed to Bessemer
Venture Partners as indicated above. Of these 2,091,877
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shares, 10,352 shares are owned by Mr. Soni individually. Mr. Soni is a
director of Maker and a member of Deer IV, the general partner of Bessemer
Venture Partners IV L.P. and Bessec Ventures IV L.P. Mr. Soni disclaims
beneficial ownership of the shares held by the two partnerships, except to
the extent of his proportionate partnership interests therein. The address
for Mr. Soni is Bessemer Venture Partners, 83 Walnut Street,
Wellesley Hills, Massachusetts 02181.
(11) The address for Level One Communications is 9750 Goethe Road, Sacramento,
California 95827.
INDEMNIFICATION PURSUANT TO THE MERGER AGREEMENT. Conexant has agreed that,
from and after the effective time of the merger for a period of six years,
Conexant will cause the surviving corporation to maintain in effect (i) the
current provisions regarding indemnification of current officers and directors
contained in the organizational documents of Maker and its subsidiary and in any
agreements between such persons and Maker or its subsidiary and (ii) the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by Maker with respect to claims arising from facts or
events that occurred on or before the effective time of the merger.
LIMITATION OF LIABILITY OF OUR DIRECTORS AND OFFICERS; DIRECTORS AND
OFFICERS INSURANCE.
The merger agreement provides that Conexant and the surviving corporation
will cause to be maintained in effect for a period of six years following the
time of the merger:
- the current provisions in our certificate of incorporation, bylaws and
indemnification agreements regarding indemnification of our current and
former officers and directors; and
- the current policies of our director's and officer's liability insurance
and fiduciary liability insurance, provided that Conexant and the
surviving corporation may substitute policies with at least the same
coverage and amounts and containing terms and conditions, which in the
aggregate, are no less advantageous to the insured.
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DESCRIPTION OF CONEXANT CAPITAL STOCK
The following summary of the current terms of the capital stock of Conexant
is not meant to be complete and is qualified by reference to the restated
certificate of incorporation and by-laws of Conexant. For more information as to
how you can obtain the Conexant restated certificate of incorporation and
by-laws, see "WHERE YOU CAN FIND MORE INFORMATION."
AUTHORIZED CAPITAL STOCK
Under its current charter, Conexant has the authority to issue up to
500,000,000 shares of Conexant common stock, and 25,000,000 shares of preferred
stock. 1,500,000 shares of the 25,000,000 shares of preferred stock have been
designated as Series A Junior Participating Preferred Stock for issuance in
Conexant with the Conexant's Rights Agreement. There is currently a proposal
pending for the Conexant annual meeting scheduled for February 10, 2000 to grant
Conexant the authority to issue 1,000,000,000 shares of common stock and
50,000,000 shares of preferred stock.
CONEXANT COMMON STOCK
CONEXANT COMMON STOCK OUTSTANDING
The outstanding shares of Conexant common stock are, and the shares of
common stock issued pursuant to the merger will be, duly authorized, validly
issued, fully paid and non-assessable. As of December 31, 1999 there were
198,118,000 shares of Conexant common stock outstanding.
ChaseMellon Shareholder Services LLC is the transfer agent and registrar for
the Conexant common stock. Shares of Conexant common stock will be listed on the
Nasdaq National Market and will trade under the symbol "CNXT."
DIVIDENDS
Owners of shares of Conexant common stock are entitled to receive dividends
when, as and if declared by the Conexant board of directors, out of funds
legally available for their payment, subject to the rights of holders of any
outstanding shares of preferred stock.
VOTING RIGHTS
Owners of shares of Conexant common stock are entitled to one vote per
share. Subject to the rights of the holders of any preferred stock pursuant to
applicable law or the provision of any future certificate of designations
creating a specific series of preferred stock, all voting rights are vested in
the owners of shares of Conexant common stock. Owners of shares of Conexant
common stock have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of directors can elect 100%
of the directors.
RIGHTS UPON LIQUIDATION
In the event of Conexant's voluntary or involuntary liquidation, dissolution
or winding up, the owners of shares of Conexant common stock will be entitled to
share equally in any assets available for distribution after the payment in full
of all debts and distributions and after the owners of any outstanding Conexant
preferred stock have received their liquidation preferences in full.
OTHER RIGHTS
Owners of shares of Conexant common stock are not entitled to pre-emptive
rights with respect to the future issuances of Conexant common stock. Conexant
may, however, enter into contracts with stockholders to grant holders
pre-emptive rights. Shares of Conexant common stock are not convertible
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into shares of any other class of capital stock. If Conexant merges or
consolidates with or into another company and, as a result, the shares of
Conexant common stock are converted into or exchangeable for other securities or
property including cash, all owners of shares of Conexant common stock will be
entitled to receive the same kind and amount of such consideration for each
share of common stock.
CONEXANT PREFERRED STOCK
Conexant preferred stock may be issued from time to time in one or more
series. The Conexant board of directors is authorized to fix the number of
shares in each series, and to fix the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations and
restrictions thereof. The authority of the board of directors with respect to
each series includes, but is not limited to, determination of the following:
- the designation of the series, which may be by distinguishing number,
letter or title;
- the number of shares of the series, which number the board of directors
may thereafter, except where otherwise provided in a preferred stock
certificate of designations filed pursuant to the applicable law of the
State of Delaware, increase or decrease (but not below the number of
shares thereof then outstanding);
- whether dividends, if any, will be cumulative or noncumulative and the
dividend rate of the series;
- the dates at which dividends, if any, will be payable;
- the redemption rights and price or prices, if any, for shares of the
series;
- the terms and amount of any sinking fund provided for the purchase or
redemption of shares of the series;
- the amounts payable on shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding-up of the affairs of
Conexant;
- whether the shares of the series will be convertible into shares of any
other class or series, or any other security, of Conexant or any other
corporation, and if so, the specifications of such other class or series
or such other security, the conversion price or prices or rate or rates,
any adjustments thereof, the date or dates as of which such shares will be
convertible and all other terms and conditions upon which such conversion
may be made;
- the restrictions, if any, on the issuance of shares of the same series or
of any other class or series; and
- the voting rights, if any, of the holders of shares of the series.
Except as provided in the certificate of incorporation or in a preferred
stock certificate of designations filed pursuant to the applicable law of the
State of Delaware, the holders of common stock have the exclusive right to vote
for the election of directors and for all other purposes, and holders of
preferred stock are not entitled to receive notice of any meeting of
stockholders at which they are not entitled to vote. The number of authorized
shares of preferred stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding common stock, without a vote of the
holders of the preferred stock, or of any series thereof, unless a vote of any
such holders is required pursuant to any preferred stock certificate of
designations.
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PREFERRED SHARE PURCHASE RIGHTS AND JUNIOR PARTICIPATING PREFERRED STOCK
Conexant has distributed to its stockholders one Preferred Share Purchase
Right (the "Rights") for each outstanding share of common stock pursuant to a
Rights Agreement, dated as of November 30, 1998. Each Right entitles its holder,
until the earlier of December 31, 2008 or the redemption of the rights, to buy
one one-hundredth of a share of Series A Junior Participating Preferred Stock at
an exercise price of $75.00. The Rights Agreement also entitles the holder at
the option of the board of directors to exchange all or part of the Rights for
shares of common stock at an exchange ratio of one share of common stock per
Right, as adjusted. The Rights are represented by the certificates for shares of
common stock until the earlier of (i) the tenth day after the public
announcement that a person or group has acquired beneficial ownership of 20% or
more (a "20% holder") of the shares of common stock (such date called the
"Distribution Date") or (ii) the tenth business day after a person commences, or
announces an intention to commence, an offer, the consummation of which would
result in a person beneficially owning 20% or more of the then-outstanding
shares of common stock.
If Conexant is acquired in a merger or other business combination
transaction, each Right will entitle its holder to purchase, at the exercise
price of the right, that number of shares of common stock of the surviving
company which, at the time of the transaction, would have a market value of two
times the exercise price of the Right. Alternatively, if a 20% holder were to
acquire Conexant by means of a reverse merger in which Conexant and its stock
survive, or were to engage in "self-dealing" transactions, each Right not owned
by the 20% holder would become exercisable for the number of shares of common
stock which, at that time, would have a market value of two times the exercise
price of the Right.
The Rights are redeemable at $0.01 per Right at any time prior to the time
that a person or group becomes a 20% holder. The Rights will expire on the
earlier of (i) the Final Expiration Date which is the tenth anniversary of the
record date, (ii) the time at which the Rights are redeemed or (iii) the time at
which the Rights are exchanged for common stock. At no time will the Rights have
any voting rights.
Each share of Series A Preferred Stock entitles its holder to 100 votes on
all matters submitted to a vote of the stockholders of Conexant. If Conexant
declares or pays any dividend on the common stock payable in shares of common
stock, or effects a subdivision or reclassification of the outstanding shares of
common stock into a greater or lesser number of shares of common stock, then the
number of votes per share to which holders of Series A Preferred Stock were
entitled to immediately prior to such event will be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of common
stock outstanding immediately after such event and the denominator of which is
the number of shares of common stock that were outstanding immediately prior to
such event. The holders of Series A Preferred Stock will vote with the holders
of common stock as one class on all matters submitted to a vote of the
stockholders of Conexant.
The purchase price payable, and the number of shares of Series A Junior
Participating Preferred Stock issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution in the event of certain
dividends on, reclassification of, or distributions to the holders of, Series A
Junior Participating Preferred Stock. The percentage of a share of Series A
Junior Participating Preferred Stock for which a Right is exercisable and the
number of Rights outstanding are also subject to adjustment in the event of
dividends on the shares of common stock payable in shares of common stock or
subdivisions, combinations or consolidations of the shares of common stock,
occurring, in any case, before the Rights become exercisable or transferable
apart from the shares of common stock.
One Right is presently associated with each issued and outstanding share of
common stock. Conexant will issue one Right with each share of common stock
issued unless, prior to the issuance, the Rights are redeemed or become
exercisable and transferable apart from the shares of common stock.
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The Rights have anti-takeover effects. The Rights may cause substantial
dilution to a person or group that attempts to acquire Conexant on terms that
the Conexant board determines are not in the best interests of Conexant
stockholders. The Rights should not interfere with any merger or other business
combination approved the board of directors since the Rights may be redeemed at
$0.01 per Right prior to the time that a person or group has acquired beneficial
ownership of 20% or more of the shares of common stock.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF MAKER AND CONEXANT
Both Conexant and Maker are Delaware corporations governed by Delaware law.
In addition to the applicable provisions of the Delaware General Corporation
Law, currently the rights of Conexant's stockholders are governed by Conexant's
restated certificate of incorporation and amended and restated by-laws, and the
rights of Maker's stockholders are currently governed by Maker's amended and
restated certificate of incorporation and amended and restated by-laws.
If we complete the merger, Maker stockholders will become Conexant
stockholders. After the merger, the rights of Maker stockholders will be
governed by Conexant's restated certificate of incorporation and by-laws and
applicable provisions of the Delaware General Corporation Law.
Set forth below is a summary describing material differences between the
rights of Conexant's stockholders and the rights of Maker's stockholders.
Because Conexant and Maker are both Delaware corporations, differences between
the rights of Conexant's stockholders and Maker's stockholders will arise from
differences in the respective certificates of incorporation and by-laws of
Conexant and Maker, rather than from differences in applicable state law.
While we believe that this summary covers the material differences between
the two companies, this summary may not contain all the information that is
important to you. This summary is not intended to be a complete discussion of
the certificates of incorporation and by-laws of Conexant and Maker, and it is
qualified in its entirety by reference to applicable Delaware law as well as to
Conexant's and Maker's respective certificates of incorporation and by-laws. You
should carefully read this summary and the documents that are referenced in this
summary for a more complete understanding of the differences between being a
stockholder of Conexant and a stockholder of Maker. A copy of Conexant's
restated certificate of incorporation is attached as Appendix C and a copy of
Conexant's by-laws are attached as Appendix D to this proxy statement/prospectus
and both are incorporated in this proxy statement/prospectus by reference.
Maker's amended and restated certificate of incorporation and by-laws are on
file with the SEC, and will also be sent to you upon request. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 104.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF
MAKER STOCKHOLDERS AND RIGHTS THOSE STOCKHOLDERS WILL HAVE AS CONEXANT
STOCKHOLDERS FOLLOWING THE MERGER
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
AUTHORIZED CAPITAL The total number of shares of The total number of shares of
STOCK authorized capital stock is authorized capital stock is
101,000,000 consisting of: 525,000,000 consisting of:
- 100,000,000 shares of common - 500,000,000 shares of common
stock, par value $.01 per share, stock, par value $1.00 per share,
and and
- 1,000,000 shares of preferred - 25,000,000 shares of preferred
stock, par value $.01 per share. stock, without par value.
Of the 25,000,000 shares of
preferred stock, 1,500,000 shares
have been designated as Series A
Junior Participating Preferred
Stock. There is currently a
proposal pending for the Conexant
annual meeting scheduled for
February 10, 2000 to grant Conexant
the authority to issue
1,000,000,000 shares of common
stock and 50,000,000 shares of
preferred stock.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
BOARD OF DIRECTORS
SIZE OF THE BOARD OF The by-laws provide that the number The by-laws provide that subject to
DIRECTORS of directors shall be fixed by a the rights of the holders of any
resolution adopted by a majority of series of preferred stock to elect
the board or as set forth in the additional directors under
certificate of incorporation. specified circumstances, the number
of directors shall be fixed
exclusively by a resolution adopted
by a majority of the board.
The current board consists of The current board consists of
5 directors. 5 directors.
CLASSIFICATION OF THE The board is divided into two The board is divided into three
BOARD OF DIRECTORS classes, Class I and Class II. The classes and the directors are
term of the initial members of elected to three-year terms.
Class I will expire at the annual
stockholders meeting in 2000. The
term of the initial members of
Class II will expire at the annual
stockholders meeting in 2001. At
each stockholder meeting
thereafter, directors will be
elected to two-year terms.
ELECTION OF DIRECTORS Directors are chosen by a plurality Same.
of the votes cast by the
stockholders at the stockholders
meeting where a quorum is present.
RESIGNATION OF Directors may resign at any time by Same.
DIRECTORS giving written notice to the board
of directors, the President or the
Secretary.
REMOVAL OF DIRECTORS The certificate of incorporation The certificate of incorporation
provides that a director or the provides that a director may be
entire board of directors, may be removed from office, but only for
removed without cause by the cause, by the affirmative vote of
majority of the outstanding capital 80% of the voting power of the then
stock entitled to vote generally in outstanding capital stock entitled
the election of directors, or by a to vote generally in the election
majority vote of the board of of directors and subject to the
directors. rights of the holders of any series
of preferred stock.
VACANCIES ON THE Vacancies resulting from any Vacancies in number of
BOARD OF DIRECTORS increase in the authorized number directorships may be filled by a
of directors will be filled by a majority vote of the remaining
majority of the directors then in directors, though less than a
office, though less than a quorum, quorum.
unless previously filled by the
stockholders entitled to vote for
the election of directors, and the
directors so chosen shall hold
subject to the by-laws until the
next annual meeting of stockholders
at which the term of office of
their class expires and their
successors are duly elected and
qualified or until their earlier
resignation or removal.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
QUORUM The by-laws provide that a majority Same.
of the directors in office will
constitute a quorum.
SPECIAL MEETINGS OF Special meetings of the board may Special meetings of the board may
THE BOARD OF be called by the president on two be held whenever called by the
DIRECTORS days' notice to each director; chairman of the board and shall be
special meetings shall be called by called by the chairman of the board
the president or secretary at the or the secretary at the written
written request of two directors request of three directors.
unless the board consists of only
one director, in which case special
meetings shall be called by the
president or secretary on the
written request of the sole
director.
STOCKHOLDERS MEETINGS
Annual Meetings The annual meeting will be held on The annual meeting will be held on
the 2nd Tuesday of April in each a date and at a time and place
year at 10:00 A.M. or at such other designated by the board.
date and time as designated by the
board of directors, the chairman of
the board or the president.
SPECIAL MEETINGS Special meetings are callable by Stockholders do not have the right
the president, the chairman of the to call a special meeting.
board or the board itself and must Same.
be called by the president or
secretary at the written request of
a majority of the directors then in
office.
Special meetings are callable at
any time by the board, but only
pursuant to a resolution adopted by
a majority of the board.
ADVANCE NOTICE TO Stockholders must receive notice of Same.
STOCKHOLDERS a meeting (whether annual or
special) not less than ten days nor
more than sixty days before the
date of the meeting.
ADVANCE NOTICE OF The by-laws require that The by-laws require that
STOCKHOLDERS stockholders provide advance notice stockholders provide advance notice
NOMINATIONS AND for business to be considered at of any stockholder nominations of
BUSINESS any annual meeting of stockholders. directors or any proposal of new
Stockholders must give notice by business to be considered at any
personal delivery or U.S. mail to annual meeting of stockholders.
the secretary of Maker not later Stockholders must give notice in
than 60 days prior to the date set writing to the secretary of
forth in the by-laws for the annual Conexant not less than 90 days nor
meeting. The notice must include more than 120 days prior to the
the stockholder's name and address, first anniversary of the preceding
a representation that such year's annual meeting. In the case
stockholder is entitled to vote at of the annual meeting to be held in
the meeting and intends to appear 2000 or in the event that the
in person or by proxy at the annual meeting is more than 30 days
meeting and such other information before or more than 60 days after
as would be required to be included such anniversary date, notice must
in a proxy statement soliciting be delivered no
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
proxies for the presentation of earlier than 120 days prior to such
such matter to the meeting. annual meeting and not later than
the close of business on the later
of 90 days prior to such annual
meeting or 10 days following the
day on which the public
announcement of the date of such
meeting is announced by Conexant.
Notwithstanding the foregoing, in
the event that the number of
directors to be elected is
increased and there is no public
announcement naming all of the
nominees for directors or
specifying the size of the
increased board of directors made
by Conexant at least 100 days prior
to the first anniversary of the
preceding year's annual meeting, a
stockholder's notice will be
timely, but only with respect to
nominees for any new positions
created by such increase, if it is
received by Conexant not later than
10 days after such public
announcement is first made by
Conexant. A stockholder's notice to
Conexant proposing to nominate an
individual for election as a
director must contain certain
information, including, without
limitation, the identity and
address of the nominating
stockholder, the class and number
of shares of stock of Conexant
owned by such stockholder, and all
information regarding the proposed
nominee that would be required to
be included in a proxy statement
soliciting proxies for the proposed
nominee. If the stockholder is
proposing other business to be
brought before the meeting, the
stockholder must include in the
notice a brief description of such
business, the reasons for
conducting such business at such
meeting, and any material interest
of the stockholder in the business
so proposed.
QUORUM The holders of a majority of the Same.
issued and outstanding stock
entitled to vote in person or
represented by proxy will
constitute a quorum.
VOTING RIGHTS The by-laws provide that, subject Same.
to the laws of Delaware and the
certificate of incorporation, each
holder of common stock will be
entitled to one vote per share on
all matters to be voted on by the
stockholders.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
The certificate of incorporation
provides that, subject to the
by-laws and the laws of Delaware,
each share of Series A preferred
stock is entitled to 100 votes on
all matters submitted to a
stockholder vote. The holders of
Series A preferred stock, the
holders of any other preferred
stock designation and the holders
of common stock shall vote together
as one class on all matters
submitted to a stockholder vote.
All matters brought before the All matters will be decided by a
meeting of stockholders will be majority vote, a quorum being
decided by a majority vote. present. However, matters regarding
However, matters regarding a a business combination involving a
business combination with an transaction between Conexant and an
interested stockholder pursuant to interested stockholder or an
Section 203 of the Delaware General affiliate or associate of an
Corporation Law require at least a interested stockholder require at
66 2/3% affirmative vote. least an 80% affirmative vote.
Votes can be cast in person or by Same.
proxy, but no proxy will be voted
on or after three years from its
date, unless the proxy provides for
a longer period.
ACTION BY CONSENT OF Any action to be taken by the The certificate of incorporation
STOCKHOLDERS stockholders may be taken without a provides that any action required
meeting, without prior notice and or permitted to be taken by
without a vote, if the stockholders stockholders shall be taken only at
having the number of votes that an annual or special meeting and
would be necessary to take such not by consent in writing.
action at a meeting at which all of
the stockholders were present and
voted, consent to the action in
writing.
INSPECTION RIGHTS The by-laws provide that an officer
will prepare and make a complete
list of the stockholders entitled
to vote at a stockholders' meeting
at least ten days before such
meeting. The stockholder list will
be open to the examination of
stockholders for a period of at
least ten days prior to the meeting
for purposes germane to the meeting
as long as the examination is
conducted
- during ordinary business hours
and
- either at a place within the city
where the meeting is to be held
or at the place where the meeting
is held.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
The stockholder list will be Same, except the secretary will
produced and kept at the place of, prepare the stockholder list.
and for the duration of, the
meeting, for inspection by the
stockholders present at the
meeting.
AMENDMENTS TO
ORGANIZATIONAL
DOCUMENTS
CERTIFICATE OF The Delaware General Corporation Provisions of the certificate may
INCORPORATION Law generally requires a vote of be amended, altered or repealed by
the corporation's board of the approval of a majority of the
directors followed by the outstanding voting stock, except
affirmative vote of the holders of that (a) the amendment or repeal of
a majority of the outstanding stock the seventh, tenth and twelfth
of each class entitled to vote for articles of the certificate require
any amendment to the certificate of the affirmative vote of the at
incorporation.If an amendment least 80% of the voting power and
alters the powers, preferences or (b) the certificate may not be
special rights of a particular amended to alter or change the
class or series of stock so as to powers and rights of the Series A
affect them adversely, that class preferred stock without the
or series generally has the power affirmative vote of the holders of
to vote as a class notwithstanding at least two-thirds of the
the absence of any specifically outstanding shares of Series A
enumerated power in the certificate preferred stock, voting together as
of incorporation. a single class.
BY-LAWS The by-laws may be altered, amended The board is expressly authorized
or repealed or new by-laws may be to make, alter, amend and repeal
adopted by the stockholders or by the by-laws, subject to the power
the board, at any regular or of the stockholders, who may also
special meeting of the stockholders amend the by-laws by an affirmative
or of the board of directors, or by vote of at least 80% of the
the written consent of a majority outstanding voting stock.
in interest of the outstanding
voting stock of Maker or by the
unanimous written consent of the
directors. The power of the board
of directors to adopt, amend or
repeal the by-laws will not divest
or limit the power of the
stockholders to adopt, amend or
repeal by-laws.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
DIVIDENDS AND OTHER The certificate of incorporation The certificate of incorporation
DISTRIBUTIONS provides that holders of common provides that full dividends will
stock are entitled to receive be paid to all outstanding
dividends payable either in cash, preferred stock for all past and
in property or in shares of capital current dividend periods before
stock, subject to the powers and dividends are paid on the common
preferences of any preferred stock. stock. Holders of common stock are
The board is authorized to entitled to receive dividends and
determine the terms and dividend distributions in equal amounts per
preferences of any preferred stock. share, payable in cash or
otherwise, as may be declared by
the board.
Holders of Series A preferred stock
are entitled to receive quarterly
dividends payable in cash on the
second Monday of March, June,
September and December in an amount
per share equal to the greater of
(a) $1 or (b) 100 times the
aggregate per share amount of all
cash dividends or (c) 100 times the
aggregate per share amount of all
non-cash dividends or other
dividends other than dividends
payable in common stock. If
Conexant declares a dividend
payable on the common stock, then
the amount to which holders of
shares of Series A preferred stock
were entitled to receive
immediately before such an event
shall be adjusted by multiplying
such amount by a fraction, the
numerator of which is the number of
shares of common stock outstanding
immediately after such event and
the denominator of which is the
number of shares of common stock
that were outstanding immediately
prior to such event.
Upon liquidation, dissolution or
winding up of Conexant, no
distribution shall be made to
stockholders of common stock and
other shares of stock ranking
junior to the Series A preferred
stock until the Series A preferred
stockholders have received
$100 per share plus an amount equal
to 100 times the aggregate amount
to be distributed per share to the
holders of common stock.
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
EXCULPATION AND
INDEMNIFICATION
EXCULPATION No director will be personally Same.
liable to Maker or its stockholders
for monetary damages for breach of
his or her fiduciary duty, except
for liability:
- for a breach of the duty of
loyalty to Maker and its
stockholders,
- for acts or omissions not in good
faith or which involve
intentional misconduct or a
knowing violation of law,
- pursuant to Section 174 of the
Delaware General Corporation Law,
which governs the liability of
directors for unlawful payment of
dividends or unlawful stock
purchases or redemptions, or
- for transactions from which the
director derived improper
personal benefit.
INDEMNIFICATION Maker will indemnify its directors, Same.
officers, employees and agents
against expenses, judgments, fines
and amounts paid in settlement.
Expenses, including attorneys' Same.
fees, incurred in defending an
action will be paid by the
corporation in advance of the final
disposition of such action,
promptly after the corporation
receives a request therefor. The
claimant must post an undertaking
to repay such amount if it is
ultimately determined that the
claimant is not entitled to be
indemnified by the corporation.
The right to indemnification Same.
continues to persons who have A majority of disinterested
ceased to be directors, officers, directors will determine if
employees or agents and inures to indemnification is proper where the
the benefit of their heirs, claimant is a present or former
executors and administrators. director or officer.If there are no
A majority vote of a quorum disinterested directors or if the
consisting of directors who were disinterested directors choose, an
not parties to such an action or if independent counsel or a majority
such a quorum is not obtainable, of the stockholders will make such
independent legal counsel (if such determination. If the claimant
quorum is not obtainable or, even seeking indemnification is not a
if obtainable, a quorum of present or former director, then
disinterested directors so directs) the chief executive officer or
or the stockholders will determine other officer designated by the
if indemnification is proper. board will determine if
indemnification is proper.
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
If a change of control has
occurred, the claimant may select
independent counsel or, in certain
cases may request that the board or
a designated officer determine if
indemnification is proper.
If no change of control has
occurred or if a change of control
has occurred and the claimant has
requested the board to determine
indemnification, then the claimant
shall be conclusively presumed to
be entitled to indemnification so
long as the claimant is not a
present or former director or
officer, the authorized officer has
not made a determination regarding
the indemnification within 60 days
of receipt of the claim by the
corporation and the claimant has
not misstated or omitted any
material facts in his claim. If the
claimant is a present or former
director or officer, then the
claimant shall be conclusively
presumed to be entitled to
indemnification if 15 days
following the next board meeting
the board has not resolved to
submit the determination to
independent counsel or the
stockholders and 60 days following
receipt by Conexant of the claim
the majority of disinterested
directors has not made a
determination. If such claim is
submitted to the stockholders for
determination and the stockholder
meeting does not take place, then
the claimant is presumed to be
entitled to indemnification.
APPRAISAL RIGHTS Under Delaware law, the rights
ofdissenting stockholders to obtain
the fair value of their shares,
which are referred to as appraisal
rights, may be available in
connection with a statutory merger
or consolidation in certain
specific situations. Appraisal
rights are not available to a
corporation's stockholders under
Delaware law when the corporation
is to be the surviving corporation
and no vote of its stockholders is
required to approve the merger.
</TABLE>
100
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
In addition, unless otherwise Same.
provided in the certificate or
incorporation, no appraisal rights
are available under Delaware law to
holders of shares of any class of
stock which is either (a) listed on
a national securities exchange or
designated as a national market
system security on an interdealer
quotation system by the NASD or
(b) held of record by more than
2,000 stockholders, unless these
stockholders are required by the
terms of the merger to accept
anything other than:
- shares of stock of the surviving
corporation;
- shares of stock of another
corporation which, as of the
effective time of the merger or
consolidation, are of the kind
described in clauses (a) and
(b) above;
- cash instead of fractional shares
of such stock; or
- any combination of the above
three bullets.
Appraisal rights are not available
under Delaware law in the event of
the sale of all or substantially
all of a corporation's assets or
the adoption of an amendment to its
certificate of incorporation,
unless such rights are granted in
the corporation's certificate of
incorporation.
The certificate of incorporation
does not grant these rights.
STOCKHOLDER RIGHTS None. Conexant has entered into a Rights
PLAN Agreement, dated as of
November 30, 1998, pursuant to
which it has issued rights to
purchase preferred stock. See
"DESCRIPTION OF CONEXANT CAPITAL
STOCK."
OWNERSHIP LIMITATIONS Neither the certificate of Same.
incorporation nor the by-laws
imposes limitations on the
ownership of capital stock.
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
BUSINESS COMBINATIONS The certificate of incorporation Same.
WITH INTERESTED states that Maker will be governed In addition, a business combination
STOCKHOLDERS by Section 203 of the Delaware is defined in the certificate of
General Corporation Law. incorporation to include the
A business combination involving a following transactions between
transaction between Maker and an Conexant or any subsidiary and an
interested stockholder or an affiliate, associate or interested
affiliate of the interested stockholder:
stockholder requires the - a merger or consolidation;
affirmative vote of the holders of - a sale, lease, exchange,
at least 66 2/3% of the outstanding mortgage, pledge, transfer or other
shares of capital stock, which is disposition of any assets or
not owned by the interested securities of Conexant, or of a
stockholder. subsidiary having an aggregate
A business combination is defined fair market value of at least
in Section 203 to include the $25,000,000;
following transactions between - the adoption of a plan or
Maker or its subsidiary and an proposal for the liquidation or
interested stockholder or its dissolution of Conexant proposed
affiliate: by an interested stockholder or
- a merger or consolidation; an affiliate or an associate of
- a sale, lease, exchange, the interested stockholder;
mortgage, pledge, transfer or other - a reclassification of securities,
disposition of the assets of recapitalization of Conexant or
Maker that has an aggregate fair any merger or consolidation of
market value of more than 10% of Conexant with its subsidiaries
either the aggregate market value that has the effect of increasing
of all the assets of the the proportionate ownership
corporation or the fair value of interest of an interested
Maker's common stock; stockholder or an affiliate or an
- certain issuances or transfers by associate of an interested
Maker or its subsidiary of the stockholder; or
securities of Maker or its - any agreement, contract,
- the adoption of a plan or arrangement or other
proposal for the liquidation or understanding providing for any
dissolution of Maker proposed by one or more of the actions
an interested stockholder or an specified above.
affiliate of the interested A business combination requires the
stockholder; affirmative vote of the holders of
- any transaction involving Maker at least 80% of the outstanding
and its subsidiary, or a merger or shares of voting stock.
consolidation of Maker with its This 80% vote is not applicable to
subsidiary that has the effect of business combinations where such
increasing the proportionate combination is approved by at least
ownership interest of the two-thirds of the directors who are
interested stockholder or of an not affiliates, associates or
affiliate of the interested representatives of an interested
stockholder; or stockholder nor were members of the
- any receipt by the interested board prior to the time the
stockholder of the benefit of any interested stockholder became an
loans, advances, guarantees or interested stockholder.
other financial benefits provided
through the corporation or any
subsidiary of the corporation.
</TABLE>
102
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAKER CONEXANT
<CAPTION>
<S> <C> <C>
This 80% vote is also not
applicable to business combinations
where the aggregate amount of the
consideration to be received per
share by holders of common stock as
a result of the business
combination is at least equal to
the highest of the following:
- the highest share price paid by
the interested stockholder within
the two-year period prior to the
business combination,
- the fair market value per share
of company common stock on the date
on which the interested
stockholder became an interested
stockholder, and
- the fair market value per share
of company common stock on the date
on which the business combination
is publicly announced.
and
- the consideration to be received
by holders of a particular class or
series of outstanding stock shall
be in the form as paid by the
interested stockholder in
becoming an interested
stockholder,
- the interested stockholder has
not become the beneficial owner of
additional shares except as part
of the transaction that resulted
in the interested stockholder
becoming an interested
stockholder.
- the interested stockholder, after
becoming an interested
stockholder, has not received the
benefit of any loans, advances,
guarantees, pledges or other
financial assistance or any tax
credit or tax advantage from
Conexant,
- a proxy statement, describing the
business combination and
compliant with the securities
laws must be sent to all
stockholders, and
- the interested stockholder shall
not have made any material change
in Conexant's capital structure
without approval of at least two
thirds of the continuing
directors.
</TABLE>
103
<PAGE>
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Conexant Systems, Inc. and subsidiaries and its predecessor,
Semiconductor Systems, Inc., representing the semiconductor business of Rockwell
International Corporation and subsidiaries (the "Company"), incorporated in this
proxy statement/prospectus by reference from the Annual Report on Form 10-K of
Conexant Systems, Inc. for the year ended September 30, 1999 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of Maker as of December 31, 1997 and
1998 and for each of the three years in the period ended December 31, 1998
included in this proxy statement/prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving these reports.
Representatives for Arthur Andersen LLP, independent auditors for Maker for
the current year and for the most recently completed fiscal year: (i) are
expected to be present at the special meeting; (ii) will have the opportunity to
make a statement if they desire to do so; and (iii) are expected to be available
to respond to appropriate questions.
LEGAL MATTERS
The legality of the shares of Conexant common stock offered will be passed
upon for Conexant by Latham & Watkins of New York, New York, counsel for
Conexant.
Latham & Watkins and Hutchins Wheeler & Dittmar, A Professional Corporation,
of Boston, Massachusetts, counsel for Maker, have delivered opinions concerning
certain federal income tax consequences of the merger. See "THE MERGER--Material
Federal Income Tax Consequences" on page 51 and "THE MERGER
AGREEMENT--Conditions to Precedent to the Merger" on page 60. As of the date of
this Proxy Statement/Prospectus, certain stockholders of Hutchins, Wheeler &
Dittmar, A Professional Corporation, beneficially own 16,632 shares of Maker
common stock.
FUTURE STOCKHOLDER PROPOSALS
If the merger is not consummated, the only proposals of holders of Maker
common stock eligible to be considered for inclusion in the proxy statement and
form of proxy relating to the Annual Meeting of the Stockholders of Maker in
2000 will be those which have been duly received by Maker, at 73 Mount Wayte
Avenue, Framingham, Massachusetts 01702, no later than November 13, 1999 (which
date is 120 days prior to the anticipated mailing date of the proxy statement
and form of proxy relating to such Annual Meeting). If the merger is approved at
the Special Meeting, no Annual Meeting will be held in 2000.
WHERE YOU CAN FIND MORE INFORMATION
Conexant and Maker file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy reports,
proxy statements and other information filed by Conexant and Maker with the SEC
at the following locations:
- SEC's public reference room located at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; and
104
<PAGE>
- Public reference facilities in the SEC's regional offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World
Trade Center, Suite 1300, New York, New York 10048.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also obtain copies of the materials
described above at prescribed rates by writing to the SEC, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
Conexant and Maker file their reports, proxy statements and other
information electronically with the SEC. You may access information on Conexant
and Maker at the SEC's web site containing reports, proxy statements and other
information at: HTTP://WWW.SEC.GOV.
Conexant has filed a Registration Statement on Form S-4 to register with the
SEC the Conexant common stock to be issued to Maker stockholders in the merger.
This document is part of that registration statement and constitutes a
prospectus of Conexant in addition to being a proxy statement to the Maker
stockholders.
As allowed by SEC rules, this proxy statement does not contain all of the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows Conexant to "incorporate by reference" information into this
proxy statement/ prospectus, which means that Conexant can disclose important
information to you by referring you to another document filed separately with
the SEC. Some of the important business and financial information that you may
want to consider in deciding how to vote is not included in this proxy
statement/prospectus, but rather is "incorporated by reference" to documents
that have been filed by Conexant with the SEC. The information incorporated by
reference is deemed to be part of this proxy statement/prospectus, except for
any information superseded by information contained directly in this proxy
statement/prospectus. This proxy statement/prospectus incorporates by reference
the documents set forth below that Conexant has previously filed with the SEC.
These documents contain important information about Conexant and its financial
condition.
CONEXANT SEC FILINGS
ANNUAL REPORTS ON FORM 10-K:
Year ended September 30, 1999.
CURRENT REPORTS ON FORM 8-K:
Filed on January 4, 2000.
Conexant can also incorporate by reference into this proxy
statement/prospectus additional documents that may be filed with the SEC from
the date of this proxy statement/prospectus to the date of the special meeting
of Maker stockholders. These include periodic reports such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
If there is any contrary information in a previously filed document that is
incorporated by reference in this proxy statement/prospectus, then you should
rely on the information in this proxy statement/prospectus.
All information contained in this proxy statement/prospectus relating to
Conexant has been supplied by Conexant, and all information relating to Maker
has been supplied by Maker.
If you are a stockholder, you can obtain any of the documents incorporated
by reference through Conexant or the SEC. Documents incorporated by reference
are available from Conexant without
105
<PAGE>
charge, excluding all exhibits. You may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them by telephone or
in writing from the following address:
Conexant Systems, Inc
Attention: Investor Relations
4311 Jamboree Road
Newport Beach, California 92660-3095
Telephone: (949) 483-CNXT (2698)
YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/ PROSPECTUS TO VOTE ON THE MERGER AGREEMENT AND MERGER. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN FEBRUARY 2, 2000. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
106
<PAGE>
INDEX TO MAKER COMMUNICATIONS, INC. AND SUBSIDIARY'S
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999 (unaudited)........................ F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997, and 1998 and the nine months
ended September 30, 1998 and 1999 (unaudited)............. F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1996, 1997, and 1998 and
the nine months ended September 30, 1999 (unaudited)...... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997, and 1998 and the nine months
ended September 30, 1998 and 1999 (unaudited)............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Maker Communications, Inc. and subsidiary:
We have audited the accompanying consolidated balance sheets of Maker
Communications, Inc. (a Delaware corporation) and subsidiary as of December 31,
1997 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of Maker Communications, Inc.'s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Maker
Communications, Inc. and subsidiary as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
Boston, Massachusetts ARTHUR ANDERSEN LLP
February 10, 1999
F-2
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $10,865 $ 13,615 $ 18,123
Marketable securities..................................... -- -- 23,487
Accounts receivable, net of reserve of $90, at
December 31, 1998 and September 30, 1999................ 330 932 1,776
Inventory................................................. 150 296 554
Prepaid expenses and other current assets................. 250 106 735
------- -------- --------
Total current assets.................................... 11,595 14,949 44,675
Marketable securities, noncurrent........................... -- -- 14,235
Property and equipment, net................................. 703 952 1,739
Other assets................................................ 99 56 262
------- -------- --------
Total assets.......................................... $12,397 $ 15,957 $ 60,911
======= ======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of note payable to a bank................. $ 145 $ 308 $ --
Accounts payable.......................................... 203 412 752
Accrued expenses.......................................... 544 1,820 1,999
Deferred revenue.......................................... 54 181 634
------- -------- --------
Total current liabilities............................. 946 2,721 3,385
Note payable to a bank, less current portion................ 290 642 --
Convertible note payable (Note 6)........................... -- 500 --
Commitments and contingencies (Note 9)
Redeemable preferred stock, at redemption value (Note 7).... 18,795 23,440 --
Stockholders' equity (deficit) (Note 8):
Junior convertible preferred stock, $.01 par value--
Authorized--3,154,000 shares at December 31, 1997
and 1998 and no shares at September 30, 1999
Issued and outstanding--3,154,000 shares at
December 31, 1997 and 1998 and no shares at
September 30, 1999.................................... 32 32 --
Common stock, $.01 par value--
Authorized--15,195,710, 17,174,670 and 100,000,000
shares at December 31, 1997 and 1998 and
September 30, 1999, respectively
Issued and outstanding--5,402,400, 5,882,490 and
18,402,333 shares at December 31, 1997, 1998 and
September 30, 1999, respectively...................... 54 59 184
Additional paid-in capital................................ 1 68 67,529
Accumulated deficit....................................... (7,721) (11,505) (10,187)
------- -------- --------
Total stockholders' equity (deficit).................. (7,634) (11,346) 57,526
------- -------- --------
Total liabilities, redeemable preferred stock and
stockholder's equity (deficit)...................... $12,397 $ 15,957 $ 60,911
======= ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -----------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product.................................. $ 101 $ 1,231 $ 6,309 $ 3,935 $ 9,424
Software and maintenance................. 241 543 1,385 975 1,389
------- ------- ------- ------- -------
Total revenues......................... 342 1,774 7,694 4,910 10,813
Cost of revenues........................... 329 1,031 3,238 2,277 3,532
------- ------- ------- ------- -------
Gross profit............................... 13 743 4,456 2,633 7,281
------- ------- ------- ------- -------
Operating expenses:
Research and development................. 1,198 2,727 4,171 2,802 4,220
Selling and marketing.................... 332 883 2,078 1,471 1,882
General and administrative............... 373 751 1,299 946 1,137
Litigation............................... -- 462 1,118 1,118 --
------- ------- ------- ------- -------
Total operating expenses............... 1,903 4,823 8,666 6,337 7,239
------- ------- ------- ------- -------
Income (loss) from operations.............. (1,890) (4,080) (4,210) (3,704) 42
Interest income............................ 51 212 538 407 1,389
Other expenses, net........................ (132) (33) (82) (54) (67)
------- ------- ------- ------- -------
Income (loss) before income taxes.......... (1,971) (3,901) (3,754) (3,351) 1,364
Provision for income taxes................. -- -- -- -- 46
------- ------- ------- ------- -------
Net income (loss)...................... $(1,971) $(3,901) $(3,754) $(3,351) $ 1,318
======= ======= ======= ======= =======
Net income (loss) per share:
Basic.................................... $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.11
======= ======= ======= ======= =======
Diluted.................................. $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.07
======= ======= ======= ======= =======
Weighted average common shares outstanding:
Basic.................................... 1,516 5,383 5,647 5,568 12,513
======= ======= ======= ======= =======
Diluted.................................. 1,516 5,383 5,647 5,568 18,541
======= ======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNIOR CONVERTIBLE COMMON
PREFERRED STOCK COMMON STOCK STOCK
------------------ --------------------- -------------------
NUMBER $.01 NUMBER $.01 NUMBER NO ADDITIONAL
OF PAR OF PAR OF PAR PAID-IN
SHARES VALUE SHARES VALUE SHARES VALUE CAPITAL
---------- ----- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996................ -- $ -- -- $ -- 1,000 $ 1 $ --
Delaware reincorporation, exchange of
no par value common stock for $.01
par value common stock.............. -- -- 4,019,654 40 (1,000) (1) --
Conversion of $.01 par value common
stock to junior convertible
preferred stock..................... 4,019,654 40 (4,019,654) (40) -- -- --
Issuance of common stock.............. -- -- 5,359,134 54 -- -- --
Offering costs related to the issuance
of Class A redeemable preferred
stock............................... -- -- -- -- -- -- --
Repurchase and retirement of junior
convertible preferred stock......... (865,654) (8) -- -- -- -- --
Exercise of employee stock options.... -- -- 19,040 -- -- -- 1
Net loss.............................. -- -- -- -- -- -- --
---------- ---- ---------- ---- ------ ---- -------
BALANCE, DECEMBER 31, 1996.............. 3,154,000 32 5,378,174 54 -- -- 1
Offering costs related to the issuance
of Class B redeemable convertible
preferred stock..................... -- -- -- -- -- -- --
Conversion of note payable into common
stock............................... -- -- 20,866 -- -- -- --
Exercise of employee stock options.... -- -- 3,360 -- -- -- --
Net loss.............................. -- -- -- -- -- -- --
---------- ---- ---------- ---- ------ ---- -------
BALANCE, DECEMBER 31, 1997.............. 3,154,000 32 5,402,400 54 -- -- 1
Offering costs related to the issuance
of Class C redeemable convertible
preferred stock..................... -- -- -- -- -- -- --
Exercise of employee stock options.... -- -- 480,090 5 -- -- 67
Net loss.............................. -- -- -- -- -- -- --
---------- ---- ---------- ---- ------ ---- -------
BALANCE, DECEMBER 31, 1998.............. 3,154,000 32 5,882,490 59 -- -- 68
Conversion of Class B redeemable
convertible preferred stock into
common stock (unaudited)............ -- -- 3,416,575 34 -- -- 10,215
Conversion of Class C redeemable
convertible preferred stock into
common stock (unaudited)............ -- -- 1,137,858 11 -- -- 4,995
Conversion of junior convertible
preferred stock into common stock
(unaudited)......................... (3,154,000) (32) 3,154,000 32 -- -- --
Conversion of convertible note payable
into common stock (unaudited)....... -- -- 125,000 1 -- -- 499
Common stock issued during the initial
public offering and concurrent
private placement................... -- -- 4,352,500 44 -- -- 51,610
Exercise of employee stock options
(unaudited)......................... -- -- 333,910 3 -- -- 142
Net income (unaudited)................ -- -- -- -- -- -- --
---------- ---- ---------- ---- ------ ---- -------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)........................... -- $ -- 18,402,333 $184 -- $ -- $67,529
========== ==== ========== ==== ====== ==== =======
<CAPTION>
TOTAL
STOCKHOLDERS'
ACCUMULATED EQUITY
DEFICIT (DEFICIT)
----------- -------------
<S> <C> <C>
BALANCE, JANUARY 1, 1996................ $ (1,017) $ (1,016)
Delaware reincorporation, exchange of
no par value common stock for $.01
par value common stock.............. (39) --
Conversion of $.01 par value common
stock to junior convertible
preferred stock..................... -- --
Issuance of common stock.............. -- 54
Offering costs related to the issuance
of Class A redeemable preferred
stock............................... (64) (64)
Repurchase and retirement of junior
convertible preferred stock......... (667) (675)
Exercise of employee stock options.... -- 1
Net loss.............................. (1,971) (1,971)
-------- --------
BALANCE, DECEMBER 31, 1996.............. (3,758) (3,671)
Offering costs related to the issuance
of Class B redeemable convertible
preferred stock..................... (62) (62)
Conversion of note payable into common
stock............................... -- --
Exercise of employee stock options.... -- --
Net loss.............................. (3,901) (3,901)
-------- --------
BALANCE, DECEMBER 31, 1997.............. (7,721) (7,634)
Offering costs related to the issuance
of Class C redeemable convertible
preferred stock..................... (30) (30)
Exercise of employee stock options.... -- 72
Net loss.............................. (3,754) (3,754)
-------- --------
BALANCE, DECEMBER 31, 1998.............. (11,505) (11,346)
Conversion of Class B redeemable
convertible preferred stock into
common stock (unaudited)............ -- 10,249
Conversion of Class C redeemable
convertible preferred stock into
common stock (unaudited)............ -- 5,006
Conversion of junior convertible
preferred stock into common stock
(unaudited)......................... -- --
Conversion of convertible note payable
into common stock (unaudited)....... -- 500
Common stock issued during the initial
public offering and concurrent
private placement................... -- 51,654
Exercise of employee stock options
(unaudited)......................... -- 145
Net income (unaudited)................ 1,318 1,318
-------- --------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)........................... $(10,187) $ 57,526
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(1,971) $(3,901) $(3,754) $(3,351) $ 1,318
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities--
Depreciation and amortization............................. 132 211 410 306 472
Issuance of convertible note payable in settlement of
litigation.............................................. -- -- 500 500 --
Changes in operating assets and liabilities--
Accounts receivables.................................... (205) (125) (602) (86) (844)
Inventory............................................... (54) (96) (146) 86 (258)
Prepaid expenses and other current assets............... (11) (229) 144 119 (629)
Accounts payable........................................ 58 119 209 81 340
Accrued expenses........................................ 5 445 1,276 558 179
Deferred revenue........................................ 58 (4) 127 41 453
------- ------- ------- ------- --------
Net cash (used in) provided by operating activities... (1,988) (3,580) (1,836) (1,746) 1,031
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities......................... -- -- -- -- (37,722)
Purchase of property and equipment........................ (206) (587) (659) (426) (1,259)
(Increase) decrease in other assets....................... -- (93) 43 46 (206)
------- ------- ------- ------- --------
Net cash used in investing activities................... (206) (680) (616) (380) (39,187)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under note payable to a bank................... -- 436 689 689 450
Payments on note payable to a bank........................ -- -- (174) (130) (1,400)
Net proceeds from note payable to stockholders............ 1,600 -- -- -- --
Payment of note payable to stockholders................... (2,825) -- -- -- --
Net proceeds from initial public offering of common
stock................................................... -- -- -- -- 45,609
Net proceeds from private placement of common stock....... -- -- -- -- 6,045
Proceeds from issuance of common stock.................... 54 -- -- -- --
Repurchase of Junior convertible preferred stock.......... (675) -- -- -- --
Net proceeds from issuance of Class A redeemable preferred
stock................................................... 8,537 -- -- -- --
Net proceeds from issuance of Class B redeemable
convertible preferred stock............................. -- 10,098 89 89 --
Net proceeds from issuance of Class C redeemable
convertible preferred stock............................. -- -- 4,526 -- 450
Proceeds from exercise of stock options................... 1 -- 72 59 145
Redemption of Class A redeemable preferred Stock.......... -- -- -- -- (8,635)
------- ------- ------- ------- --------
Net cash provided by financing activities............. 6,692 10,534 5,202 707 42,664
------- ------- ------- ------- --------
Net increase (decrease) in cash and cash equivalents........ 4,498 6,274 2,750 (1,419) 4,508
Cash and cash equivalents, beginning of period.............. 93 4,591 10,865 10,865 13,615
------- ------- ------- ------- --------
Cash and cash equivalents, end of period.................... $ 4,591 $10,865 $13,615 $ 9,446 $ 18,123
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 176 $ 129 $ 65 $ 49 $ 42
======= ======= ======= ======= ========
Cash paid during the year for income taxes................ $ -- $ -- $ 2 $ 2 $ 72
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
Conversion of note payable into common stock and
Class A redeemable preferred stock...................... $ -- $ 34 $ -- $ -- $ --
======= ======= ======= ======= ========
Conversion of note payable into common stock.............. $ -- $ -- $ -- $ -- $ 500
======= ======= ======= ======= ========
Conversion of Junior preferred stock into common stock.... $ -- $ -- $ -- $ -- $ 32
======= ======= ======= ======= ========
Conversion of Class B redeemable convertible preferred
stock into common stock................................. $ -- $ -- $ -- $ -- $ 10,249
======= ======= ======= ======= ========
Conversion of Class C redeemable convertible preferred
stock into common stock................................. $ -- $ -- $ -- $ -- $ 5,006
======= ======= ======= ======= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) NATURE OF OPERATIONS
Maker Communications, Inc. ("Maker"), a Delaware corporation, was founded in
1994. Maker is a fabless semiconductor company that develops and markets
high-performance programmable communications processors, development tools and
application software for use in communications systems equipment. Maker sells
its products to telecommunications and data networking vendors based primarily
in North America.
In 1998, Maker established a wholly owned subsidiary, Maker Communications
Securities Corporation, which is a qualified Massachusetts securities
corporation.
On December 18, 1999, Maker entered into an Agreement and Plan of Merger
with Conexant Systems, Inc. ("Conexant"), whereby Maker will be merged with and
into Conexant. Holders of Maker common stock would receive 0.66 of a share of
Conexant common stock for each share of Maker common stock. Consummation of the
merger is subject to customary conditions to closing including the approval of
the stockholders of Maker and certain regulatory approvals. The merger will be
accounted for as a "purchase" transaction for accounting and financial reporting
purposes and is intended to qualify as a tax-free reorganization for federal
income tax purposes.
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements reflect the application of certain
significant accounting policies as described in this note and elsewhere in the
accompanying consolidated financial statements and notes.
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Maker and its wholly owned subsidiary. All significant intercompany balances
have been eliminated in consolidation.
(B) INTERIM FINANCIAL STATEMENTS
The accompanying consolidated balance sheet as of September 30, 1999, and
the statements of operations and cash flows for the nine months ended September
30, 1998 and 1999, and the statement of stockholders' equity (deficit) for the
nine months ended September 30, 1999 are unaudited, but in the opinion of
management, include all adjustments, consisting normal recurring adjustments,
necessary for a fair presentation of results for these interim periods. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted, although Maker believes that the disclosures included are adequate to
make the information presented not misleading. The results of operations for the
nine months ended September 30, 1999, are not necessarily indicative of the
results to be expected for the entire fiscal year.
(C) INITIAL PUBLIC OFFERING
Maker completed its initial public offering (the "Offering") of 3,852,500
shares of its common stock in May 1999, including 502,500 shares issued in
connection with the exercise of the underwriters' over-allotment option on the
Offering date. These shares were offered to the public at $13 per share, which
net of Offering expenses and the $0.91 per share underwriting discount, resulted
in net proceeds
F-7
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of $45,609,000. In addition, Maker sold 500,000 shares of common stock in a
concurrent private placement that was not underwritten at a price of $12.09 per
share, resulting in net proceeds of $6,045,000. Concurrent with the Offering,
all of the Class A Redeemable Preferred Stock was redeemed resulting in cash
payments totaling $8,635,000 and the Junior Convertible Preferred Stock,
Class B Convertible Preferred Stock, and Class C Convertible Preferred Stock
were all converted into 7,708,433 shares of common stock on the date of the
Offering. Proceeds from the Offering were used to repay bank debt of $1,243,000
in May 1999.
(D) REVENUE RECOGNITION
Revenue derived from the sale of processors is recognized upon shipment.
Provisions are made at that time for any applicable warranty costs expected to
be incurred. Revenue from software license agreements is recognized upon
execution of a license agreement and delivery of the software, provided that the
fee is fixed or determinable and deemed collectible by management. Revenue from
software maintenance agreements is recognized ratably over the term of the
maintenance period, which is typically one year. Amounts collected or billed
prior to satisfying the above revenue recognition criteria are reflected as
deferred revenue. Maker recognizes software revenue in accordance with the
provisions of Statement of Position (SOP) No. 97-2, SOFTWARE REVENUE
RECOGNITION.
(E) INCOME (LOSS) PER SHARE
Basic income (loss) per share is calculated using the weighted average
number of common shares outstanding. Diluted income (loss) per share is computed
on the basis of the weighted average number of common shares outstanding and the
effect of dilutive securities using the treasury stock method. The following
table sets forth the computation of basic and diluted income (loss) per share,
including a reconciliation of basic and diluted weighted average shares
outstanding (in thousands, except per share amounts):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income (loss)............................... $(1,971) $(3,901) $(3,754) $(3,351) $ 1,318
------- ------- ------- ------- -------
Basic weighted average common shares
outstanding................................... 1,516 5,383 5,647 5,568 12,513
Effect of dilutive securities:
Stock options............................... -- -- -- -- 2,311
Convertible note............................ -- -- -- -- 54
Convertible preferred stock................. -- -- -- -- 3,663
------- ------- ------- ------- -------
Diluted weighted average common shares
outstanding................................... 1,516 5,383 5,647 5,568 18,541
======= ======= ======= ======= =======
Basic net income (loss) per share............... $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.11
======= ======= ======= ======= =======
Diluted net income (loss) per share............. $ (1.30) $ (0.72) $ (0.66) $ (0.60) $ 0.07
======= ======= ======= ======= =======
</TABLE>
Options to purchase a weighted total of 72,000, 492,000, 1,503,000, and
1,391,000 common shares have been excluded from the computation of diluted
weighted average shares outstanding for the years
F-8
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ended December 31, 1996, 1997 and 1998 and the nine months ended September 30,
1998 respectively since their effect is antidilutive as Maker has recorded a net
loss for those periods. For the nine month period ended September 30, 1999,
options to purchase 18,564 weighted shares of common stock were excluded from
the computation of diluted net income per share because the exercise prices of
such options were greater than the average fair market value of Maker's common
stock, and therefore would be antidilutive. In accordance with the SEC Staff
Accounting Bulletin No. 98, EARNINGS PER SHARE IN AN INITIAL PUBLIC OFFERING,
Maker determined that there were no nominal issuances of Maker's common stock
prior to Maker's initial public offering.
(F) COST OF REVENUES
Cost of revenues includes the cost of purchasing fully assembled, tested and
packaged communications processors from Maker's independent foundries,
production related expenses, warranty, and quality assurance for those products,
as well as costs of personnel associated with supporting Maker's customers. Cost
of revenues also includes software costs, consisting of the cost of media on
which it is delivered, which amounts are not significant.
(G) CASH EQUIVALENTS AND MARKETABLE SECURITIES
Maker classifies short-term, highly liquid investments with original
maturity dates of ninety days or less as cash equivalents and all investments
with original maturity dates greater than ninety days as marketable securities.
Marketable securities with remaining maturities of less than one year as of the
balance sheet date are classified as current.
At September 30, 1999, all of Maker's cash equivalents and marketable
securities were in commercial paper, corporate bonds and government securities
and were classified as held-to-maturity. Held-to-maturity securities represent
those securities for which Maker has the intent and ability to hold to maturity
and are stated at cost, adjusted for amortization of premiums and discounts.
A summary of held-to-maturity securities, at amortized cost which
approximates market value, by balance sheet caption is as follows (in
thousands):
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
DECEMBER 31, AVERAGE DECEMBER 31, AVERAGE SEPTEMBER 30, AVERAGE
1997 MATURITY 1998 MATURITY 1999 MATURITY
------------ -------- ------------ -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash equivalents........... $10,758 -- $9,051 -- $13,935 --
Marketable securities
current.................. -- -- -- -- 23,487 4 months
Marketable securities non-
current.................. -- -- -- -- 14,235 21 months
------- ------ -------
Total held-to-maturity
securities............... $10,758 $9,051 $51,657
======= ====== =======
</TABLE>
(H) INVENTORY
Inventory, which consists of finished goods, is stated at the lower of cost
(first-in, first-out) or market.
F-9
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Maker provides for depreciation and amortization using the
straight-line method to allocate the cost of property and equipment over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
- -------------------- -------------
<S> <C>
Computer equipment.......................................... 3 years
Computer software........................................... 3 years
Furniture and fixtures...................................... 5 years
Leasehold improvements...................................... Life of lease
</TABLE>
Property and equipment at December 31, 1997 and 1998 and September 30, 1999
consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Computer equipment.............................. $ 634 $1,236 $ 1,922
Computer software............................... 372 422 868
Furniture and fixtures.......................... 51 53 96
Leasehold improvements.......................... 43 48 132
------ ------ -------
1,100 1,759 3,018
Less-accumulated depreciation and
amortization.................................. (397) (807) (1,279)
------ ------ -------
$ 703 $ 952 $ 1,739
====== ====== =======
</TABLE>
(J) SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards (SFAS) No.
86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR
OTHERWISE MARKETED, Maker has evaluated the establishment of technological
feasibility of its various products during the development phase. Due to the
dynamic changes in the market, Maker has concluded that it cannot determine
technological feasibility until the development phase of the project is nearly
complete. The time period during which costs could be capitalized from the point
of reaching technological feasibility until the time of general product release
is very short and, consequently, the amounts that could be capitalized are not
material to Maker's financial position or results of operations. Therefore,
Maker charges all research and development expenses to operations in the period
incurred.
(K) INCOME TAXES
Maker accounts for income taxes in accordance with the provisions of SFAS
No. 109, ACCOUNTING FOR INCOME TAXES. This statement requires Maker to recognize
a current tax asset or liability for current taxes payable or refundable and to
record a deferred tax asset or liability for the estimated future tax effects of
temporary differences and carry forwards to the extent they are realizable. A
deferred tax
F-10
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
provision or benefit results from the net change in deferred tax assets and
liabilities during the year. A deferred tax valuation allowance is required if
it is more likely than not that all or a portion of the recorded deferred tax
assets will not be realized.
(L) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and use
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(M) CONCENTRATION OF CREDIT RISK
Maker has no significant off-balance-sheet concentrations of credit risk
such as foreign exchange contracts, option contracts or other foreign hedging
arrangements. Financial instruments that potentially subject Maker to
concentrations of credit risk are principally cash equivalents, marketable
securities, accounts receivable, accounts payable, notes payable and redeemable
preferred stock. Concentration of credit risk with respect to accounts
receivable is limited to certain customers to whom Maker makes substantial
sales. Maker performs periodic credit evaluations of its customers and generally
does not require collateral. Maker has $90,000 in allowances for estimated
losses at December 31, 1998 and September 30, 1999.
The following table summarizes the number of customers that individually
comprise greater than 10% of the total accounts receivable and their aggregate
percentage of Maker's total accounts receivable.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF ACCOUNTS
CUSTOMERS RECEIVABLE
--------- ----------------
<S> <C> <C>
December 31, 1997................................ 5 77%
December 31, 1998................................ 3 58%
September 30, 1999............................... 3 56%
</TABLE>
(N) FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist principally of cash and cash equivalents,
marketable securities, accounts receivable, accounts payable, notes payable and
redeemable preferred stock. The estimated fair value of these instruments
approximates their carrying value.
(O) STOCK-BASED COMPENSATION
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the
measurement of the fair value of stock options or warrants to be included in the
consolidated statement of operations or disclosed in the notes to consolidated
financial statements. Maker has determined that it will account for stock-based
compensation for employees under the intrinsic value-based method of Accounting
F-11
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles Board Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and elect the disclosure-only alternative under SFAS No. 123.
(P) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, REPORTING COMPREHENSIVE INCOME. Maker does not have any components of
comprehensive income except its reported net loss.
(3) ACCRUED EXPENSES
Accrued expenses at December 31, 1997 and 1998 and September 30, 1999
consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Payroll and related costs........................ $204 $ 520 $ 753
Production costs................................. -- 231 245
Warranty......................................... 16 140 162
Other............................................ 324 929 838
---- ------ ------
$544 $1,820 $1,999
==== ====== ======
</TABLE>
(4) INCOME TAXES
As of December 31, 1998, Maker has net operating loss carryforwards of
approximately $8,710,000 available to reduce future federal and state income
taxes, if any. Maker also has available federal tax credits of approximately
$330,000 expiring through 2010. If not utilized, these carryforwards expire at
various dates through 2018. If substantial changes in Maker's ownership should
occur, as defined by Section 382 of the Internal Revenue Code (the Code), there
could be annual limitations on the amount of carryforwards which can be realized
in future periods. Maker has completed several financings since its inception
and has incurred an ownership change as defined under the Code. Maker does not
believe that this change in ownership will have a material impact on its ability
to utilize its net operating loss and tax credit carryforwards.
Net deferred tax assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards.......................... $ 2,002 $ 3,507
Nondeductible expenses and reserves....................... 300 550
------- -------
2,302 4,057
Valuation allowance....................................... (2,302) (4,057)
------- -------
$ -- $ --
======= =======
</TABLE>
F-12
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(4) INCOME TAXES (CONTINUED)
Due to the uncertainty surrounding Maker's ability to utilize its net
operating loss carryforwards, Maker has provided a full valuation allowance
against its otherwise recognizable deferred tax asset at December 31, 1997 and
1998. Maker recorded a provision for income taxes in the amount of $46,000 for
the nine month period ended September 30, 1999 for minimum federal and state tax
liabilities.
(5) NOTES PAYABLE TO A BANK
(A) WORKING CAPITAL LINE OF CREDIT
On February 18, 1997, Maker entered into a working capital line of credit of
$1,000,000 with a bank. On May 12, 1998 and on February 3, 1999, Maker entered
into loan modification agreements with the bank whereby the working capital line
of credit was increased to $2,000,000 and $2,500,000, respectively. Borrowings
bear interest at the bank's prime rate (7.75% at December 31, 1998) plus .25%.
The line of credit is collateralized by substantially all assets of Maker. The
line of credit expires in February 2000. Maker had no borrowings under the
working capital line of credit as of December 31, 1998 and September 30, 1999.
(B) CAPITAL EXPENDITURE LINE OF CREDIT
Maker has borrowings under a modified equipment line of credit facility with
the same bank. Borrowings are payable over a 30 to 39 month period and bear
interest at the bank's prime rate (7.75% at December 31, 1998) plus .25% to
prime plus 1.0%. In 1999, Maker borrowed an additional $450,000 under its
existing equipment line of credit facility. On February 3, 1999, Maker entered
into a loan modification agreement with the bank that provided Maker with an
additional $1,000,000 of borrowing availability under its capital expenditure
line of credit. As of September 30, 1999, Maker had $1,000,000 available under
the modified equipment line of credit. All borrowings under the equipment line
of credit are collateralized by substantially all assets of Maker. Under these
agreements, Maker is required to comply with certain restrictive covenants. As
of December 31, 1998 and September 30, 1999, Maker was in compliance with all
such covenants. In connection with Maker's initial public offering in May 1999,
all outstanding amounts under Maker's capital expenditure line of credit were
repaid and Maker has no borrowings under this line as of September 30, 1999.
(6) CONVERTIBLE NOTE PAYABLE
In July 1998, Maker issued a $500,000 convertible note payable to LSI Logic
Corporation (LSI) which accrued interest at an annual rate of 6.5%. All
principal and interest was due on June 30, 2001. Upon the occurrence of certain
events, LSI had the ability to convert the principal of the note into fully paid
and nonassessable shares of common stock of Maker at the lesser of $4.00 per
share, subject to certain dilutive events, as defined, or the subsequent sale
price per share of common stock issued by Maker in which the aggregate gross
proceeds received by Maker is at least $1,000,000. In April 1999, LSI notified
Maker of its intention to convert the note to 125,000 shares of Maker's common
stock. The conversion occurred prior to the closing of the Maker's initial
public offering.
F-13
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7) REDEEMABLE PREFERRED STOCK
(A) CLASS A REDEEMABLE PREFERRED STOCK
In September 1996, Maker authorized the issuance of up to 5,380,000 shares
of Class A redeemable preferred stock, $.01 par value and issued 5,359,134
shares at $1.605 per share resulting in net proceeds of approximately
$8,537,000. In October 1997, Maker issued an additional 20,866 shares of
Class A redeemable preferred stock at $1.605 per share in exchange for the
conversion of a note payable to a stockholder in the amount of approximately
$34,000. These shares were nonvoting, nonconvertible and had dividend rights
superior to junior convertible preferred stock, Class B redeemable convertible
preferred stock, Class C redeemable convertible preferred stock and common
stock. The Class A redeemable preferred stock had a liquidation preference of
$1.605 per share plus all declared but unpaid dividends. As of December 31,
1998, the preference in liquidation and redemption value was approximately
$8,635,000. In May 1999, in connection with Maker's initial public offering, the
Class A redeemable preferred stock was redeemed for approximately $8,635,000.
(B) CLASS B REDEEMABLE CONVERTIBLE PREFERRED STOCK
In October 1997, Maker authorized the issuance of up to 3,416,670 shares of
Class B redeemable convertible preferred stock, $.01 par value, and issued
3,386,675 shares at $3.00 per share resulting in net proceeds of approximately
$10,098,000. In July 1998, Maker issued an additional 29,900 shares resulting in
net proceeds of approximately $89,000. These shares were convertible into common
stock at the rate of one share of common stock for each share of preferred
stock, adjustable for certain dilutive events. Conversion was automatic upon the
closing of Maker's initial public offering of common stock which occurred in May
1999. All outstanding shares of Class B redeemable convertible preferred stock
were converted into 3,416,575 shares of common stock. These shares had dividend
rights superior to junior convertible preferred stock and common stock and
similar to the Class C redeemable convertible preferred stock. The Class B
redeemable convertible preferred stock had a liquidation preference of $3.00 per
share plus all declared but unpaid dividends. As of December 31, 1998, the
preference in liquidation and redemption value was approximately $10,249,000.
(C) CLASS C REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 1998, Maker authorized the issuance of up to 1,138,000 shares of
Class C redeemable convertible preferred stock and issued 1,035,586 shares at
$4.40 per share resulting in net proceeds of approximately $4,526,000. In
January 1999, Maker sold an additional 102,272 shares of Class C redeemable
convertible preferred stock at $4.40 per share, resulting in net proceeds to
Maker of approximately $450,000. These shares were convertible into common stock
at the rate of one share of common stock for each share of preferred stock,
adjustable for certain dilutive events. Conversion was automatic upon the
closing of Maker's initial public offering of common stock in May 1999. All
outstanding shares of Class C redeemable convertible preferred stock were
converted into 1,137,858 shares of common stock. These shares had dividend
rights superior to junior convertible preferred stock and common stock and
similar to Class B redeemable convertible preferred stock. The Class C
redeemable convertible preferred stock had a liquidation preference of $4.40 per
share plus all declared but unpaid dividends. As of December 31, 1998, the
preference in liquidation and redemption value was approximately $4,556,000.
F-14
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT)
(A) COMMON STOCK
In 1999, Maker increased the authorized shares of common stock to
100,000,000.
(B) JUNIOR CONVERTIBLE PREFERRED STOCK
In 1996, Maker authorized 4,019,654 shares of junior convertible preferred
stock, $0.01 par value. In September 1996, each outstanding share of $.01 par
value common stock, totaling 4,019,654 shares, was exchanged for one share of
junior convertible preferred stock. In October 1996, Maker repurchased and
retired 865,654 shares of junior convertible preferred stock.
The junior convertible preferred stock was subordinate to Class A redeemable
preferred stock and Class B convertible preferred stock and Class C convertible
preferred stock and superior to common stock in regard to liquidation. Junior
convertible preferred stock was optionally redeemable by Maker at a price of
$0.005 per share subsequent to the redemption of the Class A redeemable
preferred stock. Each share of junior convertible preferred stock could, at the
option of the holder, be converted to one share of common stock, as adjusted for
certain events.
Conversion occurred automatically upon the completion of Maker's initial
public offering. All outstanding shares of junior convertible preferred stock
were converted into 3,154,000 shares of common stock. Voting rights were
provided to junior convertible preferred stock in proportion to the number of
shares of common stock that would be received upon conversion.
(C) STOCK PLANS
1996 OPTION PLAN
During 1996, the board of directors approved the 1996 Stock Option Plan (the
1996 Plan). The board of directors has reserved 3,876,000 shares of common stock
for issuance under the 1996 Plan. Options issued under the 1996 Plan may be
either incentive stock options or nonqualified stock options at the discretion
of the board of directors. Options may be granted to key employees, officers,
consultants and advisers of Maker. Options expire up to 10 years from the date
of grant or as determined by the board of directors. Options vest over a term to
be established by the board of directors at the date of grant. Under the 1996
Plan, at the option of the board of directors, certain option grants may be
immediately exercisable but subject to a right to repurchase at cost at the
option of the board of directors, pursuant to the vesting schedule of such
grant. In addition, upon a change in control of Maker, as defined, the
exercisability of options due to vest during the following twelve month period
are automatically accelerated. Upon the effectiveness of Maker's 1999 Incentive
Stock Plan, no further options were granted under the 1996 Plan.
1999 INCENTIVE STOCK PLAN
In April 1999, the board of directors approved the 1999 Incentive Stock Plan
(1999 Plan) permitting the grant of stock options, which may be either incentive
stock or nonqualified options and stock awards. This plan became effective upon
the successful closing of Maker's initial public offering in May 1999. The
maximum number of shares of Maker's common stock available for stock options and
stock awards granted under the 1999 Plan is 2,600,000 plus annual cumulative
increases on each
F-15
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
January 1, beginning in 2000 equal to (a) 5% of Maker's issued and outstanding
common stock calculated on a fully diluted basis or (b) a lesser amount as
determined by the board of directors.
Options designated as incentive stock options may be granted only to
employees of Maker. Non-qualified options may be granted to any officer,
employee, consultant or director of Maker. No option designated as an incentive
stock option shall be granted to any employee of Maker or any subsidiary if such
employee owns, immediately prior to the grant of an option, stock representing
more than 10% of the combined voting power of all classes of stock of Maker,
unless the purchase price for the stock under such option is at least 110% of
its fair market value at the time the option is granted and the option, by its
terms is not exercisable more than five years from the date it is granted.
The maximum number of shares of Maker's common stock with respect to which
an option or options may be granted to any employee in any calendar year shall
not exceed 500,000 shares, taking into account shares subject to options granted
and terminated, or repriced, during such calendar year. Options granted under
the 1999 Incentive Plan will vest as determined by the board of directors. Upon
a change in control of Maker, the exercisability of options due to vest during
the twelve month period following the change in control are automatically
accelerated.
1999 NON-EMPLOYEE DIRECTOR PLAN
In January 1999, the board of directors adopted a Director Option Plan
(Director Plan) pursuant to which 125,000 shares of common stock have been
reserved for future issuance, plus annual increases such that the total number
of shares subject to issuance shall be (i) 125,000 on January 1 of each year, or
(ii) a lesser amount determined by the board of directors. The Director Plan
provides that each non-employee director will automatically be granted an option
to purchase 20,000 shares on the date which such person first becomes a
non-employee director. In addition, each non-employee director will
automatically be granted an option to purchase 15,000 shares on the date two
days after Maker announces its fiscal year-end earnings of each year, if on such
date that director will have served on the board of directors for at least the
preceding six months. Each option has a term of up to 10 years and vests over a
term determined by the board of directors at the time of grant. In addition,
upon a change in control of Maker, as defined in the Director Plan, all unvested
options shall vest immediately.
1999 EMPLOYEE STOCK PURCHASE PLAN
In April 1999, the board of directors approved the Maker 1999 Employee Stock
Purchase Plan (the Stock Purchase Plan). This plan became effective upon the
closing of Maker's proposed initial public offering. The Stock Purchase Plan is
intended to provide a means whereby eligible employees may purchase, on a
quarterly basis, common stock of Maker through payroll deductions. Such payroll
deductions cannot amount to less than 1% nor more than 10% of the participant's
regular compensation and cannot exceed $25,000 or 3,000 shares per year. The
purchase price of shares of Maker common stock under the Stock Purchase Plan is
the lower of 85% of the fair market value of a share of common stock for the
first business day of the relevant purchase period or 85% of such value for the
relevant exercise date. 400,000 shares of Maker common stock have been reserved
for issuance under the Stock Purchase Plan. Maker will account for the Stock
Purchase Plan in accordance with APB No. 25 and accordingly, no compensation
cost will be recognized under the Stock Purchase Plan. Maker will elect the
"disclosure only" alternative under SFAS No. 123.
F-16
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The following table summarizes option activity under the stock plans:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE EXERCISE PRICE
--------- -------------- --------------
<S> <C> <C> <C>
Granted................................. 831,990 $ .05-$ .16 $ .08
Exercised............................... (19,040) .05 .05
--------- ------------ ------
Outstanding, December 31, 1996.......... 812,950 .05- .16 .08
Granted................................. 1,163,100 .16- .30 .17
Exercised............................... (3,360) .05 .05
Canceled................................ (44,620) .05- .16 .09
--------- ------------ ------
Outstanding, December 31, 1997.......... 1,928,070 .05- .30 .13
Granted................................. 1,782,250 .30- 3.75 2.03
Exercised............................... (480,090) .05- 1.00 .15
Canceled................................ (611,980) .05- .30 .16
--------- ------------ ------
Outstanding, December 31, 1998.......... 2,618,250 .05- 3.75 1.42
Granted................................. 484,250 4.40- 29.25 11.34
Exercised............................... (333,910) .05- 4.40 .43
Canceled................................ (188,700) .16- 3.75 1.31
--------- ------------ ------
Outstanding, September 30, 1999......... 2,579,890 $ .05- 29.25 $ 3.41
========= ============ ======
Exercisable, September 30, 1999......... 531,594 $ .05- 8.50 $ 1.69
========= ============ ======
</TABLE>
The following table summarizes information relating to currently outstanding
and exercisable options as of September 30, 1999.
<TABLE>
<CAPTION>
OUTSTANDING
-----------------------------------------
WEIGHTED EXERCISABLE
AVERAGE --------------------------
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER OF CONTRACTUAL AVERAGE NUMBER OF AVERAGE
EXERCISE PRICES SHARES LIFE (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
- --------------------- --------- ------------ -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.05 255,090 7.04 $ 0.05 125,020 $0.05
-- 0.16 205,550 7.63 0.16 41,513 0.16
-- 0.30 363,750 8.45 0.30 68,586 0.30
-- 0.75 255,000 8.73 0.75 67,500 0.75
$ 2.00- 2.75 818,000 8.96 2.74 163,600 2.74
3.75- 4.40 313,250 9.11 3.95 45,000 4.33
8.50- 9.50 244,000 5.84 8.95 20,375 8.50
-- 13.00 30,000 5.61 13.00 --
21.00- 29.25 95,250 5.86 25.32 --
--------- -------
2,579,890 531,594
========= =======
</TABLE>
F-17
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
For purposes of the pro forma disclosures required by SFAS No. 123, the fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model. The assumptions used and the weighted
average information for the years ended December 31, 1996, 1997 and 1998 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rates................................. 6.09% 5.89-6.46% 4.47-5.49%
Expected dividend yield.................................. -- -- --
Expected life............................................ 4 years 4 years 4 years
Expected volatility...................................... 60% 60% 60%
Weighted average fair value of options granted........... $.04 $.09 $1.02
Weighted-average remaining contractual life of options
outstanding............................................ 9.81 years 9.27 years 9.13 years
</TABLE>
Had compensation expense from Maker's stock option plan been determined
consistent with SFAS No. 123, net loss and net loss per share would have been
approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss:
As reported.................................. $(1,971) $(3,901) $(3,754)
Pro forma.................................... (1,974) (3,929) (3,967)
Basic and diluted net loss per share:
As reported.................................. $ (1.30) $ (0.72) $ (0.66)
Pro forma.................................... (1.30) (0.73) (0.70)
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
(A) LITIGATION
In February 1997, LSI filed a lawsuit against Maker. During July 1998, Maker
and LSI reached a settlement agreement under which Maker paid LSI a lump-sum of
$200,000 and issued a $500,000 convertible note as discussed in Note 6. Maker
has included in a separate line item in its consolidated statement of operations
the legal and settlement costs associated which the LSI litigation. Maker is not
currently involved in any litigation which, in management's opinion, would have
a material adverse effect on its business, operating results or financial
condition.
F-18
<PAGE>
MAKER COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
(B) LEASES
Maker has operating leases for various facilities and equipment expiring at
various dates through August 2001. Future minimum lease payments at December 31,
1998 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1999........................................................ $359
2000........................................................ 166
2001........................................................ 5
----
$530
====
</TABLE>
Rent expense under operating leases totaled approximately $92,000, $200,000,
$278,000, $206,000 and $286,000 for the years ended December 31, 1996, 1997 and
1998 and nine months ended September 30, 1998 and 1999, respectively.
On November 4, 1999, Maker entered into a new lease agreement whereby Maker
would occupy approximately 41,000 square feet. The lease is an operating lease
and has a term of five years from the commencement date, which is scheduled to
be during the first quarter of 2000. Future minimum lease payments escalate
annually over the life of the lease and range from approximately $820,000 to
$890,000, annually.
(10) EMPLOYEE BENEFIT PLAN
Effective January 1, 1996, Maker adopted a 401(k) savings and profit-sharing
plan (the Plan). All employees are immediately eligible to participate upon the
attainment of age 21. The Plan is intended to qualify as a defined contribution
plan in accordance with Section 401(k) of the Internal Revenue Code.
Participants may defer up to 15% of their compensation under the Plan. Maker may
make discretionary profit-sharing contributions to the Plan. Participants vest
in Maker's contributions ratably over five years. No discretionary contributions
were made in 1996, 1997 or 1998 or the nine months ended September 30, 1999.
(11) SEGMENT, SIGNIFICANT CUSTOMER AND SUPPLIER INFORMATION
Maker operates in one industry segment, communications processors, and
derives substantially all of its revenues from US customers. Maker had a total
of three customers whose revenue represented a significant percentage of total
revenue in certain or all years or periods as follows:
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Customer A............................................... 32% 29% 21% 33%
Customer B............................................... 23 16 21 16
Customer C............................................... -- 13 11 12
</TABLE>
Maker currently outsources substantially all manufacturing, assembly and
test of communications processors to one outside foundry.
F-19
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 18, 1999
AMONG
CONEXANT SYSTEMS, INC.,
MERLOT
ACQUISITION CORP.
AND
MAKER COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I. THE MERGER............................................ 2
1.1 THE MERGER........................ ......................... 2
1.2 CLOSING.......................... .......................... 2
1.3 EFFECTIVE TIME...................... ....................... 2
1.4 EFFECTS OF THE MERGER................... ................... 2
1.5 CERTIFICATE OF INCORPORATION............... ................ 2
1.6 BYLAWS.......................... ........................... 2
1.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION...... ...... 2
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES................ 3
2.1 EFFECT ON CAPITAL STOCK.................. .................. 3
2.2 EXCHANGE OF CERTIFICATES................. .................. 3
ARTICLE III. REPRESENTATIONS AND WARRANTIES...................... 6
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....... ....... 6
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT.......... ......... 17
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
RESPECTING MERGER SUB................... ................... 23
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS............ 24
4.1 COVENANTS OF THE COMPANY.................. ................. 24
4.2 COVENANTS OF PARENT AND MERGER SUB............. ............ 27
4.3 ADVICE OF CHANGES; GOVERNMENT FILINGS........... ........... 27
4.4 CONTROL OF OTHER PARTY'S BUSINESS............. ............. 28
ARTICLE V. ADDITIONAL AGREEMENTS................................. 28
5.1 PREPARATION OF FORM S-4 AND PROXY STATEMENT; THE COMPANY
STOCKHOLDERS MEETING.................... ................... 28
5.2 ACCESS TO INFORMATION................... ................... 29
5.3 APPROVALS AND CONSENTS; COOPERATION............ ............ 30
5.4 ACQUISITION PROPOSALS................... ................... 31
5.5 EMPLOYEE BENEFITS..................... ..................... 32
5.6 FEES AND EXPENSES..................... ..................... 32
5.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.... .... 32
5.8 PUBLIC ANNOUNCEMENTS.................... ................... 33
5.9 TAX TREATMENT....................... ....................... 33
5.10 AFFILIATES......................... ........................ 33
5.11 STOCK LISTING....................... ....................... 33
5.12 TAKEOVER STATUTES..................... ..................... 33
5.13 RIGHTS AGREEMENTS..................... ..................... 33
5.14 EMPLOYEE STOCK OPTIONS AND EQUITY INCENTIVES........ ....... 33
5.15 TAX REPRESENTATIONS.................... .................... 33
5.16 FURTHER ASSURANCES..................... .................... 35
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VI. CONDITIONS PRECEDENT................................. 35
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER........................... .......................... 35
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB............................ ............................ 36
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.... .... 37
ARTICLE VII. TERMINATION AND AMENDMENT........................... 37
7.1 TERMINATION........................ ........................ 37
7.2 EFFECT OF TERMINATION................... ................... 39
7.3 AMENDMENT......................... ......................... 40
7.4 EXTENSION; WAIVER..................... ..................... 40
ARTICLE VIII. GENERAL PROVISIONS................................. 40
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
NO OTHER REPRESENTATIONS AND WARRANTIES.......... .......... 40
8.2 NOTICES.......................... .......................... 41
8.3 INTERPRETATION....................... ...................... 41
8.4 COUNTERPARTS........................ ....................... 42
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES....... ...... 42
8.6 GOVERNING LAW....................... ....................... 42
8.7 SEVERABILITY........................ ....................... 42
8.8 ASSIGNMENT......................... ........................ 42
8.9 ENFORCEMENT........................ ........................ 42
8.10 DEFINITIONS........................ ........................ 43
</TABLE>
<TABLE>
<S> <C>
ANNEX A VOTING AGREEMENTS
ANNEX B FORM OF NON-COMPETE AGREEMENTS
EXHIBIT A FORM OF AFFILIATE LETTER
EXHIBIT B FORM OF TAX REPRESENTATIONS
</TABLE>
A-ii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
<S> <C>
Acquisition Proposal........................................ Section 5.4(a)
Agreement................................................... Preamble
Board of Directors.......................................... Section 8.10(a)
Business Day................................................ Section 8.10(b)
Certificate of Merger....................................... Section 1.3
Certificates................................................ Section 2.2(b)
Closing..................................................... Section 1.2
Closing Date................................................ Section 1.2
Code........................................................ Recitals
Common Shares Trust......................................... Section 2.2(e)(iii)
Company..................................................... Preamble
Company Benefit Plans....................................... Section 3.1(l)(i)
Company Common Stock........................................ Recitals
Company Disclosure Schedule................................. Section 3.1
Company Material Contracts.................................. Section 3.1(k)
Company Permits............................................. Section 3.1(f)
Company Rights Agreement.................................... Section 3.1(b)(i)
Company SEC Reports......................................... Section 3.1(d)(i)
Company Stock Option Plans.................................. Section 8.10(c)
Company Stockholders Meeting................................ Section 5.1(b)
Company Sub................................................. Section 3.1(a)
Company Voting Debt......................................... Section 3.1(b)(iii)
Confidentiality Agreement................................... Section 5.2
Conversion Number........................................... Section 2.1(c)
DGCL........................................................ Recitals
Effective Time.............................................. Section 1.3
ERISA....................................................... Section 3.1(l)(i)
Exchange Act................................................ Section 3.1(c)(iii)
Exchange Agent.............................................. Section 2.2(a)
Exchange Fund............................................... Section 2.2(a)
Expenses.................................................... Section 5.6
Form S-4.................................................... Section 3.1(e)(i)
GAAP........................................................ Section 3.1(d)(i)
Governmental Entity......................................... Section 3.1(c)(iii)
HSR Act..................................................... Section 3.1(c)(iii)
Indemnified Party........................................... Section 5.7
Liens....................................................... Section 3.1(b)(ii)
Material Adverse Effect..................................... Section 8.10(d)
Merger...................................................... Recitals
Merger Sub.................................................. Preamble
Nasdaq...................................................... Section 2.2(e)(ii)
New Stock Rights............................................ Section 5.14(c)
Organizational Documents.................................... Section 8.10(e)
Outside Date................................................ Section 7.1(b)
Parent...................................................... Preamble
Parent Benefit Plans........................................ Section 3.2(k)(i)
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
<S> <C>
Parent Common Stock......................................... Recitals
Parent Disclosure Schedule.................................. Section 3.2
Parent Material Contracts................................... Section 3.2(j)
Parent Permits.............................................. Section 3.2(f)
Parent Rights............................................... Section 3.2(b)(i)
Parent Rights Agreement..................................... Section 3.2(b)(i)
Parent SEC Reports.......................................... Section 3.2(d)(i)
Parent Voting Debt.......................................... Section 3.2(b)(iii)
Person...................................................... Section 8.10(f)
Proxy Statement............................................. Section 3.1(e)(i)
Required Company Votes...................................... Section 3.1(j)
Required Regulatory Approvals............................... Section 6.1(e)
SEC......................................................... Section 3.1(d)(i)
Securities Act.............................................. Section 3.1(c)(iii)
Subsidiary.................................................. Section 8.10(g)
Superior Proposal........................................... Section 5.4(b)
Surviving Corporation....................................... Section 1.1
Takeover statute............................................ Section 5.12
Tax......................................................... Section 8.10(h)
Taxable..................................................... Section 8.10(h)
Taxes....................................................... Section 8.10(h)
Tax Return.................................................. Section 8.10(h)
Terminating Company Breach.................................. Section 7.1(g)
Terminating Parent Breach................................... Section 7.1(h)
The other party............................................. Section 8.10(i)
Violation................................................... Section 3.1(c)(ii)
1996 Plan................................................... Section 5.14
</TABLE>
A-iv
<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated as of December 18, 1999 (this
"AGREEMENT"), by and among Conexant Systems, Inc., a Delaware corporation
("PARENT"), Merlot Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("MERGER SUB"), and Maker Communications, Inc., a Delaware
corporation (the "COMPANY").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company to merge its operations with a strategic
partner and has initiated discussions with regard to such a merger and has
obtained and considered proposals for such a merger from a number of such other
companies;
WHEREAS, the Board of Directors of the Company has determined that the
merger proposal of Parent was superior to all other such proposals after
receiving proposals from other qualified bidders;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have each determined that the Merger (as defined below) is in the best
interests of their respective stockholders and have approved the Merger upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of common stock, par value $.01 per share, of the
Company ("COMPANY COMMON STOCK"), other than shares owned directly or indirectly
by Parent or by the Company, will be converted into the right to receive the
Conversion Number (as defined below) of a fully paid and nonassessable share of
common stock, without par value, of Parent together with the associated Parent
Right (the "PARENT COMMON STOCK" which term, unless the context otherwise
requires, shall include the associated Parent Right);
WHEREAS, in order to effectuate the foregoing, Merger Sub, upon the terms
and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL"), will merge with and into the
Company (the "MERGER");
WHEREAS, Parent has requested, and the certain stockholders of the Company
have agreed, as a condition to Parent's willingness to enter into this
Agreement, that certain stockholders of the Company enter into those certain
Voting Agreements dated as of the date hereof and attached hereto as Annex A
(the "VOTING AGREEMENTS");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for United States Federal income tax purposes it is intended that
the Merger qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"); and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I. THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with
and into the Company at the Effective Time (as defined below). Following the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") in accordance with the DGCL.
1.2 CLOSING. The closing of the Merger (the "CLOSING") will take place as
soon as practicable after satisfaction or waiver (as permitted by this Agreement
and applicable law) of the conditions (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date) set forth in Article VI (the
"CLOSING DATE"), unless another time or date is agreed to in writing by the
parties hereto. The Closing
<PAGE>
shall be held at the offices of Latham & Watkins, 885 Third Avenue, New York,
New York 10022, unless another place is agreed to in writing by the parties
hereto.
1.3 EFFECTIVE TIME. Upon the Closing, the parties shall file with the
Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings, recordings or publications required under the DGCL in connection with
the Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such other time
as the parties may agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the "Effective Time").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger will
have the effects set forth in Section 259 of the DGCL.
1.5 CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Merger Sub as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Company until thereafter changed or amended
as provided therein or by applicable law, provided that such certificate of
incorporation shall be amended to reflect "Maker Communications, Inc." as the
name of the Surviving Corporation.
1.6 BYLAWS. The bylaws of Merger Sub as in effect at the Effective Time
shall be the bylaws of the Company until thereafter changed or amended as
provided therein or by applicable law.
1.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers and
directors of Merger Sub shall be the officers and directors of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or director or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully
paid and nonassessable share of common stock, par value $0.01 per share, of
the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share of
Company Common Stock that is owned by the Company or by a wholly owned
subsidiary of the Company and each share of Company Common Stock that is
owned by Parent, Merger Sub or any other wholly owned subsidiary of Parent
shall automatically be canceled and retired and shall cease to exist, and no
Parent Common Stock or other consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each issued and outstanding
share of Company Common stock (other than shares to be canceled in
accordance with Section 2.1(b)) shall be converted into the right to receive
the Conversion Number of fully paid and nonassessable shares of Parent
Common Stock together with the associated Parent Right. The "CONVERSION
NUMBER" shall mean .66, as adjusted pursuant to Section 2.1(d). As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive upon the surrender of such certificates,
certificates representing the shares of Parent Common Stock, and cash in
lieu of fractional shares of Parent Common Stock and any dividends
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to the extent provided in Section 2.2(c) to be issued or paid in
consideration therefor upon surrender of such certificates in accordance
with Section 2.2, without interest.
(d) ADJUSTMENT OF CONVERSION NUMBER. In the event of any split,
combination or reclassification of any Parent Common Stock or any issuance
or the authorization of any issuance of any other securities in exchange or
in substitution for shares of Parent Common Stock at any time during the
period from the date of this Agreement to the Effective Time, the Company
and Parent shall make such adjustment to the Conversion Number as the
Company and Parent shall mutually agree so as to preserve the economic
benefits that the Company and Parent each reasonably expected on the date of
this Agreement to receive as a result of the consummation of the Merger and
the other transactions contemplated by this Agreement.
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Immediately following the Effective Time, Parent
shall deposit with The Bank of New York or such other bank or trust company
as may be designated by Parent and the Company (the "EXCHANGE AGENT"), for
the benefit of the holders of shares of Company Common Stock, for exchange
in accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock issuable pursuant to Section
2.1 in exchange for outstanding shares of Company Common Stock together with
amounts sufficient in the aggregate to provide all funds necessary for the
Exchange Agent to make payments in lieu of fractional shares pursuant to
Section 2.2(e) and dividend payments pursuant to Section 2.2(c) (such shares
of Parent Common Stock and funds, together with any dividends or
distributions with respect thereto with a record date after the Effective
Time, being hereinafter referred to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock,
other than shares to be canceled or retired in accordance with Section
2.1(b), (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of Section 2.1(c) of this
Article II, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be
issued to a Person other than the Person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the Person requesting such
payment shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a Person other than the
registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.2, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender the certificate representing the appropriate number of whole
shares of Parent Common Stock, cash in lieu of any fractional shares of
Parent Common Stock and any dividends to the
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extent provided in Section 2.2(c) as contemplated by this Section 2.2. No
interest will be paid or will accrue on any cash payable in lieu of any
fractional shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.2(e) until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms of this Article II (including any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such Certificates, and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II, except as otherwise provided by law.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate issued and outstanding at the
Effective Time who would otherwise be entitled to receive a fractional
share of Parent Common Stock upon surrender of such Certificate for
exchange pursuant to this Article II (after taking into account all
shares of Company Common Stock then held by such holder) shall receive,
in lieu thereof, cash in an amount equal to the value of such fractional
share, which shall be equal to the fraction of a share of Parent Common
Stock that would otherwise be issued multiplied by the closing price for
a share of Parent Common Stock on the Nasdaq National Market (the
"Nasdaq") (as reported in THE WALL STREET JOURNAL, or if not reported
thereby, any other authoritative source) on the last full trading day
prior to the Effective Time.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates with respect to any
fractional share interests, the Exchange Agent shall promptly pay such
amounts, without interest, to such holders of Certificates subject to and
in accordance with this Article II.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to Parent, upon demand, and any
holders of Certificates who have not theretofore
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complied with this Article II shall thereafter look only to Parent for
payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock.
(g) NO LIABILITY. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any shares of
Parent Common Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid
to Parent.
(i) LOST CERTIFICATES. In the event that any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Parent Common
Stock, and any cash in lieu of fractional shares and any unpaid dividends or
distributions with respect to Parent Common Stock, to which they are
entitled pursuant hereto.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in
the Company Disclosure Schedule delivered by the Company to Parent at or prior
to the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the
Company represents and warrants to Parent and Merger Sub as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company and Maker
Securities Corporation, a Massachusetts corporation ("COMPANY SUB"), has
been duly incorporated and is validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite power
and authority to carry on its business as now being conducted. Each of the
Company and Company Sub is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to so qualify could not reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect
on the Company. The copies of the Organizational Documents of the Company
and Company Sub which were previously furnished or made available to Parent
are true, complete and correct copies of such documents as in effect on the
date of this Agreement.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock, of which as of the date of
this Agreement 18,897,041 shares are outstanding and 1,000,000 shares of
preferred stock of which no shares are outstanding. All issued and
outstanding shares of the capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, and no class of
capital stock is entitled to preemptive rights. As of the date of this
Agreement, there are no outstanding options, warrants or other rights to
acquire capital stock from the Company (or securities convertible or
exchangeable or exercisable for such capital stock) other than 400,000
shares of Company Common Stock reserved for issuance pursuant to the
Company's 1999 Employee Stock Purchase Plan and options representing in
the aggregate the right to purchase 2,661,182 shares of Company Common
Stock under the Company Stock Option Plans. Section 3.1(b)(i) of the
Company
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Disclosure Schedule sets forth a list of each holder of options under the
Company Stock Option Plans, identifying the name, the plan under which
such option was granted, the date of grant, the exercise price, the
vesting schedule and the expiration date of each such option, and whether
such option is required to be accelerated as a result of the transactions
contemplated hereby.
(ii) All of the issued and outstanding shares of capital stock of
Company Sub are duly authorized, validly issued, fully paid and
nonassessable and are owned by the Company, free and clear of any liens,
claims, encumbrances, restrictions, preemptive rights or any other claims
of any third party ("LIENS"). Except for the capital stock of Company
Sub, the Company does not own, directly or indirectly, any capital stock
or other ownership interest in any Person.
(iii) No bonds, debentures, notes or other indebtedness of the
Company having the right to vote on any matters on which stockholders may
vote ("COMPANY VOTING DEBT") are issued or outstanding.
(iv) Except as otherwise set forth in this Section 3.1(b) and except
in connection with elections made by participants in the Company's 1999
Employee Stock Purchase Plan, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which the Company or Company Sub is a party or by which any
of them is bound obligating the Company or Company Sub to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or Company Sub or
obligating the Company or Company Sub to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding
obligations of the Company or Company Sub to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or Company
Sub other than as set forth in Section 3.1(b)(iv) of the Company
Disclosure Schedule, which sets forth a list of each holder of capital
stock of the Company and Company Sub as to whom the Company or Company
Sub, as applicable, has the right to repurchase such capital stock. With
respect to each such holder, the Company Disclosure Schedule sets forth
the name of such holder, the vesting schedule of such holder's shares,
the repurchase price and the expiration date of such repurchase right.
(c) AUTHORITY; NO CONFLICTS.
(i) The Company has all requisite corporate power and corporate
authority to enter into this Agreement and, subject, in the case of the
consummation of the Merger only, to the adoption of this Agreement by the
requisite vote of the holders of Company Common Stock, to consummate the
transactions contemplated hereby. The Board of Directors of the Company
has approved this Agreement and the transactions contemplated by this
Agreement and has duly resolved (subject to its rights under Sections 5.1
and 5.4) to recommend to the Company's stockholders that they approve
this Agreement and the transactions contemplated under this Agreement.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject in the
case of the consummation of the Merger to the adoption of this Agreement
by the stockholders of the Company. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally and by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The Board of Directors of the Company
has
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(i) unanimously, except with respect to one director who abstained based
on a conflict of interest, approved and adopted this Agreement and the
transactions contemplated hereby and thereby and has declared that the
Merger and this Agreement and the other transactions contemplated hereby
are advisable and in the best interests of the Company and its
shareholders and (ii) unanimously, except with respect to one director
who abstained based on a conflict of interest, taken all action necessary
to render inapplicable to the transactions contemplated by this Agreement
and by the Voting Agreements any state anti-takeover or similar law,
including Section 203 of the DGCL or any other such law relating to the
voting of shares or a moratorium on the consummation of any business
combination. The Board of Directors of the Company has directed that this
Agreement and the transactions contemplated hereby be submitted to the
holders of the Company Common Stock to obtain the Required Company Vote
and, subject to the terms hereof, has unanimously, except with respect to
one director who abstained based on a conflict of interest, recommended
that such holders vote for approval and adoption of this Agreement and
the transactions contemplated hereby.
(ii) The execution and delivery of this Agreement or the Voting
Agreements does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby and thereby will not, conflict
with, or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a right
of consent, termination, amendment, cancellation or acceleration of any
obligation or the loss of any material property, material right or
material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on any assets (any such conflict,
violation, default, right of consent, termination, amendment,
cancellation or acceleration, loss or creation, a "VIOLATION") pursuant
to: (A) any provision of the Organizational Documents of the Company or
any of its subsidiaries or (B) except as could not reasonably be expected
to have a Material Adverse Effect on the Company and, subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph
(iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company, any Subsidiary of the Company or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal or local government, any instrumentality, subdivision,
court, administrative agency or commission or other authority thereof, or
any quasi-governmental or private body exercising any regulatory, taxing,
or other governmental or quasi-governmental authority (a "GOVERNMENTAL
ENTITY"), is required by or with respect to the Company or Company Sub in
connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, except for (x) those required under or in relation
to (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (B) state securities or "blue sky" laws,
(C) the Securities Act of 1933, as amended (the "SECURITIES ACT"),
(D) the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
(E) the DGCL with respect to the filing and recordation of appropriate
merger or other documents, (F) rules and regulations of the Nasdaq, and
(G) antitrust or other competition laws of other jurisdictions, and (y)
such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain could not
reasonably be expected to have a Material Adverse Effect on the Company
or materially impair or delay the ability of the Company to consummate
the transactions contemplated hereby.
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(d) REPORTS AND FINANCIAL STATEMENTS.
(i) The Company has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") since January 1, 1999,
including without limitation the Company's registration statement on Form
S-1 declared effective by the SEC on May 10, 1999 (collectively,
including all exhibits thereto, the "Company SEC Reports"). Company Sub
is not required to file any form, report or other document with the SEC.
None of the Company SEC Reports, as of their respective dates (and, if
amended or superseded by a filing prior to the date of this Agreement or
of the Closing Date, then on the date of such filing), contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the financial statements (including the related
notes) included in the Company SEC Reports presents fairly, in all
material respects, the consolidated financial position and consolidated
results of operations and cash flows of the Company and Company Sub as of
the respective dates or for the respective periods set forth therein, all
in conformity with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments that
have not been and are not expected to be material in amount. All of such
Company SEC Reports, as of their respective dates (and as of the date of
any amendment to the respective Company SEC Report), complied as to form
in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as set forth in the Company SEC Reports filed prior to
the date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business since December 31, 1998,
neither the Company nor Company Sub has any liabilities or obligations of
any nature required by GAAP to be set forth on a consolidated balance
sheet of the Company and Company Sub which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
on the Company.
(e) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 filed with the SEC by Parent in connection with the
issuance of Parent Common Stock in the Merger (the "FORM S-4") will, at
the time any amendment or supplement to the Form S-4 is filed with the
SEC, or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the proxy statement related to
the meeting of the Company's stockholders to be held in connection with
the Merger and the transactions contemplated by this Agreement (the
"PROXY STATEMENT") will, on the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting (as
defined below) or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 3.1(e),
no representation or warranty is made by the Company with respect to
statements made or incorporated by
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reference in the Proxy Statement or Form S-4 based on information
supplied by Parent or Merger Sub for inclusion or incorporation by
reference therein.
(f) COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS. The Company and
Company Sub hold all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of their
businesses, taken as a whole (the "Company Permits"). The Company and
Company Sub are in compliance with the terms of the Company Permits, except
where the failure so to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company.
Except as disclosed in the Company SEC Reports, the businesses of the
Company and Company Sub are not being and have not been conducted in
violation of any law, ordinance, regulation, judgment, decree, injunction,
rule or order of any Governmental Entity, except for violations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company and since December 31, 1998, neither
the Company nor Company Sub has received any written warning, notice, notice
of violation or probable violation, notice of revocation, or other written
communication from or on behalf of any Governmental Entity, alleging
(A) any violation of any Company Permit or (B) that the Company or Company
Sub requires any Company Permit required for its business that is not
currently held by it. To the knowledge of the Company, no material
investigation by any Governmental Entity with respect to the Company or
Company Sub is pending or threatened.
(g) LITIGATION. Section 3.1(g) of the Company Disclosure Schedule sets
forth a true and complete list of all material litigation as of the date
hereof to which either the Company or Company Sub is, or to the knowledge of
the Company, is threatened to be, a party or as to which the property of
either of them may be bound. There is no material litigation, arbitration,
claim, suit, action, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or affecting the Company or
Company Sub, nor is there any material judgment, award, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
the Company or Company Sub which does not affect all companies similarly
situated.
(h) TAXES. (i) The Company and Company Sub have duly and timely filed
(taking into account any extension of time within which to file) all
material Tax Returns required to be filed by any of them and all such filed
Tax Returns are complete and accurate in all material respects; (ii) the
Company and Company Sub have paid all material Taxes that are shown as due
on such filed Tax Returns or that the Company or Company Sub is obligated to
withhold from amounts owing to any employee, creditor or third party, except
with respect to matters contested in good faith; (iii) except as disclosed
in the Company's SEC Reports, to the knowledge of the Company, there are no
pending or threatened in writing audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters relating to the Company
or Company Sub; (iv) except as disclosed in the Company's SEC Reports, there
are no material deficiencies or claims for any Taxes that have been
proposed, asserted or assessed against the Company or Company Sub;
(v) there are no material Liens for Taxes upon the assets of the Company or
Company Sub, other than Liens for current Taxes not yet due and payable and
Liens for Taxes that are being contested in good faith by appropriate
proceedings; (vi) neither of the Company nor Company Sub has made an
election under Section 341(f) of the Code; (vii) neither the Company nor
Company Sub has extended, or waived application of, any statute of
limitations of any jurisdiction covering the assessment or collection of any
Taxes; (viii) to the Company's knowledge there are no conditions that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code; and (ix) except as set forth in Section
3.1(h) of the Company Disclosure Schedule, neither the Company nor Company
Sub is a party to any agreement, contract, arrangement or plan that has
resulted or would result, separately or in the aggregate, in the payment of
"excess parachute payments" within the meaning of Section 280G of the Code.
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(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1999
through the date of this Agreement, (A) each of the Company and Company Sub
has conducted its business in the ordinary course and has not incurred any
material liability, except in the ordinary course of its business;
(B) there has not been any change in the business, financial condition or
results of operations of the Company or Company Sub that has had, or could
reasonably be expected to have, a Material Adverse Effect on the Company,
(C) there has not been any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any shares of Company capital stock; (D) there has not been any
split, combination or reclassification of any Company capital stock or any
issuance or the authorization of any issuance of any other securities in
exchange or in substitution for shares of Company capital stock; (E) there
has not been (i) any granting by the Company or Company Sub to any executive
officer of the Company or Company Sub of any increase in compensation,
except in the ordinary course of business consistent with prior practice or
as was required under employment agreements in effect as of the date of the
most recent audited financial statements included in the Company SEC
Reports, (ii) any granting by the Company or Company Sub to any such
executive officer of any increase in severance or termination pay, except as
was required under any employment, severance or termination agreements in
effect as of the date of the most recent audited financial statements
included in the Company SEC Reports, or (iii) any entry by the Company of
Company Sub into any employment, severance or termination agreement with any
such executive officer; and (F) there has not been any change in accounting
methods, principles or practices by either the Company or Company Sub
materially affecting its assets, liabilities or business, except insofar as
may have been required by a change in GAAP.
(j) VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock (the "REQUIRED COMPANY
VOTES") is the only vote of the holders of any class or series of the
Company capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
(k) CERTAIN AGREEMENTS.
(i) All contracts that should be listed as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999
under the rules and regulations of the SEC relating to the business of
the Company and Company Sub (the "COMPANY MATERIAL CONTRACTS") are valid
and in full force and effect except to the extent they have previously
expired in accordance with their terms, and neither the Company nor
Company Sub has violated any provision of, or committed or failed to
perform any act which, with or without notice, lapse of time, or both,
could reasonably be expected to constitute a material default under the
provisions of, any such Company Material Contract. Except as set forth in
Section 3.1(k) of the Company Disclosure Schedule, the Company Material
Contracts are the only contracts that were listed as an exhibit to the
Company's Registration Statement on Form S-1 declared effective by SEC on
May 10, 1999 or to a quarterly report of the Company on Form 10-Q for the
fiscal quarters ended June 30, 1999 or September 30, 1999. To the
knowledge of the Company, no counterparty to any such Company Material
Contract has violated any provision of, or committed or failed to perform
any act which, with or without notice, lapse of time, or both, could
reasonably be expected to constitute a material default or other material
breach under the provisions of, such Company Material Contract.
(l) EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(i) With respect to each employee benefit plan, program, arrangement
and contract (including, without limitation, any "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and any bonus, deferred compensation, stock
bonus, stock purchase, restricted stock, stock option,
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employment, termination, change in control and severance plan, program,
arrangement and contract), to which the Company or Company Sub is a
party, which is maintained or contributed to by the Company or Company
Sub, or with respect to which the Company or Company Sub could incur
material liability under Section 4069, 4201 or 4212(c) of ERISA (the
"COMPANY BENEFIT PLANS"), the Company has made available to Parent a true
and complete copy of such Company Benefit Plan.
(ii) Each of the Company Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS or is a standardized
prototype plan with a favorable IRS opinion letter, and the Company is
not aware of any circumstances likely to result in the revocation of any
such favorable determination letter or opinion letter, as appropriate,
that could not reasonably be corrected under Rev. Proc. 98-22.
(iii) With respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists no condition
or set of circumstances, in connection with which the Company or Company
Sub could be subject to any material liability under the terms of such
Company Benefit Plans, ERISA, the Code or any other applicable law which
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect on the Company or Company Sub.
(iv) Neither of the Company nor Company Sub is a party to any
collective bargaining or other labor union contracts and no collective
bargaining agreement is being negotiated by the Company or Company Sub.
There is no pending labor dispute, strike or work stoppage against the
Company or Company Sub which may interfere with the respective business
activities of the Company or Company Sub, except where such dispute,
strike or work stoppage could not reasonably be expected to have a
Material Adverse Effect on the Company. There is no pending charge or
complaint against the Company or Company Sub by the National Labor
Relations Board or any comparable state agency, except where such unfair
labor practice, charge or complaint could not reasonably be expected to
have a Material Adverse Effect on the Company.
(v) Except as set forth in Section 3.1(l)(v) of the Company
Disclosure Schedule, no amount that could be received (whether in cash or
property or the vesting of property) as a result of the consummation of
the transactions contemplated by this Agreement by any employee, officer
or director of the Company or any Company Sub who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation
Section 1.280G-1) under any Company Benefit Plan could be characterized
as an "excess parachute payment" (as defined in Section 280G(b)(1) of the
Code).
(m) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any
of the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company, except Deutsche Bank Securities, Inc.
(n) OPINION OF FINANCIAL ADVISOR. The Company has received the oral
opinion of Deutsche Bank Securities, Inc. as of the date of this Agreement,
to the effect that, as of such date, the Conversion Number is fair, from a
financial point of view, to the holders of Company Common Stock.
(o) Neither the Company nor Company Sub owns any real property.
(p) AFFILIATED TRANSACTIONS AND CERTAIN OTHER AGREEMENTS. Set forth in
Section 3.1(p) of the Company Disclosure Schedule is a list of (a) all
contracts, arrangements, agreements or
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understandings that would be required to be described pursuant to Item 404
of Regulation S-K of the Securities Act of 1933, as amended, and (b) all
agreements or understandings, whether written or oral, giving any Person the
right to require the Company to register shares of capital stock or to
participate in any such registration. The Company has previously provided to
Parent true and complete copies of each of the foregoing agreements.
(q) ENVIRONMENTAL MATTERS. Except as could not reasonably be expected to
result in a Material Adverse Effect on the Company: (i) the Company and its
Subsidiaries have complied with all applicable Environmental Laws; (ii) the
properties currently owned or operated by the Company and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures)
are not contaminated with any Hazardous Substance to an extent reasonably
likely to give rise to liability or remediation obligations for the Company
or any Subsidiary under any applicable Environmental Law; (iii) the
properties formerly owned or operated by the Company or any of its
Subsidiaries were not contaminated with any Hazardous Substance during the
period of ownership or operation by the Company or any of its Subsidiaries
to an extent reasonably likely to give rise to liability or remediation
obligations for the Company or any Subsidiary; (iv) neither the Company nor
any of its Subsidiaries is reasonably likely to be subject to liability or
remediation obligations for any Hazardous Substance disposal or management
or contamination at any other property to an extent reasonably likely to
give rise to liability or remediation obligations for the Company or any
Subsidiary under any Environmental Laws; (v) neither the Company nor any of
its Subsidiaries has received any notice, demand, letter, claim or request
for information indicating that the Company or any of its Subsidiaries may
be in violation of or subject to liability under any Environmental Law;
(vi) neither the Company nor any of its Subsidiaries is subject to any
orders, decrees, injunctions or other arrangements with any Governmental
Entity or any indemnity or other agreement with any third party relating to
any Environmental Law or Hazardous Substances; and (vii) there are no other
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of
any property of the Company pursuant to any Environmental Law. As used
herein, the term "ENVIRONMENTAL LAW" means any federal, state, local or
foreign law, statute, ordinance, regulation, judgment, order, decree,
arbitration award, agency requirement, license, permit, authorization or
common law, relating to the protection, investigation or restoration of the
environment, health and safety, or natural resources. As used herein, the
term "HAZARDOUS SUBSTANCE" means any substance that is: (A) a pollutant or
contaminant or a hazardous or toxic chemical, waste, substance or material,
including any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (B) any other substance that may be the subject of
regulatory action by any Governmental Entity pursuant to any Environmental
Law.
(r) INTELLECTUAL PROPERTY. The Company and its Subsidiaries own, or have
the defensible right to use, the Intellectual Property used in their
respective businesses, except where the failure to own or have the right to
use such Intellectual Property, individually or in the aggregate, does not
and would not have a Material Adverse Effect on the Company. As used herein,
"Intellectual Property" means all industrial and intellectual property
rights, including Proprietary Technology, patents, patent applications,
trademarks, trademark applications and registrations, service marks, service
mark applications and registrations, copyrights, know-how, licenses, trade
secrets, proprietary processes, formulae and customer lists; and
"PROPRIETARY TECHNOLOGY" means all processes, formulae, inventions, trade
secrets, know-how, development tools and other rights used by the Company
and its Subsidiaries pertaining to any product, software or service
manufactured, marketed, licensed or sold by the Company and its Subsidiaries
or Parent and its Subsidiaries, as the case may be, in the conduct of their
business or used, employed or exploited in the development, license, sale,
marketing, distribution or maintenance thereof, and all documentation and
media constituting, describing or relating to the above, including manuals,
memoranda, know-
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how, notebooks, software, records and disclosures. The Company has not
received any notice or claim or nor does it have knowledge that the
Company's Intellectual Property or Proprietary Technology infringes on the
rights of any third party. The Company has not received any notice or claim
nor does it have any knowledge that any patent, copyright or trademark has
any invalidity which could reasonably be expected to have a Material Adverse
Effect on the Company. Except as set forth in Section 3.1(r) of the Company
Disclosure Schedule, each of the Company and Company Sub owns all
Intellectual Property (or has the right to use such Intellectual Property)
free and clear of all Liens, and there is no requirement to make royalty or
other payments for the continued use of such Intellectual Property. Section
3.1(r) of the Company Disclosure Schedule sets forth a complete list of all
patents and patent applications held by the Company and Company Sub and none
of such patents or patent applications has lapsed, expired or been
abandoned. Except as would not have a Material Adverse Effect on the
Company, none of the Company, Company Sub or any employee of the Company or
Company Sub has violated any confidentiality or non-disclosure agreement
with respect to the Intellectual Property or Proprietary Technology of any
other person.
(s) YEAR 2000. Except as set forth in Section 3.1(s) of the Company
Disclosure Schedule and except as would not result in a Material Adverse
Effect on the Company, the occurrence, recording, processing or use of any
date or time in the year 2000 will not adversely affect the information and
business systems, products or business or operations of the Company or
Company Sub as a result of any failure or error by any hardware or software
(whether or not in the control of the Company) to properly or accurately
recognize, record, process or use such date or time.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Except as set forth in the
Parent Disclosure Schedule delivered by Parent to the Company at or prior to the
execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), Parent
represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of Parent and its Significant
Subsidiaries (as hereinafter defined) has been duly incorporated and is
validly existing in good standing under the laws of its jurisdiction of
incorporation and has the requisite power and authority to carry on its
business as now being conducted. Each of Parent and its Significant
Subsidiaries is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary, except where the
failure so to qualify could not reasonably be expected, either individually
or in the aggregate, to have a Material Adverse Effect on Parent. The copies
of the Organizational Documents of Parent which were previously furnished or
made available to the Company are true, complete and correct copies of such
documents as in effect on the date of this Agreement. The "Significant
Subsidiaries" shall mean all Subsidiaries considered significant
subsidiaries under Regulation S-X of the Securities Act together with the
subsidiaries designated as significant subsidiaries of Parent set forth in
Section 3.2(b)(ii) of the Parent Disclosure Schedule. Parent together with
the Significant Subsidiaries account for substantially all of the
consolidated revenues of Parent.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of Parent consists of
(A) 500,000,000 shares of Parent Common Stock, of which as of October 29,
1999, 196,389,578 shares are outstanding, and (B) 25,000,000 shares of
preferred stock, of which as of the date of this Agreement no shares are
outstanding. All issued and outstanding shares of the capital stock of
Parent are duly authorized, validly issued, fully paid and nonassessable,
and no class of capital stock is entitled to preemptive rights. As of the
date of this Agreement, there are no outstanding options, warrants or
other rights to acquire capital stock from Parent other than (C) rights
(the "PARENT RIGHTS") issued pursuant to the Rights Agreement, dated as
of November 30, 1998, between Parent and ChaseMellon Shareholder
Services, L.L.C. (the "PARENT RIGHTS AGREEMENT"),
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(D) options representing in the aggregate the right to purchase
33,460,849 shares of Parent Common Stock under Parent's equity incentive
plans and (E) 15,152,826 shares issuable upon conversion of the 4.25%
Convertible Subordinated Notes due 2006, in aggregate principal amount of
$350,000,000.
(ii) Section 3.2(b)(ii) of the Parent Disclosure Schedule lists all
Significant Subsidiaries of Parent as of the date of this Agreement. All
of the issued and outstanding shares of capital stock of each Significant
Subsidiary of Parent are duly authorized, validly issued, fully paid and
nonassessable and are owned, directly or indirectly, by Parent and are
owned free and clear of any Liens. Except for the capital stock of the
Significant Subsidiaries listed in Section 3. 2(b)(ii) of the Parent
Disclosure Schedule and Parent's other Subsidiaries, Parent does not own,
directly or indirectly, any capital stock or other ownership interest in
any Person that is material to Parent.
(iii) No bonds, debentures, notes or other indebtedness of Parent
having the right to vote on any matters on which stockholders may vote
("PARENT VOTING DEBT") are issued or outstanding.
(iv) Except as otherwise set forth in this Section 3.2(b) and except
pursuant to equity incentive plans of Parent or any of its Significant
Subsidiaries, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to
which Parent or any of its Significant Subsidiaries is a party or by
which any of them is bound obligating Parent or any of its Significant
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities of
Parent or any of its Significant Subsidiaries or obligating Parent or any
of its Significant Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. There are no outstanding obligations of
Parent or any of its Significant Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Parent.
(c) AUTHORITY; NO CONFLICTS.
(i) Parent has all requisite corporate power and corporate authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The Board of Directors of Parent has approved this
Agreement and the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent. This Agreement has been
duly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(ii) The execution and delivery of this Agreement does not or will
not, as the case may be, and the consummation of the transactions
contemplated hereby will not, result in any Violation of: (A) any
provision of the Organizational Documents of Parent or any of its
Significant Subsidiaries or (B) except as could not reasonably be
expected to have a Material Adverse Effect on Parent and subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph
(iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent,
any of its Significant Subsidiaries or their respective properties or
assets.
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(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent in connection with the execution
and delivery of this Agreement by Parent or the consummation by Parent of
the transactions contemplated hereby, except for (x) those required under
or in relation to (A) the HSR Act, (B) state securities or "blue sky"
laws, (C) the Securities Act, (D) the Exchange Act, (E) the DGCL with
respect to the filing and recordation of appropriate merger or other
documents, (F) rules and regulations of the Nasdaq, and (G) antitrust or
other competition laws of other jurisdictions, and (y) such consents,
approvals, orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain could not reasonably be
expected to have a Material Adverse Effect on Parent or materially impair
or delay the ability of Parent to consummate the transactions
contemplated hereby.
(d) REPORTS AND FINANCIAL STATEMENTS.
(i) Parent has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
since January 1, 1999 (collectively, including all exhibits thereto, the
"PARENT SEC REPORTS"). No Subsidiary of Parent is required to file any
form, report or other document with the SEC. None of the Parent SEC
Reports, as of their respective dates (and, if amended or superseded by a
filing prior to the date of this Agreement or of the Closing Date, then
on the date of such filing), contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Each of the financial
statements (including the related notes) included in the Parent SEC
Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows
of Parent and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments that
have not been and are not expected to be material in amount. All of such
Parent SEC Reports, as of their respective dates (and as of the date of
any amendment to the respective Parent SEC Report), complied as to form
in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as set forth in the Parent SEC Reports filed prior to the
date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice
since September 30, 1999, neither Parent nor any of its Subsidiaries has
any liabilities or obligations of any nature required by GAAP to be set
forth on a consolidated balance sheet of Parent and its Subsidiaries
which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on Parent.
(e) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by Parent or
Merger Sub for inclusion or incorporation by reference in (i) the Form
S-4 will, at the time any amendment or supplement to the Form S-4 is
filed with the SEC, or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) the Proxy Statement
will, on the date it is first mailed to the Company's stockholders or at
the time of the Company Stockholders Meeting, 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.
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(ii) Notwithstanding the foregoing provisions of this Section 3.2(e),
no representation or warranty is made by Parent or Merger Sub with
respect to statements made or incorporated by reference in the Proxy
Statement or Form S-4 based on information supplied by the Company for
inclusion or incorporation by reference therein.
(f) COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS. The Parent and
its Significant Subsidiaries hold all required permits, licenses,
certificates, franchises, registrations, variances, exemptions, orders and
approvals of all Governmental Entities (the "PARENT PERMITS"), except where
the failure to do so, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on Parent. The Parent and its
Significant Subsidiaries are in compliance with the terms of the Parent
Permits, except where the failure so to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect on Parent. Except as disclosed in Parent SEC Reports, the businesses
of Parent and its Significant Subsidiaries are not being and have not been
conducted in violation of any law, ordinance, regulation, judgment, decree,
injunction, rule or order of any Governmental Entity, except for violations
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Parent and since September 30, 1999,
neither Parent nor any of its Significant Subsidiaries has received any
written warning, notice, notice of violation or probable violation, notice
of revocation, or other written communication from or on behalf of any
Governmental Entity, alleging (A) any violation of any Parent Permit or
(B) that Parent or any of its Significant Subsidiaries requires any Parent
Permit required for its business that is not currently held by it, except
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Parent. To the knowledge of Parent, no
investigation by any Governmental Entity with respect to Parent or any of
its Significant Subsidiaries is pending or threatened, other than
investigations which, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on Parent.
(g) LITIGATION. Except as set forth in Section 3.2(g) of the Parent
Disclosure Schedule, there is no litigation, arbitration, claim, suit,
action, investigation or proceeding pending or, to the knowledge of Parent,
threatened, against or affecting Parent or any of its Significant
Subsidiaries which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect on Parent, nor is
there any judgment, award, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Parent or any of its
Significant Subsidiaries which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect on Parent.
(h) TAXES. (i) Parent and each of its Significant Subsidiaries have duly
and timely filed (taking into account any extension of time within which to
file) all material Tax Returns required to be filed by any of them and all
such filed Tax Returns are complete and accurate in all material respects;
(ii) Parent and each of its Significant Subsidiaries have paid all Taxes
that are shown as due on such filed Tax Returns or that Parent or any of its
Significant Subsidiaries is obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters contested
in good faith or for such amounts that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Parent; (iii) to the knowledge of Parent, there are no pending or threatened
in writing audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters relating to Parent or any of its Significant
Subsidiaries which, if determined adversely to Parent or such Significant
Subsidiary, could reasonably be expected to have a Material Adverse Effect
on Parent; (iv) there are no deficiencies or claims for any Taxes that have
been proposed, asserted or assessed against Parent or any of its Significant
Subsidiaries which, if such deficiencies or claims were finally resolved
against Parent or any of its Significant Subsidiaries, could reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Parent; (v) there are no material Liens for Taxes upon the
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assets of Parent or any of its Significant Subsidiaries, other than Liens
for current Taxes not yet due and payable and Liens for Taxes that are being
contested in good faith by appropriate proceedings; (vi) none of Parent or
any of its Significant Subsidiaries has made an election under Section
341(f) of the Code; and (vii) to Parent's knowledge, there are no conditions
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1999
through the date of this Agreement, (A) each of Parent and its Significant
Subsidiaries has conducted its business in the ordinary course consistent
with its past practice and has not incurred any material liability, except
in the ordinary course of their respective businesses; (B) there has not
been any change in the business, financial condition or results of
operations of Parent or any of its Significant Subsidiaries that has had, or
could reasonably be expected to have, a Material Adverse Effect on Parent;
(C) there has not been any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any shares of Parent capital stock, except for dividends in the
ordinary course of business consistent with past practice; (D) there has not
been any split, combination or reclassification of any Parent capital stock
or any issuance or the authorization of any issuance of any other securities
in exchange or in substitution for shares of Parent capital stock; and
(E) there has not been any change in accounting methods, principles or
practices by Parent or any of Parent's Significant Subsidiaries materially
affecting its assets, liabilities or business, except insofar as may have
been required by a change in GAAP or in connection with Parent's change to
GAAP.
(j) CERTAIN AGREEMENTS.
(i) All contracts listed as an exhibit to Parent's Annual Report on
Form 10-K under the rules and regulations of the SEC relating to the
business of the Parent and its Significant Subsidiaries (the "PARENT
MATERIAL CONTRACTS") are valid and in full force and effect except to the
extent they have previously expired in accordance with their terms, and
neither Parent nor any of its Significant Subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or
without notice, lapse of time, or both, could reasonably be expected to
constitute a default under the provisions of, any such Parent Material
Contract, except for defaults which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Parent. To the knowledge of the Company, no counterparty to any such
Parent Material Contract has violated any provision of, or committed or
failed to perform any act which, with or without notice, lapse of time,
or both, could reasonably be expected to constitute a default or other
breach under the provisions of, such Parent Material Contract, except for
defaults or breaches which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Parent.
(k) EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(i) With respect to each U.S. employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of ERISA and any bonus,
deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, change in control and severance
plan, program, arrangement and contract), to which Parent or any of its
Significant Subsidiaries is a party, which is maintained or contributed
to by Parent or any of its Significant Subsidiaries, or with respect to
which Parent or any of its Significant Subsidiaries could incur material
liability under Section 4069, 4201 or 4212(c) of ERISA (the "PARENT
BENEFIT PLANS"), Parent has made available to the Company a true and
complete copy of such Parent Benefit Plan.
(ii) Each of the Parent Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of Erisa and that is
intended to be qualified under Section
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401(a) of the Code has received a favorable determination letter from the
IRS, and Parent is not aware of any circumstances likely to result in the
revocation of any such favorable determination letter that could not
reasonably be corrected under Rev. Proc. 98-22.
(iii) With respect to the Parent Benefit Plans or other employee
benefit plans, programs, arrangements and contracts to which Parent or
any of its Significant Subsidiaries is a party, no event has occurred
and, to the knowledge of the Parent, there exists no condition or set of
circumstances, in connection with which the Parent or any of its
Significant Subsidiaries could be subject to any liability under the
terms of such Parent Benefit Plans, ERISA, the Code or any other
applicable law which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on Parent.
(iv) Except as set forth in Section 3.1(k)(iv) of the Parent
Disclosure Schedule, none of Parent or its Significant Subsidiaries is a
party to any collective bargaining or other labor union contracts and no
collective bargaining agreement is being negotiated by Parent or any of
its Significant Subsidiaries. There is no pending labor dispute, strike
or work stoppage against Parent or any of its Significant Subsidiaries
which may interfere with the respective business activities of Parent or
any of its Significant Subsidiaries, except where such dispute, strike or
work stoppage could not reasonably be expected to have a Material Adverse
Effect on Parent. There is no pending charge or complaint against Parent
or any of its Significant Subsidiaries by the National Labor Relations
Board or any comparable state agency, except where such unfair labor
practice, charge or complaint could not reasonably be expected to have a
Material Adverse Effect on Parent.
(l) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any
of the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent on Merger Sub, except Credit Suisse First
Boston Corporation.
(m) OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date of this
Agreement, neither Parent nor any of its Significant Subsidiaries or, to the
best of its knowledge without investigation, any of its affiliates or
associates (as such terms are defined under the Exchange Act)
(i) beneficially owns, directly or indirectly or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in case of either clause (i) or (ii),
shares of capital stock of the Company.
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB RESPECTING
MERGER SUB. Parent and Merger Sub represent and warrant to the Company as
follows:
(a) ORGANIZATION AND CORPORATE POWER. Merger Sub is a wholly owned
Subsidiary of Parent and a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware. The copies of the
Organizational Documents of Merger Sub which were previously furnished or
made available to the Company are true, complete and correct copies of such
documents as in affect on the date of this Agreement.
(b) CORPORATE AUTHORIZATION. Merger Sub has all requisite corporate
power and corporate authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger
Sub of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Merger Sub. This Agreement has
been duly executed and delivered by Merger Sub and constitutes a valid and
binding agreement of Merger Sub, enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors
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generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) NON-CONTRAVENTION. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
Organizational Documents of Merger Sub.
(d) NO BUSINESS ACTIVITIES. Merger Sub is not a party to any material
agreements and has not conducted any activities other than in connection
with the organization of Merger Sub, the negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby.
Merger Sub has no Subsidiaries.
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that Parent shall
otherwise consent in writing):
(a) ORDINARY COURSE. The Company and Company Sub shall carry on their
respective businesses in the usual, regular and ordinary course in all
material respects, shall not enter into any hedging contracts or
arrangements other than in the ordinary course of business and consistent
with past practice, and shall use all reasonable efforts to preserve intact
their present business organizations and preserve their relationships with
customers, suppliers and others having business dealings with them.
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall not, and
shall not permit Company Sub to, and shall not propose to, (i) declare or
pay any dividends on or make other distributions in respect of any of its
capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock,
or (iii) repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exercisable for any shares of
its capital stock (except for stock purchases pursuant to the terms of the
1999 Employee Stock Purchase Plan as in effect on the date hereof or with
respect to repurchase agreements with certain employees listed in Section
3.1(b) of the Company Disclosure Schedule).
(c) ISSUANCE OF SECURITIES. The Company shall not, and shall cause
Company Sub not to issue, grant, deliver or sell, or authorize or propose
the issuance, grant, delivery or sale of, any shares of its capital stock of
any class, any Company Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or Company Voting Debt, or enter into any agreement with respect to
any of the foregoing, other than (i) the issuance of Company Common Stock
upon the exercise of stock options or stock appreciation rights issued prior
to the date of this Agreement in the ordinary course of business and
consistent with past practice in accordance with the terms of the Company
Stock Option Plans as in effect on the date of this Agreement or pursuant to
elections made by participants in the Company's 401(k) plan, and
(ii) issuances of options, rights or other awards prior to the date of this
Agreement in the ordinary course of business and consistent with past
practice pursuant to the Company Stock Option Plans as in effect on the date
of this Agreement.
(d) ORGANIZATIONAL DOCUMENTS. Except to the extent required to comply
with their respective obligations hereunder, required by law or required by
the rules and regulations of the Nasdaq, the Company and Company Sub shall
not amend or propose to amend their respective Organizational Documents.
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(e) INDEBTEDNESS. The Company shall not, and shall not permit Company
Sub to, (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or Company Sub or guarantee any
debt securities of other Persons other than indebtedness of the Company or
Company Sub to the Company or Company Sub and other than in the ordinary
course of business, (ii) make any loans, advances or capital contributions
to, or investments in, any other Person, other than by the Company or
Company Sub to or in the Company or Company Sub, (iii) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise) other than in the ordinary course of
business or (iv) enter into any derivative contracts (other than hedging
contracts in the ordinary course of business and consistent with past
practice), other than in the case of clauses (ii) and (iii), investments in
marketable securities, payments, discharges or satisfactions incurred or
committed to in the ordinary course of business consistent with past
practice.
(f) BENEFIT PLANS. The Company shall not, and shall not permit Company
Sub to, (i) increase the compensation payable or to become payable to any of
its executive officers or employees, (ii) take any action with respect to
the grant of any severance or termination pay, or stay, bonus or other
incentive arrangement (other than pursuant to benefit plans and policies in
effect on the date of this Agreement), (iii) adopt any new Company Benefit
Plan or (iv) amend or modify any Company Benefit Plan, except as required by
law or Section 5.14.
(g) ACQUISITIONS. Subject to Section 5.4, the Company shall not, and
shall not permit Company Sub to, acquire or agree to acquire (i) by merging
or consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
limited liability company, joint venture, association or other business
organization or division thereof or (ii) any assets that are material,
individually or in the aggregate, to the Company and Company Sub, taken as a
whole.
(h) SALES; LIENS AND ENCUMBRANCES. The Company shall not, and shall not
permit Company Sub to, sell, lease, license, mortgage or other wise encumber
or subject to any Lien or otherwise dispose of any Company Property other
than (i) sales and dispositions of inventories, in each case only if in the
ordinary course of business consistent with past practice, and (ii)
encumbrances and Liens that are incurred in the ordinary course of business
consistent with past practice.
(i) MATERIAL AGREEMENTS. The Company shall not, and shall not permit
Company Sub to, terminate or amend on terms materially less favorable to the
Company any agreement filed as an exhibit to any Company SEC Report or that
would be filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
(j) AUTHORIZATION OF ACTIONS. The Company shall not, and shall not
permit Company Sub to, authorize any of, or commit to agree to take any of,
the foregoing actions in this Section 4.1.
(k) CAPITAL EXPENDITURES. The Company shall not, and shall not permit
Company Sub to, make or agree to make any new capital expenditure or
expenditures, other than capital expenditures of up to $1.25 million in
connection with the Company's move to new facilities in the first calendar
quarter of 2000, that, in the aggregate, are in excess of $600,000;
provided, however, that Parent's consent to capital expenditures in excess
of such amount shall not be unreasonably withheld.
(l) TAX ELECTIONS. The Company shall not, and shall not permit Company
Sub to, make any material Tax election or settle or compromise any material
Tax liability or refund, except to the extent already provided for in the
Company SEC Reports; provided, however, that Parent's consent to any Tax
election or settlement or compromise of any Tax liability or refund shall
not be unreasonably withheld.
(m) STOCK OPTION PLANS. Without limiting the generality of clause
(f) above, the Company shall not, and shall not permit Company Sub to,
(i) make any amendment to any Company Stock
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Option Plan or option agreement as a result of this Agreement or in
contemplation of the Merger, (ii) except pursuant to the terms of the 1999
Employee Stock Purchase Plan, grant or issue any options or stock awards
under the Company Stock Option Plans, except (A) to new employees in
connection their hiring in the ordinary course of business and (B) to
directors in accordance with the 1999 Director Option Plan as in effect on
the date of this Agreement or (iii) accelerate the vesting or exercisabilty
of any options under the Company Stock Option Plans, other than as required
by any automatic acceleration provisions contained in the Company Stock
Option Plans.
(n) OTHER ACTIONS. The Company shall not, and shall not permit Company
Sub to, take any action that could reasonably be expected to result in
(i) any of the representations or warranties of the Company set forth in
this Agreement that are qualified as to materiality becoming untrue,
(ii) any of such representations and warranties that are not so qualified
becoming untrue or (iii) any of the conditions to the Merger set forth in
Article VI not being satisfied.
(o) INTENTION. The Company and its Subsidiaries shall not enter into any
agreement, commitment, arrangement, or obligation to take any action
prohibited by this Section 4.1.
4.2 COVENANTS OF PARENT AND MERGER SUB. During the period from the date of
this Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that the Company
shall otherwise consent in writing):
(a) ORGANIZATIONAL DOCUMENTS. Except to the extent required to comply
with their respective obligations hereunder, required by law or required by
the rules and regulations of any applicable governmental entity, Parent and
its Significant Subsidiaries shall not amend or propose to amend their
respective Organizational Documents.
(b) OTHER ACTIONS. Parent shall not, and shall not permit any of its
Subsidiaries to, take any action that could reasonably be expected to result
in (i) any of the representations or warranties of the Company set forth in
this Agreement that are qualified as to materiality becoming untrue in any
material respect or (ii) any of the conditions to the Merger set forth in
Article VI not being satisfied.
4.3 ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall (a) confer on a
regular and frequent basis with the other, (b) report (to the extent permitted
by law, regulation and any applicable confidentiality agreement) to the other on
operational matters and (c) promptly advise the other orally and in writing of
(i) any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (A) to comply with or
satisfy in any respect any covenant, condition or agreement required to be
complied with or satisfied by it under this Agreement that is qualified as to
materiality or (B) to comply with or satisfy in any material respect any
covenant, condition or agreement required to be complied with or satisfied by it
under this Agreement that is not so qualified as to materiality or (iii) any
change, event or circumstance that has had or could reasonably be expected to
have a Material Adverse Effect on such party or materially adversely affect its
ability to consummate the Merger in a timely manner; provided, however, that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. The Company and Parent shall file all reports required to
be filed by each of them with the SEC (and all other Governmental Entities)
between the date of this Agreement and the Effective Time and shall (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) deliver to the other party copies of all such reports promptly after
the same are filed. Subject to applicable laws relating to the exchange of
information, each of the Company and Parent shall have the right to review in
advance, and to the extent practicable each will consult with the other, with
respect to all the information relating to the other party and each of their
respective Subsidiaries, which appears in any filings, announcements or
publications made with, or written materials submitted
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to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party agrees that, to the extent practicable, it will consult
with the other party with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party apprised of the status of
matters relating to completion of the transactions contemplated hereby.
4.4 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this Agreement
shall give the Company, directly or indirectly, the right to control or direct
Parent's operations prior to the Effective Time. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, each of the Company and Parent shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
ARTICLE V. ADDITIONAL AGREEMENTS
5.1 PREPARATION OF FORM S-4 AND PROXY STATEMENT; THE COMPANY STOCKHOLDERS
MEETING.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy Statement
and Parent shall prepare and file with the SEC the Form S-4, in which the
Proxy Statement shall be included as a prospectus. Each of the Company and
Parent shall use reasonable efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company shall use reasonable efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. Parent shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified) required to be taken under any applicable
securities or "blue sky" laws in connection with the issuance of Parent
Common Stock pursuant to the Merger, and the Company shall furnish all
information concerning the Company and the holders of the Company Common
Stock and rights to acquire Company Common Stock pursuant to the Company
Stock Option Plans as may be reasonably requested in connection with any
such action.
(b) The Company shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "COMPANY STOCKHOLDERS MEETING") for the purpose of
obtaining the Required Company Vote, and, the Company shall, through its
Board of Directors, unanimously, except with respect to one director who
abstained based on a conflict of interest, recommend to its stockholders
that they approve the transactions contemplated by this Agreement; provided,
however, that the Board of Directors of the Company may withdraw, modify or
change such recommendation if it receives a Superior Proposal and determines
in good faith, in consultation with outside counsel, that making such
recommendation, or the failure to so withdraw, modify or change its
recommendation, or the failure to recommend any other offer or proposal,
could reasonably be deemed to cause the members of the Board of Directors to
breach their fiduciary duties under applicable law. Parent shall vote or
cause to be voted all the shares of Company Common Stock owned of record by
Parent or any of its Subsidiaries in favor of the transactions contemplated
by this Agreement; provided further that any such withdrawal, modification
or change in recommendation shall not relieve the Company of its obligations
under Section 5.1(b) hereof. The parties shall use their commercially
reasonable efforts to hold the Company Stockholders Meeting on or before
March 31, 2000.
(c) The Company shall use reasonable efforts to cause to be delivered to
Parent a letter of Arthur Andersen LLP, the Company's independent public
accountants, dated a date within two Business Days before the date on which
the Form S-4 shall become effective and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and
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substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
(d) Parent shall use reasonable efforts to cause to be delivered to the
Company a letter of Deloitte & Touche LLP, Parent's independent public
accountants, dated a date within two business days before the date on which
the Form S-4 shall become effective and addressed to the Company, in form
and substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
5.2 ACCESS TO INFORMATION. Upon reasonable notice, each of the Company and
Parent shall (and shall cause their respective Subsidiaries, to the extent
permitted by the Organizational Documents or other pertinent agreements of such
entity, to) afford to the officers, employees, accountants, counsel, financial
advisors and other representatives of the other party reasonable access during
normal business hours, during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and its officers,
employees and representatives and, during such period, each of the Company and
Parent shall (and shall cause its Subsidiaries, to the extent permitted by the
Organizational Documents or other pertinent agreements of such entity, to)
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than reports or documents which such
party is not permitted to disclose under applicable law) and (b) consistent with
its legal obligations, all other information concerning its business, properties
and personnel as the other party may reasonably request, including any
information requested with respect to Company stockholder approval at the
Company Stockholders Meeting and the status of efforts to obtain such approval;
provided, however, each of the Company and Parent may restrict the foregoing
access to the extent that (i) a Governmental Entity requires such party or any
of its Subsidiaries to restrict access to any properties or information
reasonably related to any such contract on the basis of applicable laws and
regulations or (ii) any law, treaty, rule or regulation of any Governmental
Entity applicable to such party or any of its Subsidiaries requires such party
or any of its Subsidiaries to restrict access to any properties or information.
Such information shall be held in confidence to the extent required by, and in
accordance with, the provisions of the letter (the "CONFIDENTIALITY AGREEMENT")
dated December 5, 1999, between the Company and Parent, which Confidentiality
Agreement shall remain in full force and effect.
5.3 APPROVALS AND CONSENTS; COOPERATION. Each of the Company and Parent
shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) its reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on their part under this Agreement and applicable laws to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
as soon as practicable, including (i) preparing and filing as promptly as
practicable all documentation to effect all necessary applications, notices,
petitions, filings, tax ruling requests and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders, registrations,
approvals, permits, tax rulings and authorizations necessary or advisable to be
obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement, (ii) taking all reasonable steps as may be necessary to obtain all
such consents, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals and (iii) subject to fiduciary duties, the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed. Without limiting the generality of the foregoing, each of
the Company and Parent agrees to make all necessary filings in connection with
the Required Regulatory Approvals as promptly as practicable after the date of
this Agreement, and to use its reasonable efforts to furnish or cause to be
furnished, as promptly as practicable, all information and
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documents requested with respect to such Required Regulatory Approvals and shall
otherwise cooperate with the applicable Governmental Entity in order to obtain
any Required Regulatory Approvals in as expeditious a manner as possible. Each
of the Company and Parent shall use its reasonable efforts to resolve such
objections, if any, as any Governmental Entity may assert with respect to this
Agreement and the transactions contemplated hereby in connection with the
Required Regulatory Approvals. In the event that a suit is instituted by a
Person or Governmental Entity challenging this Agreement and the transactions
contemplated hereby as violative of applicable antitrust or competition laws,
each of the Company and Parent shall use its reasonable efforts to resist or
resolve such suit. The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may reasonably be
necessary or advisable in connection with the Form S-4 or Proxy Statement or any
other statement, filing, tax ruling request, notice or application made by or on
behalf of the Company, Parent or any of their respective Subsidiaries to any
third party and/or any Governmental Entity in connection with the Merger or the
other transactions contemplated by this Agreement.
5.4 ACQUISITION PROPOSALS.
(a) Unless and until this Agreement shall have been terminated by either
party pursuant to Article VII hereof or except as provided in Section
5.4(b), the Company shall not take or cause, directly or indirectly, (and it
agrees to cause its officers, directors, employees, agents, investment
bankers, advisors and representatives not to take or cause) any of the
following actions with any party other than Parent, Merger Sub or their
respective designees: (i) solicit, encourage, initiate, participate in or
facilitate or consent to any negotiations or discussions with respect to any
offer, indication or proposal to acquire all or more than 20% of its
business, assets or capital shares or voting securities whether by merger,
consolidation, other business combination, purchase of assets, tender or
exchange offer or otherwise (each of the foregoing, an "ACQUISITION
PROPOSAL"); or (ii) disclose, in connection with an Acquisition Proposal,
any information or provide access to its properties, books or records,
except as required by law or pursuant to a governmental request for
information. In addition, the Company shall, and shall cause its officers,
directors, employees, agents, investment bankers, advisors and
representatives to, immediately cease any activities of the type described
in (a)(i) and (a)(ii) existing as of the date of this Agreement.
(b) Nothing contained in this Agreement shall prevent the Company or its
Board of Directors from (a) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to any Acquisition Proposal; and (b) if and only to
the extent that the Board of Directors of the Company concludes in good
faith (after having consulted with and considered the advice of its
investment bank and outside legal counsel) that such Acquisition Proposal
would, if consummated, result in a transaction more favorable to the Company
stockholders from a financial point of view than the transaction
contemplated by this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as a "SUPERIOR PROPOSAL"), until the
Required Company Vote has been obtained, the Company may furnish or cause to
be furnished confidential information or data and may participate in such
negotiations and discussions but only if (i) the Company is not then in
breach of its obligations under this Section, (ii) and only to the extent
that the Board of Directors of the Company concludes in good faith (after
having consulted with and considered the advice of outside legal counsel)
that such action is necessary in order for its directors to comply with
their respective fiduciary duties under applicable law and
(iii) confidentiality arrangements on terms no less beneficial to the
Company as those entered into by Parent are entered into with respect
thereto. The Company will notify Parent immediately if any inquiries,
proposals or offers respecting an Acquisition Proposal are received by, any
such information or data is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, it or any such
Persons indicating, in connection with such notice, the name of such Person
and the material terms and conditions of any proposals or offers, and shall
keep Parent apprised with respect to the
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status and terms thereof. The Company also will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with
its consideration of an Acquisition Proposal to return all confidential
information heretofore furnished to such Person by or on behalf of it or any
of its officers, directors, employees, agents, investment bankers, advisors
or representatives and will not waive any "standstill" provision of any
such, or any other, agreement. The Company shall provide Parent at least two
business days advance notice of its intention to present to its Board of
Directors or accept any Superior Proposal and shall provide Parent with a
summary of the terms and conditions thereof.
5.5 EMPLOYEE BENEFITS.
(a) For purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits where length of service is relevant under
any employee benefit plan or arrangement of Parent, the Surviving
Corporation or any of their respective, employees of the Company and Company
Sub as of the Effective Time shall receive service credit for service with
the Company and Company Sub to the same extent such service credit was
granted under the Company Benefit Plans, subject to no duplication of
benefits.
(b) Parent shall cause the Surviving Corporation to assume and honor in
accordance with their terms all written employment, severance and
termination plans and agreements (including change in control provisions) of
employees of the Company and Company Sub provided to Parent on or prior to
the date of this Agreement.
5.6 FEES AND EXPENSES Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
(a) if the Merger is consummated, Surviving Corporation shall pay, or cause to
be paid, any and all property or transfer taxes imposed on the Company or
Company Sub, (b) the Expenses incurred in connection with the printing, filing
and mailing to stockholders of the Form S-4 and Proxy Statement and the
solicitation of stockholder approvals shall be shared equally by the Company and
Parent, and (c) as provided in Section 7.2. As used in this Agreement,
"EXPENSES" includes all out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Form S-4 and Proxy Statement and the solicitation of stockholder approvals
and all other matters related to the transactions contemplated hereby.
5.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Parent and the
Surviving Corporation shall cause to be maintained in effect (i) for a period of
six years after the Effective Time, the current provisions regarding
indemnification of current officers and directors (each, an "INDEMNIFIED PARTY")
contained in the Organizational Documents of the Company or Company Sub and in
any agreements between an Indemnified Party and the Company or Company Sub and
(ii) for a period of six years, the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by the Company
(provided that Parent or the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured)
with respect to claims arising from facts or events that occurred on or before
the Effective Time. This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their respective
heirs and legal representatives.
5.8 PUBLIC ANNOUNCEMENTS. The Company and Parent shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult
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with each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or the transactions contemplated
hereby.
5.9 TAX TREATMENT. For Federal income tax purposes, the parties agree that
the Merger is intended to constitute a tax-free reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 368(a) of
the Code. Each of Parent, Merger Sub and the Company shall not take any action
and shall not fail to take any action which action or failure to act would
prevent, or would be likely to prevent, the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
5.10 AFFILIATES.
(a) Prior to the Closing Date, the Company shall deliver to Parent a
letter identifying all Persons who are, at the time this Agreement is
submitted for approval to the stockholders of the Company, "affiliates" of
the Company (including all directors of the Company) for purposes of
Rule 145 under the Securities Act. The Company shall use reasonable efforts
to cause each such Person to deliver to Parent on or prior to the Closing
Date a written agreement substantially in the form attached hereto as
Exhibit A.
5.11 STOCK LISTING. Parent shall use reasonable best efforts to cause the
shares of Parent Common Stock to be issued in the Merger and pursuant to the
Company Stock Option Plans to be approved for listing on the Nasdaq, subject to
customary conditions, prior to the Closing Date.
5.12 TAKEOVER STATUTES. If Section 203 of the DGCL or any other takeover
statute ("TAKEOVER STATUTE") shall become applicable to the transactions
contemplated hereby, the Company and the members of the Board of Directors of
the Company shall grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby including, without limitation, the
transactions contemplated by the Voting Agreements may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such Takeover Statute on the transactions
contemplated hereby.
5.13 RIGHTS AGREEMENTS. Parent shall take all necessary action prior to the
Effective Time to cause the dilution provisions of the Parent Rights Agreement
to be inapplicable to the transactions contemplated by this Agreement, without
any payment to holders of rights issued pursuant to such rights agreements.
5.14 EMPLOYEE STOCK OPTIONS AND EQUITY INCENTIVES.
(a) Simultaneously with the Merger, (i) each outstanding option to
purchase a share of Company Common Stock under the Company Stock Option
Plans and the Company's 1999 Employee Stock Purchase Plan that is not
exercised by the holder thereof shall be converted into an option to
purchase the number of shares of Parent Common Stock equal to the Conversion
Number multiplied by the number of shares of Company Common Stock which
could have been obtained prior to the Effective Time upon the exercise of
each such option, at an exercise price per share equal to the exercise price
for each such share of Company Common Stock subject to an option under the
Company Stock Option Plans and the Company's 1999 Employee Stock Purchase
Plan being so converted divided by the Conversion Number, and all references
in each such option to the Company shall be deemed to refer to Parent, where
appropriate, and (ii) Parent shall assume the obligations of the Company
under the Company Stock Option Plans and the Company's 1999 Employee Stock
Purchase Plan, provided that the Company agrees not to accelerate any stock
options that do not require acceleration pursuant to the terms in effect on
the date hereof as a result of the transactions contemplated hereby.
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(b) Parent shall (i) reserve for issuance the number of shares of Parent
Common Stock that will become subject to the Company Stock Option Plans and
the Company's 1999 Employee Stock Purchase Plan and (ii) issue or cause to
be issued the appropriate number of shares of Parent Common Stock pursuant
to such plans, upon the exercise or maturation of rights existing thereunder
at the Effective Time or thereafter granted or awarded.
(c) Subject to any applicable limitations under the Securities Act,
Parent shall file a registration statement on Form S-8 (or any successor
form) or another appropriate form (or shall cause options to purchase
Company Common Stock that were converted into options to purchase Parent
Common Stock (the "NEW STOCK RIGHTS") to be deemed to be options issued
pursuant to a stock option or other equity compensation plan of Parent for
which shares of Parent Common Stock have been previously registered pursuant
to an appropriate registration form with the SEC) and shall cause such
registration statement to be effective as soon as practicable following to
the Effective Time, with respect to the shares of Parent Common Stock
issuable upon the exercise of the New Stock Rights, and shall use all
reasonable efforts to maintain the effectiveness of such registration
statement for so long as such New Stock Rights shall remain outstanding.
(d) Company shall amend the Company Stock Option Plans and the Company's
1999 Employee Stock Purchase Plan effective on the Effective Date to provide
that no further options shall be granted under such plans after the
Effective Date.
(e) The Company shall terminate its 1999 Employee Stock Purchase Plan
effective on the Effective Date.
5.15 TAX REPRESENTATIONS. Parent, Merger Sub and Company agree to deliver
to counsel tax representations, substantially in the form attached hereto as
Exhibit B, reasonably prior to the date the Proxy Statement is mailed to the
Company's stockholders.
5.16 FURTHER ASSURANCES. In case at any time after the Effective Time any
further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE VI. CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained all approvals
of holders of shares of capital stock of the Company necessary to approve
this Agreement and all the transactions contemplated hereby (including the
Merger).
(b) HSR ACT. The waiting periods (and any extensions thereof) applicable
to the transactions contemplated by this Agreement under the HSR Act shall
have been terminated or shall have expired. Any consents, approvals and
filings under any antitrust law, the absence of which would prohibit the
consummation of the Merger, shall have been obtained or made.
(c) EFFECTIVE REGISTRATION STATEMENT. The Form S-4 shall have been
declared effective by the SEC under the Securities Act, and no stop order
suspending the effectiveness of the Form S-4 shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Parent or the Company, threatened by the SEC, and all
necessary approvals under blue sky laws (including customary approvals with
respect to the issuance and resale of such Parent Common Stock) relating to
the issuance or trading of the Parent Common Stock to be issued to the
stockholders of the Company in connection with the Merger shall have been
received.
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(d) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court
or other Governmental Entity of competent jurisdiction shall be in effect
and have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger; provided, however, that the provisions of this
Section 6.1(d) shall not be available to any party whose failure to fulfill
its obligations pursuant to Section 5.3 shall have been the cause of, or
shall have resulted in, such order or injunction.
(e) REQUIRED REGULATORY APPROVALS. All authorizations, consents, orders
and approvals of, and declarations and filings with, and all expirations of
waiting periods imposed by, any Governmental Entity which, if not obtained
in connection with the consummation of the transactions contemplated hereby,
could reasonably be expected to have a Material Adverse Effect on the
Company (collectively, "REQUIRED REGULATORY APPROVALS"), shall have been
obtained, have been declared or filed or have occurred, as the case may be,
and all such Required Regulatory Approvals shall be in full force and
effect.
(f) LISTING OF PARENT COMMON STOCK. The Parent Common Stock to be issued
to the stockholders of the Company in connection with the Merger and
pursuant to the Company Stock Option Plans shall have been approved for
listing on the Nasdaq subject only to other customary conditions.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent, on or prior to the Closing Date, of the
following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in this Agreement that is qualified as
to materiality shall have been true and correct when made and shall be true
and correct on and as of the Closing Date as if made on and as of such date
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date), and
each of the representations and warranties of the Company that is not so
qualified shall have been true and correct in all material respects when
made and shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date (other than representations
and warranties which address matters only as of a certain date which shall
be true and correct in all material respects as of such certain date).
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality and shall have performed or complied in all
material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are not so qualified as to materiality.
(c) TAX OPINION. Parent shall have received an opinion from Latham &
Watkins, dated on or about the date the Proxy Statement is mailed to the
Company's stockholders, in form and substance reasonably satisfactory to
Parent and based on customary representations of Parent, Merger Sub and the
Company and on the basis of facts and assumptions set forth in such opinion,
which are consistent with the state of facts existing at the Effective Time,
substantially to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and (ii) no
gain or loss will be recognized by Company stockholders for United States
Federal income tax purposes upon the exchange of their Company Common Stock
solely for shares of Parent Common Stock, except with respect to cash, if
any, received in lieu if fractional shares of Company Common. Further, the
opinion Latham & Watkins delivered pursuant to this section shall not have
been withdrawn or modified in any material respect on or prior to the
Effective Time.
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(d) ABSENCE OF COMPANY MATERIAL ADVERSE EFFECT. There shall not have
occurred since the date of this Agreement any Material Adverse Effect on the
Company.
(e) NON-COMPETE AGREEMENTS. The individuals listed on Schedule
6.2(e) shall have entered into Non-Compete Agreements with Parent in the
form attached hereto as Annex B.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger are subject to the satisfaction of, or waiver
by the Company on or prior to the Closing Date of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement that is
qualified as to materiality shall have been true and correct when made and
shall be true and correct on and as of the Closing Date as if made on and as
of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct as of such
certain date), and each of the representations and warranties of each of
Parent and Merger Sub that is not so qualified shall have been true and
correct in all material respects when made and shall be true and correct in
all material respects on and as of the Closing Date as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct in all material
respects as of such certain date).
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have performed or
complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as
to materiality and shall have performed or complied in all material respects
with all agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified as to
materiality.
(c) TAX OPINION. The Company shall have received an opinion from
Hutchins, Wheeler & Dittmar, a Professional Corporation, dated on or about
the date the Proxy Statement is mailed to Company stockholders, in form and
substance reasonably satisfactory to the Company and based on customary
representations of Parent, Merger Sub and the Company and on the basis of
facts and assumptions set forth in such opinion, which are consistent with
the state of facts existing at the Effective Time, substantially to the
effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and (ii) no gain or loss will be
recognized by Company stockholders for United States Federal income tax
purposes upon the exchange of their Company Common Stock solely for shares
of Parent Common Stock, except with respect to cash, if any, received in
lieu if fractional shares of Company Common Stock. Further, the opinion of
Hutchins, Wheeler & Dittmar, a Professional Corporation, delivered pursuant
to this section shall not have been withdrawn or modified in any material
respect on or prior to the Effective Time.
(d) ABSENCE OF PARENT MATERIAL ADVERSE EFFECT. There shall not have
occurred since the date of this Agreement, any Material Adverse Effect on
the Parent.
ARTICLE VII. TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) By mutual written consent of Parent and the Company, by action of
their respective Boards of Directors;
(b) By either the Company or Parent if the Merger shall not have been
consummated by March 31, 1999; provided that such date shall automatically
be extended up to three additional
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periods of 30 days upon the written request by any party hereto to any other
party hereto so long as at the time of such request, such requesting party
was not in material breach of any of its obligations under this Agreement
(the "OUTSIDE DATE"); provided further that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or before
such date;
(c) By either the Company or Parent if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties shall have used their
reasonable best efforts to resist, resolve or lift, as applicable, subject
to the provisions of Section 5.3) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) By either Parent or the Company if the approval by the stockholders
of the Company required for the consummation of the Merger or the other
transactions contemplated hereby shall not have been obtained at the Company
Stockholders Meeting or at any adjournment thereof by reason of the failure
to obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(e) By Parent if (i) the Board of Directors of the Company shall have
withdrawn or modified its recommendation of the Merger or this Agreement;
(ii) the Board of Directors of the Company shall have failed to recommend
the Merger or this Agreement or shall have recommended to the stockholders
of the Company that they approve an Acquisition Proposal other than
contemplated by this Agreement; (iii) a tender offer or exchange offer that,
if successful, would result in any Person or "group" becoming a "beneficial
owner" (such terms having the meaning in this Agreement as is ascribed under
Regulation 13D under the Exchange Act) of 20% or more of the outstanding
shares of Company Common Stock is commenced (other than by Parent or an
affiliate of Parent) and the Board of Directors of the Company does not
oppose such tender offer or recommends that the stockholders of the Company
tender their shares in such tender or exchange offer; or (iv) for any reason
the Company fails to call and hold the Company Stockholders Meeting by the
Outside Date (provided that Parent's right to terminate this Agreement under
such clause (iv) shall not be available if at such time the Company would be
entitled to terminate this Agreement under Section 7.1(g));
(f) By Parent, upon a material breach of any covenant or agreement (y)
on the part of the Company set forth in this Agreement or (z) on the part of
any party to a Voting Agreement (other than Parent), or if (i) any
representation or warranty of the Company in this Agreement that is
qualified as to materiality shall have become untrue or (ii) any
representation or warranty of the Company that is not so qualified shall
have become untrue in any material respect, in each case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied (a "TERMINATING COMPANY BREACH"); provided, however, that, if such
Terminating Company Breach is capable of being cured by the Company prior to
the Effective Time through the exercise of its best efforts, Parent shall
promptly give notice of such Terminating Company Breach to the Company and
if such Terminating Company Breach is cured within 15 days after giving
notice to the Company of such breach, Parent may not terminate this
Agreement under this Section 7.1(f); or
(g) By the Company, upon a material breach of any covenant or agreement
on the part of Parent or Merger Sub set forth in this Agreement, or if
(i) any representation or warranty of Parent or Merger Sub that is qualified
as to materiality shall have become untrue or (ii) any representation or
warranty of Parent or Merger Sub that is not so qualified shall have become
untrue in any material respect, in each case such that the conditions set
forth in Section 6.3(a) or Section 6.3(b) would not be satisfied
("TERMINATING PARENT BREACH"); provided, however, that, if
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such Terminating Parent Breach is capable of being cured by Parent prior to
the Effective Time through the exercise of best efforts, the Company shall
promptly give notice of such Terminating Parent Breach to Parent and if such
Terminating Parent Breach is cured within 15 days after giving written
notice to Parent of such breach, the Company may not terminate this
Agreement under this Section 7.1(g).
7.2 EFFECT OF TERMINATION
(a) In the event of termination of this Agreement by either the Company
or Parent as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent or
the Company or their respective officers or directors except (i) with
respect to Section 5.6, this Section 7.2 and Article VIII and (ii) with
respect to any liabilities or damages incurred or suffered by a party as a
result of the willful breach by the other party of any of its covenants or
other agreements set forth in this Agreement.
(b) In the event that this Agreement is terminated pursuant to Section
7.1(d), 7.1(e), or 7.1(f), then the Company shall pay the Parent a cash fee
of $25.0 million, which amount shall be payable by wire transfer of
immediately available funds on the date of such termination; PROVIDED, that
in the event of a termination under Section 7.1(d), 7.1(e) or 7.1(f), such
fee shall not be payable unless and until the Company enters into a
transaction that constitutes an Acquisition Proposal (or an agreement for
such a transaction) within nine months of such termination or unless and
until any Person or Persons purchases 20% or more of the assets or voting
stock of the Company within nine months of such termination, such payment to
be made on the date of any such event. The Company acknowledges that the
agreements contained in this Section 7.2(b) are an integral part of the
transactions contemplated in this Agreement, and that, without these
agreements, the Parent and Merger Sub would not enter into this Agreement.
(c) In addition, in the event of termination of this Agreement by Parent
pursuant to Section 7.1(b), (d), (e) or (f), then the Company shall
reimburse Parent for all its reasonable out-of-pocket expenses (up to
$3,000,000) actually incurred in connection with this Agreement and the
transactions contemplated hereby, which amount shall be payable by wire
transfer of same day funds within three Business Days of written demand,
accompanied by a reasonably detailed statement of such expenses and
appropriate supporting documentation therefor.
(d) In addition, in the event of termination of this Agreement by the
Company pursuant to Section 7.1(g) then Parent shall reimburse the Company
for all its reasonable out-of-pocket expenses (up to $3,000,000) actually
incurred in connection with this Agreement and the transactions contemplated
hereby, which amount shall be paid by wire transfer of same day funds within
three Business Days of written demand, accompanied by a reasonably detailed
statement of such expenses and appropriate supporting documentation
therefor.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company, but, after any such approval, no amendment
shall be made which by law or in accordance with the rules of the Nasdaq
requires further approval by such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or
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waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties hereto may otherwise have at law or in equity. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE VIII. GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER
REPRESENTATIONS AND WARRANTIES. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained herein
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement, none
of the Company, Parent or Merger Sub makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement, the documents and the instruments referred to
herein, or the transactions contemplated hereby or thereby, notwithstanding the
delivery or disclosure to the other party or the other party's representatives
of any documentation or other information with respect to any one or more of the
foregoing.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service, (c) on the tenth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Parent or Merger Sub, 4311 Jamboree Road, Newport Beach, CA
92660, Attention: President, Telecopy No.: (949) 483-4318, with copies to
Latham & Watkins, 135 Commonwealth Drive, Menlo Park, CA 94025, Attention:
Christopher Kaufman, Esq., Telecopy No.: (650) 463-2600 and Latham &
Watkins, 885 Third Avenue, New York, New York 10022, Attention: Raymond Lin,
Esq., Telecopy No.: (212) 751-4864;
(b) if to the Company, 73 Mount Wayte Avenue, Framingham, MA 01702,
Attention: President, Telecopy No.: (508) 628-0256, with a copy to Hutchins,
Wheeler & Dittmar, 101 Federal Street, Boston, MA 02210, Attention: Richard
Stein, Esq., Telecopy No.: (617) 951-1295.
8.3 INTERPRETATION. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The parties
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have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden or proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statue or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
content requires otherwise.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement (including the Schedules and Exhibits) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, other than the Confidentiality Agreement, which shall survive the
execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other
than Sections 5.5 and 5.7 (which is intended to be for the benefit of the
Persons covered thereby and may be enforced by such Persons).
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might be applicable under conflicts of laws principles.
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. Any provision of this Agreement held invalid or
unenforceable only in part, degree or certain jurisdictions will remain in full
force and effect to the extent not held invalid or unenforceable. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
8.9 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
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8.10 DEFINITIONS. As used in this Agreement:
(a) "BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
(b) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
(c) "COMPANY STOCK OPTION PLANS" means the Company's 1996 Stock Option
Plan, the 1999 Director Option Plan and the 1999 Stock Incentive Plan.
(d) "MATERIAL ADVERSE EFFECT" means, with respect to any entity, any
adverse change, circumstance or effect (not proximately caused by the public
announcement of the proposed Merger) that, individually or in the aggregate
with all other adverse changes, circumstances and effects, is or is
reasonably likely to be materially adverse to the business, operations,
assets, liabilities, financial condition or results of operations of such
entity and its Subsidiaries taken as a whole or would prevent the Company or
Parent (as the case may be) from performing its obligations under this
Agreement; provided that with respect to Parent, a change in the market
price of Parent Common Stock shall not be a Material Adverse Effect on
Parent.
(e) "ORGANIZATIONAL DOCUMENTS" means, with respect to any entity, the
certificate of incorporation, bylaws or other governing documents of such
entity.
(f) "PERSON" means an individual, corporation, partnership, limited
liability company association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
(g) "SUBSIDIARY" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the voting and economic interests in such partnership) or (ii) at least a
majority of the securities or other interests of which having by their terms
ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.
(h) (i)"TAX" (including, with correlative meaning, the terms "TAXES" and
"TAXABLE") means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax,
and (ii) "TAX RETURN" means all returns and reports (including elections,
claims, declarations, disclosures, schedules, estimates, computations and
information returns) required to be supplied to a Tax authority in any
jurisdiction relating to Taxes.
(i) "THE OTHER PARTY" means, with respect to the Company, Parent and
means, with respect to Parent, the Company.
[Signature Page Follows]
A-34
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of December 18, 1999.
<TABLE>
<S> <C> <C>
CONEXANT SYSTEMS, INC.,
A DELAWARE CORPORATION
By: /s/ DWIGHT DECKER
-----------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
By: /s/ BALA IYER
-----------------------------------------
Name: Bala Iyer
Title: Sr. VP & CFO
MERLOT ACQUISITION CORP.,
A DELAWARE CORPORATION
By: /s/ DWIGHT DECKER
-----------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
MAKER COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
By: /s/ WILLIAM N. GIUDICE
-----------------------------------------
Name: William N. Giudice
Title: President & CEO
</TABLE>
A-35
<PAGE>
SCHEDULE 6.2(E)
William N. Giudice
Paul Bergantino
Thomas Medrek
Michael Rodensky
Walter Jones
<PAGE>
ANNEX A
FORM OF
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999, between
the undersigned stockholder ("STOCKHOLDER") of Maker Communications, Inc., a
Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a Delaware
corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Company and Parent have entered into an Agreement and Plan of Merger dated as of
December 18, 1999 (the "MERGER AGREEMENT"), providing for the merger of a
wholly-owned subsidiary of Parent ("MERGER SUB") with and into the Company (the
"MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the Merger
Agreement, pursuant to which Stockholder will receive the consideration provided
for in the Merger Agreement in exchange for each share of Company Common Stock,
par value $0.01 per share, of Company (the "COMPANY COMMON STOCK") owned by him,
Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of Company Common
Stock set forth opposite such Stockholder's name on Exhibit A (such
Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not beneficially own (as
such term is defined in the Securities Exchange Act of 1934, as amended (the
"1934 ACT")) or own of record any shares of Company Common Stock other than
such Stockholder's Shares, but excluding any shares of Company Common Stock
which such Stockholder has the right to obtain upon the exercise of stock
options outstanding on the date hereof; and
(c) has the right, power and authority to execute and deliver this
Agreement and the Proxy (as hereinafter defined) and to perform such
Stockholder's obligations under this Agreement and the Proxy, and this
Agreement and the Proxy has been duly executed and delivered by such
Stockholder and constitutes a valid and legally binding agreement of such
Stockholder, enforceable in accordance with its terms; and such execution,
delivery and performance by such Stockholder of this Agreement and the Proxy
will not (i) conflict with, require a consent, waiver or approval under, or
result in a breach of or default under, any of the terms of any contract,
commitment or other obligation (written or oral) to which such Stockholder
is a party or by which such Stockholder is bound; (ii) violate any order,
writ, injunction, decree or statute, or any rule or regulation, applicable
to Stockholder or any of the properties or assets of Stockholder; or
(iii) result in the creation of, or impose any obligation on such
Stockholder to create, any Lien (as defined in the Merger Agreement), charge
or other encumbrance of any nature whatsoever upon the Shares, other than in
favor of Parent.
The representations and warranties contained herein shall be made as of the
date hereof and as of each date from the date hereof through and including the
date that the Merger is consummated or this Agreement is terminated in
accordance with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or by
proxy) and vote his Shares and any New Shares (as defined in Section 4 hereof),
and shall cause any holder of record of his Shares or New Shares to be present
and vote, (a) in favor of adoption and approval of the Merger Agreement and the
Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger
<PAGE>
Agreement) other than the Merger (or any other Acquisition Proposal of Parent)
and (c) against any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger (or other Acquisition Proposal of
Parent) or is otherwise inconsistent therewith, and in each case, at every
meeting of the stockholders of the Company at which any such matters are
considered and at every adjournment thereof (and, if applicable, in connection
with any request or solicitation of written consents of stockholders). Any such
vote shall be cast, or consent shall be given, in accordance with such
procedures relating thereto as shall ensure that it is duly counted for purposes
of determining that a quorum is present and for purposes of recording the
results of such vote or consent. Stockholder shall deliver to Parent upon
request a proxy substantially in the form attached hereto as Exhibit B (the
"PROXY"), which proxy shall be coupled with an interest and irrevocable to the
extent permitted under Delaware law, with the total number of such Stockholder's
Shares and any New Shares correctly indicated thereon. Stockholder hereby
revokes any and all previous proxies granted with respect to his Shares. Such
irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock after the execution
of this Agreement (including by exercise of options), or (c) such Stockholder
acquires the right to vote or share in the voting of any shares of Company
Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all
times during the term hereof will be, held by such Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of
all liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever (other
than to the extent set forth on Schedule 1 to this Agreement), except for
any such encumbrances or proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent
to any transfer of, any or all of the Stockholder's Shares, or any interest
therein or
A-1-2
<PAGE>
(ii) enter into any contract, option or other agreement or understanding
with respect to any such transfer or any or all of the Stockholder's Shares,
or any interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder, except
in his capacity as an officer or director of the Company in a manner permitted
by the Merger Agreement, (i) shall not, directly or indirectly, solicit,
encourage, initiate, participate in or otherwise facilitate or consent to any
negotiations, or consent to any negotiations, inquiries or discussions with
respect to any Acquisition Proposal and (ii) has terminated any discussions or
negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that it
will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the
negotiation of this Agreement, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
A-1-3
<PAGE>
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the
internal laws of the State of Delaware without regard to principles of
conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid
and the application of such provision to persons or circumstances, other
than the party as to which it is held invalid, shall not be affected.
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement),
(B) six months after the occurrence of a termination of the Merger Agreement
in accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of
the Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof
and (D) six months after the Outside Date as defined in Section 7.1 (b) of
the Merger Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
A-1-4
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Attention:
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light
of legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS OF DECEMBER 18, 1999,
A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF CONEXANT SYSTEMS, INC. AT
ITS PRINCIPAL EXECUTIVE OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND
TRANSFER THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits
or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby (and each party hereto agrees not to
commence any action, suit or proceeding relating thereto except in such
courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to the addresses set forth herein shall be
effective service of process for any such action, suit or proceeding brought
against each party in such court. Each party hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby, in the Court of Chancery of the State of Delaware
(unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of
Delaware). Each party hereby further irrevocably and unconditionally waives
and agrees not to plead or to claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an
inconvenient forum. Each of the parties hereto also agrees that any final
and unappealable judgment against a party hereto in connection with any
action, suit or other proceeding that be conclusive and binding on such
party and that such award or judgment may be enforced in any court of
competent jurisdiction, either within or outside of the United States. A
certified or exemplified copy of such award or judgment shall be conclusive
evidence of the fact and amount of such award or judgment.
[Signature Pages Follow]
A-1-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
<TABLE>
<S> <C> <C>
CONEXANT SYSTEMS, INC.,
By:
-----------------------------------------
Name:
Title:
</TABLE>
Confirmed and accepted as of the date first written above:
<TABLE>
<S> <C> <C>
By: -----------------------------------------
Name:
</TABLE>
<PAGE>
EXHIBIT A
STOCKHOLDER
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME COMPANY COMMON STOCK TYPE OF OWNERSHIP
- ---- -------------------- -----------------
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby appoints
[PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("PARENT"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "For" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated _________________________ , 1999
______________________________________
(Signature of Stockholder)
<PAGE>
ANNEX B
FORM OF
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (the "AGREEMENT") is entered into, as of
December 18, 1999, by and among Conexant Systems, Inc., a Delaware corporation
("CONEXANT"), Maker Communications, Inc., a Delaware corporation ("COMPANY"),
and the employee of the Company identified on the signature page ("EMPLOYEE").
RECITALS
A. The Company is a semiconductor company that develops and markets
high-performance programmable processors, development tools and application
software for use in communication systems equipment (collectively referred to
herein as the "BUSINESS").
B. The parties acknowledge that the relevant market for the Business is
worldwide in scope and that there exists intense worldwide competition for the
products and services of the Business.
C. Pursuant to the Agreement and Plan of Merger, dated December 18, 1999
("MERGER AGREEMENT"), among Conexant, Merlot Acquisition Corp., a California
corporation, and wholly owned subsidiary of Conexant ("MERGER SUB"), and the
Company, the parties have agreed that Merger Sub will be merged with and into
the Company with the Company being the surviving corporation (the "MERGER") and
the issued and outstanding shares of capital stock of the Company will be
converted into shares of common stock of Conexant ("CONEXANT COMMON STOCK").
D. Employee is a key employee of the Company and has detailed knowledge of
Company's intellectual property and other confidential and proprietary
information of the Company.
E. Employee holds shares of capital stock and/or options to purchase capital
stock of the Company that will be converted into the right to receive shares of
Conexant Common Stock and Employee therefore has a material economic interest in
the consummation of the Merger and, in order to induce Conexant to enter into
the Merger Agreement and to consummate the Merger and the transactions
contemplated by the Merger Agreement, Employee has agreed to enter into this
Agreement.
F. In order to protect the goodwill, trade secrets and other confidential
and proprietary information related to the Business, Conexant and the Company
have agreed that Conexant's obligation to enter into and consummate the Merger
and the transactions contemplated by the Merger Agreement is subject to the
condition, among others, that Employee shall have entered into this Agreement.
G. Capitalized terms used herein and not defined shall have the meanings
ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements hereinafter set forth, Employee, the Company and Conexant, intending
to be legally bound, hereby agree as follows:
ARTICLE 1
NON-COMPETITION
1.1 NON-COMPETITION. As an inducement for Conexant to enter into the Merger
Agreement and to consummate the Merger, and in connection with the sale of
Employee's shares of Company capital stock in connection with the Merger and
Employee's continued employment after the Merger, Employee agrees that from and
after the consummation of the Merger and until two years from the date (the
"Closing Date") of consummation of the Merger (the "NON-COMPETITION PERIOD"),
Employee shall not, anywhere in the world, directly or indirectly, engage,
without the express prior written
<PAGE>
consent of Conexant, in any business or activity, whether as an employee,
consultant, partner, principal, agent, representative, equity holder or in any
other individual, corporate or representative capacity (without limitation by
specific enumeration of the foregoing), or render any services or provide any
advice to any business, activity or Person conducting the Business as conducted
on the Closing Date or as Contemplated by the Company as of the Closing Date (a
"COMPETING BUSINESS"). Notwithstanding the foregoing (and, so long as Employee
is an employee of Conexant or the Company, subject to written employee policies
of Conexant or the Company), Employee may as a passive investment own, directly
or indirectly, up to one percent (1%) of any class of Publicly Traded Securities
of any Person which owns or operates a business that is a Competing Business.
For the purposes of this Section 1.1, a matter shall be Contemplated if it is
included in the Company's operating plan or present product plans or if
management of the Company has prior to the Closing Date presented such matter to
the senior management of the Company and Conexant as a possible or prospective
business or product for the Company and Publicly Traded Securities shall mean
securities that are traded on a national securities exchange or listed on the
Nasdaq National Market.
1.2 NO INTERFERENCE WITH THE BUSINESS, NON-SOLICITATION. As an inducement
for Conexant to enter into the Merger Agreement and to consummate the Merger,
and to continue Employee's employment after the Merger, Employee agrees that
during the Non-Competition Period, at any time or for any reason, Employee shall
not, directly or indirectly, (a) with respect to the Business, solicit or divert
any business or clients or customers known to Employee during his employment
with the Company or Conexant away from Conexant, the Company and/or their
affiliates, (b) induce customers, clients, suppliers, agents or other persons
under contract or otherwise associated or doing business with Conexant, the
Company and/or their affiliates made known to Employee during his employment
with the Company or Conexant, to reduce or alter any such association or
business with Conexant, the Company and/or their affiliates, and/or (c) solicit
any Person who is then, or has been within the 12 months preceding such action
by Employee, in the employment of Conexant, the Company and/or their affiliates
to (i) terminate such employment, and/or (ii) accept employment, or enter into
any consulting arrangement, with any Person other than Conexant, the Company
and/or their affiliates.
ARTICLE 2
EQUITABLE RELIEF
The parties to this Agreement agree that (i) if Employee materially breaches
Article 1 of this Agreement, the damage to Conexant and the Company will be
substantial, although difficult to ascertain, and money damage will not afford
Conexant or the Company an adequate remedy, and (ii) if Employee is in material
breach of any provision of this Agreement, or threatens a breach of Article 1 of
this Agreement, Conexant and the Company shall be entitled, in addition to all
other rights and remedies as may be provided by law, to specific performance and
injunctive and other equitable relief to prevent or restrain a breach of any
provision of this Agreement.
ARTICLE 3
MISCELLANEOUS
3.1 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto. This
Agreement may be amended or modified and the terms and conditions hereof may be
waived, only by a written instrument signed by each of the parties or, in the
case of waiver, by the party waiving compliance. No delay on the part of either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of either party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any
AB-2
<PAGE>
other right, power or privilege hereunder. The rights and remedies provided
herein are cumulative and are not exclusive of any rights or remedies that
either party may otherwise have at law or in equity.
3.2 REPRESENTATIONS AND WARRANTIES. Employee represents and warrants that
this Agreement is a legal, valid and binding obligation, enforceable against
Employee in accordance with its terms to the fullest extent permitted under
applicable federal, state or local law.
3.3 NOTICES. Any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and shall be deemed to
have been duly given on the next business day after the same is sent, if
delivered personally or sent by telecopy (with confirmed delivery) or overnight
delivery, or five (5) calendar days after the same is sent, if sent by
registered or certified mail, return receipt requested, postage prepaid, to the
address set forth on the signature page to this Agreement, or to such other
persons or addresses as may be designated in writing in accordance with the
terms hereof by the party to receive such notice.
3.4 MERGER. This Agreement shall remain in effect from the date hereof until
the end of the Non-Competition Period, unless the Merger contemplated by the
Merger Agreement is not consummated. In the event the Merger is not consummated
and the Merger Agreement is terminated in accordance with its terms, this
Agreement shall be null and void.
3.5 SCOPE AND SEVERABILITY. Employee acknowledges and agrees that the
subject matter, duration, and geographic scope of this Agreement are reasonable.
Employee understands that the provisions of this Agreement may limit his ability
to earn a livelihood in a business similar to the Business, but nevertheless
believes that he will receive sufficiently high remuneration and other benefits
arising from the Merger to justify the restrictions contained in such provisions
which, given his education, skills, abilities, and financial resources, he does
not believe would prevent him from earning a living. In addition, Employee
acknowledges that the covenants contained in this Agreement are made in
connection with and as separate consideration for the execution and delivery of
the Merger Agreement executed simultaneously herewith. If any court of competent
jurisdiction shall determine any of the foregoing covenants to be unenforceable
with respect to the term thereof or the scope of the subject matter or geography
covered thereby, such remaining covenants shall nonetheless be enforceable by
such court against such other party or parties or upon such shorter term or
within such lesser scope to the maximum extent permissible under applicable law.
If the scope of any restriction contained in this Agreement is too broad to
permit enforcement of such restriction to its full extent, then such restriction
shall be enforced to the maximum extent permitted by law, and Employee hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction. The invalidity or
unenforceability of any particular provision of this Agreement as determined by
a court of competent jurisdiction shall not affect the other provisions hereof
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
3.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, the heirs and legal representatives of
Employee and the successors and assigns of Conexant and/or the Company. Employee
shall not be entitled to assign his obligations hereunder. Conexant and/ or the
Company may assign its rights under this Agreement to any successor to all or
substantially all of either (i) Conexant's business or (ii) the Company's
business without the consent or further action of Employee.
3.7 EMPLOYEE AGREEMENTS. Employee acknowledges and agrees that, following
the Merger, Employee will be required to (and will) sign Conexant's standard
form of employee intellectual property and confidentiality agreement as in
effect at that time.
3.8 INDEPENDENT REVIEW AND ADVICE. EMPLOYEE REPRESENTS AND WARRANTS THAT
EMPLOYEE HAS CAREFULLY READ THIS AGREEMENT; THAT EMPLOYEE EXECUTES
AB-3
<PAGE>
THIS AGREEMENT WITH FULL KNOWLEDGE OF THE CONTENTS OF THIS AGREEMENT, THE LEGAL
CONSEQUENCES THEREOF, AND ANY AND ALL RIGHTS WHICH EACH PARTY MAY HAVE WITH
RESPECT TO ONE ANOTHER; THAT EMPLOYEE HAS HAD THE OPPORTUNITY TO RECEIVE
INDEPENDENT LEGAL ADVICE WITH RESPECT TO THE MATTERS SET FORTH IN THIS AGREEMENT
AND WITH RESPECT TO THE RIGHTS AND ASSERTED RIGHTS ARISING OUT OF SUCH MATTERS,
AND THAT EMPLOYEE IS ENTERING INTO THIS AGREEMENT OF EMPLOYEE'S OWN FREE WILL.
EMPLOYEE EXPRESSLY AGREES THAT THERE ARE NO EXPECTATIONS CONTRARY TO THE
AGREEMENT AND NO USAGE OF TRADE OR REGULAR PRACTICE IN THE INDUSTRY SHALL BE
USED TO MODIFY THE AGREEMENT. THE PARTIES AGREE THAT THIS AGREEMENT SHALL NOT BE
CONSTRUED FOR OR AGAINST EITHER PARTY IN ANY INTERPRETATION THEREOF.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date first written above.
<TABLE>
<S> <C>
CONEXANT SYSTEMS, INC. EMPLOYEE
- -------------------------------------------- --------------------------------------------
Signature Signature
- --------------------------------------------
Print Name and Title
4311 Jamboree Road,
Newport Beach, CA 92660
Attn.: Human Resources c/o Maker Communications, Inc.
Telecopy: 949-483-6388 73 Mount Wayte Avenue,
Telecopy: 508-628-0256 Framingham, MA 01702
MAKER COMMUNICATIONS, INC.
- --------------------------------------------
Signature
- --------------------------------------------
Print Name and Title
73 Mount Wayte Avenue,
Framingham, MA 01702
Attn.: Human Resources
Telecopy: 508-628-0256
</TABLE>
AB-4
<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
[DATE]
Ladies and Gentlemen:
The Undersigned has been advised that as of the date of this letter, the
undersigned (the "UNDERSIGNED") may be deemed to be an "affiliate" of the
Company, as the term "affiliate" is defined for purposes of paragraphs (c) and
(d) of Rule 145 of the rules and regulations (the "RULES AND REGULATIONS") of
the Securities and Exchange Commission (the "COMMISSION") under the Securities
Act of 1933, as amended (the "ACT"). Pursuant to the terms of the Agreement and
Plan of Merger dated as of December 18, 1998 (the "AGREEMENT") among Parent,
Merger Sub and the Company, the Merger will occur pursuant to which the Company
will merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation, and as a result thereof the successor to the Company will become a
wholly owned subsidiary of Parent and shares of Company Common Stock will be
converted into the right to receive, subject to the terms and conditions set
forth in the Agreement, shares of Parent Common Stock and/or cash.
Any capitalized term used but not defined herein shall have the meaning set
forth in the Agreement.
The Undersigned represents, warrants and covenants to you that as of the
date the Undersigned receives any shares of Parent Common Stock as a result of
the Merger:
A. The Undersigned shall not make any sale, transfer or other disposition of
such shares of Parent Common Stock in violation of the Act or the
Rules and Regulations.
B. The Undersigned has carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon the Undersigned's ability to transfer or otherwise
dispose of such shares of Parent Common Stock to the extent the
Undersigned has felt necessary with its counsel or counsel for the
Company.
C. The Undersigned has been advised that the issuance of such shares of
Parent Common Stock to the Undersigned pursuant to the Merger has been
registered with the Commission under the Act on a Registration Statement
on Form S-4. However, the Undersigned has also been advised that, since
at the time the Merger was submitted for a vote of the shareholders of
the Company, the Undersigned may be deemed to have been an affiliate of
the Company and the distribution by the Undersigned of shares of Parent
Common Stock has not been registered under the Act, the Undersigned may
not sell, transfer or otherwise dispose of such shares of Parent Common
Stock issued to it in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer
or other disposition is made in conformity with Rule 145 promulgated by
the Commission under the Act, or (iii) in the opinion of counsel
reasonably acceptable to Parent, or as provided in a "no action" letter
obtained by the Undersigned from the staff of the Commission, such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. The Undersigned understands that Parent is under no obligation to
register the resale, transfer or other disposition of such shares of
Parent Common Stock by the Undersigned or on its behalf under the Act or
to take any other action necessary in order to make compliance with an
exemption from such registration available.
E. The Undersigned also understands that unless the transfer by the
Undersigned of its shares of Parent Common Stock has been registered
under the Act or is a sale made in conformity with the provisions of
Rule 145 or another applicable exemption from the registration
requirements under the Act, Parent reserves the right to put the
following legend on the certificates issued to the Undersigned's
transferee:
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT of 1933."
It is understood and agreed that the legend set forth in paragraph E above
shall be removed by delivery of substitute certificates without such legend if
such legend is not required for purposes of the Act or this Agreement. It is
understood and agreed that such legend shall be removed if Parent receives from
the Undersigned either an opinion of counsel (which opinion of counsel must be
reasonably satisfactory to Parent) or a "no action" letter obtained by the
Undersigned from the staff of the Commission, in either case to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply.
Execution of this letter should not be considered an admission on the
Undersigned's part that the Undersigned is an "affiliate" of the Company as
described in the first paragraph of this letter or as a waiver of any rights the
Undersigned may have to object to any claim that it is such an affiliate on or
after the date of this letter.
Very truly yours,
----------------------------------------
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<PAGE>
EXHIBIT B
COMPANY
OFFICER'S CERTIFICATE*
The undersigned officer of Company, in connection with the opinions to be
delivered by Latham & Watkins and Hutchins, Wheeler & Dittmar, A Professional
Corporation pursuant to Sections 6.2(c) and 6.3(c) of the Agreement and Plan of
Merger dated as of December 18, 1999 by and among Parent, Merger Sub and Company
(the "Agreement") and recognizing (1) that said law firms will rely on this
certificate (this certificate hereinafter referred to in its entirety as the
"Company Tax Certificate") in delivering such opinions, and (2) that the tax
opinions may not accurately describe the consequences of the Merger if any of
the following representations are not accurate in all respects, hereby certifies
and represents on behalf of the Company and in his capacity as such officer
that, to the extent the following facts and representations relate to Company,
such representations are true, complete and correct in all respects as of the
date hereof and will be true, complete and correct in all respects at the
Effective Time and, to the extent the following representations relate to Parent
or Merger Sub, the undersigned has no reason to believe such representations are
not true, and further certifies and represents that (unless otherwise defined
herein, capitalized terms shall have the meanings ascribed to them in the
Agreement):
1. The fair market value of the Parent Common Stock and other
consideration received by each Company stockholder will be approximately
equal to the fair market value of Company Common Stock surrendered in the
Merger.
2. Following the Merger, Company will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of
its gross assets and at least 90% of the fair market value of Merger Sub's
net assets and at least 70% of the fair market value of Merger Sub's gross
assets held immediately prior to the Merger. For purposes of this
representation, amounts paid by Company or Merger Sub to Company
shareholders who receive cash or other property, amounts used by Company or
Merger Sub to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by Company will be
included as assets of Company or Merger Sub, respectively, immediately prior
to the Merger. Company has made no transfer of its assets (including any
distribution of assets with respect to, or in redemption of, Company Common
Stock) in contemplation of the Merger or during the period beginning with
the commencement of negotiations (whether formal or informal) regarding the
Merger and ending at the Effective Time other than in the ordinary course of
business.
3. To the best knowledge of the management of Company, there is no plan
or intention on the part of holders of Company Common Stock to sell,
exchange or otherwise transfer ownership (including by derivative
transactions such as an equity swap which would have the economic effect of
a transfer of ownership) to Parent or any Related Person to Parent, directly
or indirectly (including through partnerships or through third parties in
connection with a plan to so transfer ownership), of any shares of Parent
Common Stock (other than fractional shares of Parent Common Stock for which
holders of Company Common Stock receive cash in the Merger).
For purposes of this Company Tax Certificate, a Related Person with respect
to either Parent or Company shall mean:
(i) with respect to Parent, a corporation that, immediately before or
immediately after such purchase, exchange, redemption, or other acquisition,
is a member of an Affiliated Group (as defined herein) of which Parent (or
any successor or predecessor corporation) is a member;
(ii) a corporation in which Parent or Company, as the case may be (or
any successor or predecessor corporation), owns, directly or indirectly,
immediately before or immediately after such purchase, exchange, redemption,
or other acquisition at least 50% of the total combined voting power of all
classes of stock entitled to vote or at least 50% of the total value of
shares of all
- ------------------------
* Subject to changes in accordance with any development or changes in the
applicable law.
<PAGE>
classes of stock, taking into account for purposes of this clause (ii) any
stock owned by 5% or greater stockholders of Parent or Company, as the case
may be (or any successor or predecessor corporation), a proportionate share
of the stock owned by entities in which Parent or Company, as the case may
be (or any successor or predecessor corporation), owns an interest, and any
stock which may be acquired pursuant to the exercise of options; or
(iii) any entity that is treated as a partnership for Federal income tax
purposes and has as an owner Parent or a corporation described in (i) or
(ii) of this paragraph.
For purposes of this Company Tax Certificate, "Affiliated Group" shall mean
one or more chains of corporations connected through stock ownership with a
common parent corporation, but only if
(x) the common parent owns directly stock that possesses at least 80% of
the total voting power, and has a value at least equal to 80% of the total
value, of the stock in at least one of the other corporations, and
(y) stock possessing at least 80% of the total voting power, and having
a value at least equal to 80% of the total value, of the stock in each
corporation (except the common parent) is owned directly by one or more of
the other corporations.
For purposes of the preceding sentence, "stock" does not include any stock
which (a) is not entitled to vote, (b) is limited and preferred as to dividends
and does not participate in corporate growth to any significant extent, (c) has
redemption and liquidation rights which do not exceed the issue price of such
stock (except for a reasonable redemption or liquidation premium), and (d) is
not convertible into another class of stock.
4. Immediately after the Merger, Parent will be in Control of Company
and Company has no plan or intention to issue additional shares of its stock
that would result in Parent losing Control of Company. For purposes of this
Company Tax Certificate, "Control" with respect to a corporation shall mean
ownership of at least 80% of the total combined voting power of all classes
of stock entitled to vote and at least 80% of the total number of shares of
each other class of stock of the corporation.
5. All shares of Company Common Stock will be exchanged in the Merger
solely for voting stock of Parent and cash in lieu of fractional shares,
and, as a result, in the Merger, Company Common Stock representing Control
of Company will be exchanged solely for voting stock of Parent and cash in
lieu of fractional shares. For purposes of this Paragraph 5, stock of
Company exchanged for cash or other property originating with Parent, if
any, will be treated as outstanding stock of Company acquired by Parent at
the Effective Time. The payment of cash in lieu of fractional shares of
Parent Common Stock to holders of Company Common Stock is solely for the
purpose of avoiding the expense and inconvenience to Parent of issuing
fractional shares and does not represent separately bargained for
consideration. To the best knowledge of the management of Company, the total
cash consideration that will be paid in the Merger to holders of Company
Common Stock in lieu of issuing fractional shares of Parent Common Stock
will not exceed 1% of the total consideration that will be issued to the
holders of Company Common Stock in the Merger. To the best knowledge of the
management of Company, the fractional share interests of each Company
stockholder will be aggregated, and no Company stockholder is intended to
receive cash in an amount equal to or greater than the value of one full
share of Parent Common Stock.
6. Immediately prior to the Merger, Company will be carrying on
Company's historic business or using a significant portion of Company's
historic business assets in a business.
7. Prior to and in connection with the Merger no Company Common Stock
has been (i) redeemed by Company, (ii) acquired by a Related Person with
respect to Company (except that for the purposes of this Paragraph 7, clause
(i) of the definition of Related Person shall not apply)
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<PAGE>
or (iii) the subject of any extraordinary distribution (excluding regular,
normal dividends and tax-free stock dividends) by Company.
8. Company will pay its expenses, if any, incurred in connection with
the Merger; PROVIDED, HOWEVER, that the Expenses incurred in connection with
the printing, filing and mailing to stockholders of the Form S-4 and the
Proxy Statement and the solicitation of stockholder approvals shall be
shared equally by Parent and Company. To the extent any expenses related to
the Merger are to be funded directly or indirectly by a party other than the
incurring party, such expenses are solely and directly related to the
Merger, and do not include expenses incurred for investment or estate
planning advice, or expenses incurred by an individual stockholder or group
of stockholders for legal, accounting or investment advice or counsel
relating to the Merger.
9. At the time of the Merger, Company will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Company that, if
exercised or converted, would affect Parent's acquisition or retention of
Control of Company.
10. At all times during the five year period ending at the Effective
Time, the fair market value of all Company's United States real property
interests was and will have been less than 50% of the fair market value of
the total of (a) its United States real property interests, (b) its
interests in real property located outside the United States, and (c) its
other assets used or held for use in a trade or business. For purposes of
the preceding sentence, (i) United States real property interests include
all interests (other than an interest solely as a creditor) in real property
and associated personal property (such as movable walls and furnishings)
located in the United States or the Virgin Islands and interests in any
corporation (other than a controlled corporation) owning any United States
real property interests, (ii) Company is treated as owning its proportionate
share (based on the relative fair market value of its ownership interest to
all ownership interests) of the assets owned by any controlled corporation
or any partnership, trust, or estate in which Company is a partner or
beneficiary, and (iii) any such entity in turn is treated as owning its
proportionate share of the assets owned by any controlled corporation or any
partnership, trust, or estate in which the entity is a partner or
beneficiary. As used in this paragraph, "controlled corporation" means any
corporation at least 50% of the fair market value of the stock of which is
owned by Company, in the case of a first-tier subsidiary of Company, or by a
controlled corporation, in the case of a lower-tier subsidiary.
11. Company is not (i) a regulated investment company, (ii) a real
estate investment trust, or (iii) a corporation 50% or more of the value of
whose total assets are stock and securities and 80% or more of the value of
whose total assets are assets held for investment (each an "Investment
Company"). For purposes of this Paragraph 11, in making the 50% and 80%
determinations under the preceding sentence, (i) stock and securities in any
subsidiary corporation shall be disregarded and the parent corporation shall
be deemed to own its ratable share of the subsidiary's assets, and (ii) in
determining total assets there shall be excluded cash and cash items
(including receivables), government securities, and assets acquired (through
incurring indebtedness or otherwise) for purposes of avoiding Investment
Company status. A corporation shall be considered a subsidiary if the parent
owns 50% or more of the combined voting power of all classes of stock
entitled to vote or 50% or more of the total value of shares of all classes
of stock outstanding.
12. On the date of the Merger, the fair market value of the assets of
Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
13. Company is not under the jurisdiction of a court in a case under
Title 11 of the United States Code or a receivership, foreclosure or similar
proceeding in a Federal or state court.
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<PAGE>
14. None of the compensation received by any stockholder-employee of
Company will be separate consideration for, or allocable to, any of such
stockholder-employee's shares of Company Common Stock; none of the shares of
Parent Common Stock received by any stockholder-employee of Company pursuant
to the Merger will be separate consideration for, or allocable to, any
employment agreement or covenant not to compete; and the compensation paid
to any stockholder-employee of Company will be for services actually
rendered (or to be rendered) and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
15. There is no intercorporate indebtedness existing between Parent and
Company or between Merger Sub and Company that was issued, acquired or will
be settled at a discount.
16. The transactions contemplated in the Merger will occur pursuant to a
plan of reorganization agreed upon before the transaction in which the
rights of the parties are defined and will take place as described in the
Agreement, and none of the material terms and conditions of the Agreement
have been or will be waived or modified. In addition, all transfers
contemplated as part of the Merger will occur on approximately the same
date. Incident to the Merger, no stock of Parent will be placed in escrow or
will be issued later under a contingent stock arrangement and no additional
stock of Parent will be issued in the near future.
17. Each of the representations made by Company and facts concerning
Company set forth in the Agreement, the Form S-4 and the Proxy Statement are
true, accurate, and complete in all material respects as of the date of this
letter.
18. Company's corporate business reasons for consummating the Merger are
set forth in the Proxy Statement. Company is participating in the Merger for
good and valid business reasons and not for tax purposes.
19. The Agreement and the documents executed in connection therewith
represent the entire understanding of Company, Parent, and Merger Sub with
respect to the Merger.
20. To the best of Company's knowledge, dissenters rights are not
available with respect to the outstanding shares of Company Common Stock.
21. In the past two years Company has not distributed the stock or
securities of a corporation controlled by it to its shareholders or security
holders in a transaction in which no gain or loss was recognized by such
shareholders or security holders on the receipt of the stock or securities.
22. There is no arrangement between Parent and Company or between Parent
and Company shareholders under which liabilities of Company or any Company
shareholder will be assumed by Parent in the Merger and, to the best of
Company's knowledge, the Company Common Stock to be exchanged for Parent
Common Stock is not pledged or otherwise employed as collateral with respect
to liabilities.
23. Subsequent to the execution of the Agreement and prior to the
Merger, Company has not been and will not be a party to any transaction
intended to qualify as a "reorganization" within the meaning of Section
368(a) of the Code (excluding the Merger).
We understand that Hutchins, Wheeler & Dittmar, A Professional Corporation,
as counsel for Company, and Latham & Watkins, as counsel for Parent and Merger
Sub, will rely on this Certificate in rendering their respective opinions as to
material Federal income tax consequences of the Merger, and we will promptly and
timely inform Hutchins, Wheeler & Dittmar, A Professional Corporation, and
Latham & Watkins in writing if, after signing this Certificate, we have reason
to believe that any of the facts described herein or any of the representations
made in this Certificate are untrue, incorrect, or incomplete in any respect. We
understand further that such respective opinions of Hutchins, Wheeler & Dittmar,
A Professional Corporation, and Latham & Watkins will be subject to certain
limitations and qualifications, including that such opinions should not be
relied upon if any of the representations made in this Certificate are not
accurate and complete in all material respects at all relevant times.
COMPANY
Dated:______________________________ By:_______________________________________
4
<PAGE>
EXHIBIT B
PARENT
AND
MERGER SUB
OFFICER'S CERTIFICATE*
The undersigned officers of Parent and Merger Sub, in connection with the
opinions to be delivered by Latham & Watkins and Hutchins, Wheeler & Dittmar, A
Professional Corporation pursuant to Sections 6.2(c) and 6.3(c) of the Agreement
and Plan of Merger dated as of December 18, 1999 by and among Parent, Merger Sub
and Company (the "Agreement") and recognizing (1) that said law firms will rely
on this certificate (this certificate hereinafter referred to as the "Parent Tax
Certificate") in delivering such opinions, and (2) that the tax opinions may not
accurately describe the consequences of the Merger if any of the following
representations are not accurate in all respects, hereby certify and represent
on behalf of Parent and Merger Sub, respectively, and in their capacity as such
officers that to the extent the following facts and representations relate to
Parent or Merger Sub, such representations are true, complete and correct in all
respects as of the date hereof and will be true, complete and correct in all
respects at the Effective Time and, to the extent the following representations
relate to Company, the undersigned have no reason to believe such
representations are not true, and further certify and represent that (unless
otherwise defined herein, capitalized terms shall have the meanings ascribed to
them in the Agreement):
1. The fair market value of the Parent Common Stock and other
consideration received by each Company stockholder will be approximately
equal to the fair market value of Company Common Stock surrendered in the
Merger.
2. Following the Merger, Company will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of
its gross assets and at least 90% of the fair market value of Merger Sub's
net assets and at least 70% of the fair market value of Merger Sub's gross
assets held immediately prior to the Merger. For purposes of this
representation, amounts paid by Company or Merger Sub to Company
shareholders who receive cash or other property, amounts used by Company or
Merger Sub to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by Company will be
included as assets of Company or Merger Sub, respectively, immediately prior
to the Merger.
3. Prior to and at the Effective Time of the Merger, Merger Sub will be
a wholly and directly owned subsidiary of Parent, and therefore Parent will
be in Control of Merger Sub. For purposes of this Parent Tax Certificate,
"Control" with respect to a corporation shall mean ownership of at least 80%
of the total combined voting power of all classes of stock entitled to vote
and at least 80% of the total number of shares of each other class of stock
of the corporation. Merger Sub has been newly formed solely in order to
consummate the Merger, and at no time has or will Merger Sub own material
assets, have liabilities or conduct any business activities or other
operations of any kind other than the issuance of its stock to Parent prior
to the Effective Time.
4. Parent has no plan or intention to cause Company to issue additional
shares of its stock or take any action that would result in Parent losing
Control of Company.
5. Other than cash paid in lieu of fractional shares, neither Parent
nor any Parent Related Person has any current plan or intention to and
Parent will not, and will cause all Parent Related Persons and any person
acting as an agent of Parent not to, redeem, purchase, exchange or otherwise
acquire (including by derivative transactions such as an equity swap which
would have the economic effect of an acquisition), directly or indirectly
(including through partnerships or through third parties in connection with
a plan to so acquire), shares of Parent Stock to be received by Company
stockholders in connection with the Merger. Neither Parent nor any Parent
Related Person will acquire Company Common Stock in connection with the
Merger for any consideration other than Parent Stock (other than cash in
lieu of fractional shares). Parent will not
- ------------------------
* Subject to changes in accordance with any development or changes in the
applicable law.
<PAGE>
cause any extraordinary distribution (excluding regular, normal dividends
and tax-free stock dividends) with respect to Company Common Stock to occur
and is not aware of any extraordinary distribution with respect to Company
Common Stock that has occurred or is intended, in each case in connection
with the Merger. Parent also has not participated, and in connection with
the Merger, will not participate, in a redemption or acquisition of Company
Common Stock made by Company or a person related to Company. Parent is not
aware of any plan of Company (or a person related to Company) to effect a
redemption or acquisition of Company Common Stock.
For purposes of this Parent Tax Certificate, "Parent Related Person" means:
(i) a corporation that, immediately before or immediately after such
purchase, exchange, redemption, or other acquisition, is a member of an
Affiliated Group (as defined herein) of which Parent (or any successor or
predecessor corporation) is a member, or
(ii) a corporation in which Parent (or any successor or predecessor
corporation) owns, directly or indirectly, immediately before or immediately
after such purchase, exchange, redemption, or other acquisition at least 50%
of the total combined voting power of all classes of stock entitled to vote
or at least 50% of the total value of shares of all classes of stock, taking
into account for purposes of this clause (ii) any stock owned by 5% or
greater stockholders of Parent (or any successor or predecessor
corporation), a proportionate share of the stock owned by entities in which
Parent (or any successor or predecessor corporation) owns an interest, and
any stock which may be acquired pursuant to the exercise of options; or
(iii) any entity that is treated as a partnership for Federal income tax
purposes and has as an owner Parent or a corporation described in (i) or
(ii) of this paragraph.
For purposes of this Parent Tax Certificate, "Affiliated Group" shall mean
one or more chains of corporations connected through stock ownership with a
common parent corporation, but only if
(x) the common parent owns directly stock that possesses at least 80% of
the total voting power, and has a value at least equal to 80% of the total
value, of the stock in at least one of the other corporations, and
(y) stock possessing at least 80% of the total voting power, and having
a value at least equal to 80% of the total value, of the stock in each
corporation (except the common parent) is owned directly by one or more of
the other corporations.
For purposes of the preceding sentence, "stock" does not include any stock
which (a) is not entitled to vote, (b) is limited and preferred as to dividends
and does not participate in corporate growth to any significant extent, (c) has
redemption and liquidation rights which do not exceed the issue price of such
stock (except for a reasonable redemption or liquidation premium), and (d) is
not convertible into another class of stock.
6. Parent has no plan or intention (i) to liquidate Company, to merge
Company with and into another corporation, or to sell, exchange, transfer or
otherwise dispose of the stock of Company, or (ii) to cause Company to sell,
exchange, transfer or otherwise dispose of any of its assets or any of the
assets acquired from Merger Sub in the Merger, except, in each case, for (a)
dispositions made in the ordinary course of business, (b) transfers or
successive transfers of stock or assets of Company if in each case the
transferor is in Control of the transferee, or (c) arm's length dispositions
to an unrelated person other than dispositions which would result in Parent
ceasing to use a significant portion of Company's historic business assets
in a business.
7. In the Merger, Merger Sub will have no liabilities assumed by
Company and will not transfer to Company any assets subject to liabilities.
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8. Following the Merger, Parent will cause Company to continue
Company's historic business or use a significant portion of Company's
historic business assets in a business. For this purpose, Parent will be
treated as holding all of the businesses and assets of its Qualified Group
and Parent will be treated as owning its proportionate share of Company's
business assets used in a business of any partnership in which members of
Parent's Qualified Group own an interest representing a significant interest
in that partnership business or in which one or more members of Parent's
Qualified Group have active and substantial management functions as a
partner with respect to that partnership business. A Qualified Group is one
or more chains of corporations connected through stock ownership with Parent
but only if Parent is in Control of at least one other corporation and each
of the corporations (other than Parent) is Controlled directly by one of the
other corporations.
9. Parent and Merger Sub will pay their respective expenses, if any,
incurred in connection with the Merger, PROVIDED, HOWEVER, that the Expenses
incurred in connection with the printing, filing and mailing to stockholders
of the Form S-4 and the Proxy Statement and the solicitation of stockholder
approvals shall be shared equally by Parent and Company. To the extent any
expenses related to the Merger are to be funded directly or indirectly by a
party other than the incurring party, such expenses are solely and directly
related to the Merger, and do not include expenses incurred for investment
or estate planning advice, or expenses incurred by an individual stockholder
or group of stockholders for legal, accounting or investment advice or
counsel relating to the Merger. Neither Parent nor Merger Sub has paid or
will pay, directly or indirectly, any expenses (including transfer taxes)
incurred or to be incurred by any holder of Company Common Stock in
connection with or as part of the Merger or any related transactions.
Neither Parent nor Merger Sub has agreed to assume, nor will it directly or
indirectly assume, any other expense or other liability, whether fixed or
contingent, of any holder of Company Common Stock.
10. There is no intercorporate indebtedness existing between Parent and
Company or between Merger Sub and Company that was issued, acquired, or will
be settled at a discount.
11. All shares of Company Common Stock will be exchanged in the Merger
for voting stock of Parent and cash in lieu of fractional shares, and, as a
result, in the Merger, shares of Company Common Stock representing Control
of Company will be exchanged solely for voting stock of Parent and cash in
lieu of fractional shares. For purposes of this Paragraph 11, if any stock
of Company is exchanged for cash or other property originating with Parent,
such stock will be treated as outstanding stock of Company acquired by
Parent at the Effective Time. The payment of cash in lieu of fractional
shares of Parent Common Stock to holders of Company Common Stock is solely
for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained for
consideration. The fractional share interests of each holder of Company
Common Stock will be aggregated and no holder of Company Common Stock will
receive cash in an amount equal to or greater than the value of one full
share of Parent Common Stock. To the best knowledge of the management of
Parent, the total cash consideration that will be paid in the Merger to
holders of Company Common Stock in lieu of issuing fractional shares of
Parent Stock will not exceed 1% of the total consideration that will be
issued to the holders of Company Common Stock in the Merger.
12. Neither Parent nor any Parent Related Person will own at the
Effective Time nor has Parent or any Parent Related Person owned during the
five year period ending at the Effective Time any class of stock of Company
or any securities of Company or any instrument giving the holder the right
to acquire any such stock or securities.
13. Neither Parent nor Merger Sub is (i) a regulated investment company,
(ii) a real estate investment trust, or (iii) a corporation 50%, or more of
the value of whose assets are stock and securities and 80% or more of the
value of whose total assets are assets held for investment (each,
3
<PAGE>
an "Investment Company"). For purposes of this Paragraph 13, in making the
50% and 80% determinations under the preceding sentence, (i) stock and
securities in any subsidiary corporation shall be disregarded and the parent
corporation shall be deemed to own its ratable share of the subsidiary's
assets, and (ii) in determining total assets there shall be excluded cash
and cash items (including receivables), government securities, and assets
acquired (through incurring indebtedness or otherwise) for purposes of
avoiding Investment Company status. A corporation shall be considered a
subsidiary if the parent owns 50% or more of the combined voting power of
all classes of stock entitled to vote or 50% or more of the total value of
shares of all classes of stock outstanding.
14. On the date of the Merger, the fair market value of the assets of
Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
15. None of the compensation received by any stockholder-employee of
Company will be separate consideration for, or allocable to, any of such
stockholder-employee's shares of Company Common Stock; none of the shares of
Parent Common Stock received by any stockholder-employee of Company pursuant
to the Merger will be separate consideration for, or allocable to, any
employment agreement or covenant not to compete; and the compensation paid
to any stockholder-employee of Company will be for services actually
rendered (or to be rendered) and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
16. Parent will acquire Company Common Stock solely in exchange for
Parent voting stock and cash in lieu of fractional shares. For purposes of
these representations, Company Common Stock redeemed for cash or other
property furnished by Parent will be considered as acquired by Parent.
Further, none of the Company Common Stock will be subject to any
liabilities.
17. The transactions contemplated in the Merger will occur pursuant to a
plan of reorganization agreed upon before the transaction in which the
rights of the parties are defined and will take place as described in the
Agreement, and none of the material terms and conditions of the Agreement
have been or will be waived or modified. In addition, all transfers
contemplated as part of the Merger will occur on approximately the same
date. Incident to the Merger, no stock of Parent will be placed in escrow or
will be issued later under a contingent stock arrangement and no additional
stock of Parent will be issued in the near future.
18. Each of the representations made by Parent and Merger Sub and facts
concerning Parent set forth in the Agreement, the Form S-4 and the Proxy
Statement are true, accurate, and complete in all material respects as of
the date of this letter.
19. Parent's corporate business reasons for consummating the Merger are
set forth in the Proxy Statement. Parent is participating in the Merger for
good and valid business reasons and not for tax purposes.
20. In the past two years Parent has not distributed the stock or
securities of a corporation controlled by it to its shareholders or security
holders in a transaction in which no gain or loss was recognized by such
shareholders or security holders on the receipt of the stock or securities.
21. The Company shareholders receiving Parent Common Stock in the Merger
will not receive any rights in connection with the Parent Common Stock other
than the Parent Rights, which rights are and at the Effective Time will be
substantially similar to the rights described in Revenue Ruling 90-11; in
particular such rights are and will be not separately tradable, contingent,
non-exercisable, and subject to redemption if they become exercisable and
have no ascertainable fair market value, and will not be separately tradable
or exercisable until there is a tender offer for, or actual purchase of,
Parent Common Stock. The Parent Rights were adopted in a plan the principal
purpose of which was to establish a mechanism by which Parent could, in the
future,
4
<PAGE>
provide its shareholders with rights to purchase stock at substantially less
than fair market value as a means of responding to unsolicited offers to
acquire Parent.
22. The Agreement and the documents executed in connection therewith
represent the entire understanding of Company, Parent, and Merger Sub with
respect to the Merger.
23. To the best of Parent's knowledge, dissenters rights are not
available with respect to the outstanding shares of Company Common Stock.
24. No stock of Merger Sub will be issued in the Merger.
25. Neither Parent nor Merger Sub is under the jurisdiction of a court
in a case under Title 11 of the United States Code or a receivership,
foreclosure or similar proceeding in a Federal or state court.
26. There is no arrangement between Parent and Company or between Parent
and Company shareholders under which liabilities of Company or any Company
shareholder will be assumed by Parent in the Merger, and, to the best of
Parent's knowledge, the Company Common Stock to be exchanged for Parent
Common Stock is not pledged or otherwise employed as collateral with respect
to liabilities.
We understand that Latham & Watkins, as counsel for Parent and Merger Sub,
and Hutchins, Wheeler & Dittmar, A Professional Corporation, as counsel for
Company, will rely on this Certificate in rendering their respective opinions as
to material Federal income tax consequences of the Merger, and we will promptly
and timely inform Latham & Watkins and Hutchins, Wheeler & Dittmar, A
Professional Corporation, in writing if, after signing this Certificate, we have
reason to believe that any of the facts described herein or any of the
representations made in this Certificate are untrue, incorrect, or incomplete in
any respect. We understand further that such respective opinions Latham &
Watkins and Hutchins, Wheeler & Dittmar, A Professional Corporation, will be
subject to certain limitations and qualifications, including that such opinions
should not be relied upon if any of the representations made in this Certificate
are not accurate and complete in all material respects at all relevant times.
<TABLE>
<S> <C>
Parent
Dated: -------------------------------------- By: ----------------------------------------
Merger Sub
Dated: -------------------------------------- By: ----------------------------------------
</TABLE>
5
<PAGE>
APPENDIX B
December 18, 1999
Board of Directors
Maker Communications, Inc.
73 Mount Wayte Avenue
Framingham, MA 01702
Gentlemen:
Deutsche Bank Securities Inc. ("Deutsche Bank") has acted as financial
advisor to Maker Communications, Inc. ("Maker") in connection with the proposed
merger of Maker and Conexant Systems, Inc. ("Conexant") pursuant to the
Agreement and Plan of Merger, dated as of December 18, 1999, among Maker,
Conexant and Maker Acquisition Corp., a wholly owned subsidiary of Conexant
("Conexant Sub") (the "Merger Agreement"), which provides, among other things,
for the merger of Conexant Sub with and into Maker (the "Transaction"), as a
result of which Maker will become a wholly owned subsidiary of Conexant. As set
forth more fully in the Merger Agreement, as a result of the Transaction, each
share of the Common Stock, par value $.01 per share, of Maker ("Maker Common
Stock") not owned directly or indirectly by Maker or Conexant will be converted
into the right to receive 0.66 shares (the "Exchange Ratio") of Common Stock,
par value $.01 per share, of Conexant ("Conexant Common Stock"). Simultaneously
with the merger, each outstanding and unexercised option to purchase a share of
Maker Common Stock will be converted at the Exchange Ratio into an option to
purchase Conexant Common Stock. The terms and conditions of the Transaction are
more fully set forth in the Merger Agreement.
You have requested Deutsche Bank's opinion, as investment bankers, as to the
fairness, from a financial point of view, to Maker of the Exchange Ratio.
In connection with Deutsche Bank's role as financial advisor to Maker, and
in arriving at its opinion, Deutsche Bank has reviewed certain publicly
available financial and other information concerning Conexant and Maker and
certain internal analyses and other information furnished to it by Conexant and
Maker. Deutsche Bank has also held discussions with members of the senior
managements of Conexant and Maker regarding the businesses and prospects of
their respective companies and the joint prospects of a combined company. In
addition, Deutsche Bank has (i) reviewed the reported prices and trading
activity for Conexant Common Stock and Maker Common Stock, (ii) compared certain
financial and stock market information for Conexant and Maker with similar
information for certain other companies whose securities are publicly traded,
(iii) reviewed the financial terms of certain recent business combinations which
it deemed comparable in whole or in part, (iv) reviewed the terms of the Merger
Agreement and certain related documents, and (v) performed such other studies
and analyses and considered such other factors as it deemed appropriate.
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning Conexant or Maker, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank has assumed and relied upon the accuracy and completeness
of all such information and Deutsche Bank has not conducted a physical
inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
Conexant or Maker. With respect to the financial forecasts and projections,
including the analyses and forecasts of certain cost savings, operating
efficiencies, revenue effects and financial synergies expected by Maker and
Conexant to be achieved as a result of the Transaction (collectively, the
"Synergies"), made available to Deutsche Bank and used in its analyses, Deutsche
Bank has assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of Conexant
or Maker, as the case may be, as to the matters covered thereby. In rendering
its opinion, Deutsche Bank expresses no view as to the reasonableness of such
forecasts and
<PAGE>
Maker Communications, Inc.
December 18, 1999
Page 2
projections, including the Synergies, or the assumptions on which they are
based. Deutsche Bank's opinion is necessarily based upon economic, market and
other conditions as in effect on, and the information made available to it as
of, the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of
Maker, Conexant and Conexant Sub contained in the Merger Agreement are true and
correct, Maker, Conexant and Conexant Sub will each perform all of the covenants
and agreements to be performed by it under the Merger Agreement and all
conditions to the obligations of each of Maker, Conexant and Conexant Sub to
consummate the Transaction will be satisfied without any waiver thereof.
Deutsche Bank has also assumed that all material governmental, regulatory or
other approvals and consents required in connection with the consummation of the
Transaction will be obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any amendments,
modifications or waivers to any agreements, instruments or orders to which
either Maker or Conexant is a party or is subject or by which it is bound, no
limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect on Maker
or Conexant or materially reduce the contemplated benefits of the Transaction to
Maker. In addition, you have informed Deutsche Bank, and accordingly for
purposes of rendering its opinion Deutsche Bank has assumed, that the
Transaction will be tax-free to each of Maker and Conexant and their respective
stockholders and that the Transaction will be accounted for as a purchase.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Maker and is not a recommendation to the stockholders of Maker to
approve the Transaction. This opinion is limited to the fairness, from a
financial point of view, to Maker of the Exchange Ratio, and Deutsche Bank
expresses no opinion as to the merits of the underlying decision by Maker to
engage in the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to
Maker in connection with the Transaction, a substantial portion of which is
contingent upon consummation of the Transaction. We are an affiliate of Deutsche
Bank AG (together with its affiliates, the "DB Group"). One or more members of
the DB Group have, from time to time, provided investment banking and other
financial services to Maker or its affiliates for which it has received
compensation, including acting as an underwriter for its initial public
offering. In the ordinary course of business, members of the DB Group may
actively trade in the securities and other instruments and obligations of Maker
and Conexant for their own accounts and for the accounts of their customers.
Accordingly, the DB Group may at any time hold a long or short position in such
securities, instruments and obligations.
Based upon and subject to the foregoing, it is Deutsche Bank's opinion as
investment bankers that the Exchange Ratio is fair, from a financial point of
view, to Maker.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
B-2
<PAGE>
APPENDIX C
RESTATED CERTIFICATE OF INCORPORATION
OF
CONEXANT SYSTEMS, INC.
FIRST: The name of the Corporation is
CONEXANT SYSTEMS, INC.
SECOND: The Corporation's registered office in the State of Delaware is
located at 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name and address of its registered agent is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or purposes to be transacted,
promoted or carried on, are: To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 525,000,000, of which
25,000,000 shares without par value are to be of a class designated Preferred
Stock and 500,000,000 shares of the par value of $1 each are to be of a class
designated Common Stock.
In this Article Fourth, any reference to a section or paragraph, without
further attribution, within a provision relating to a particular class of stock
is intended to refer solely to the specified section or paragraph of the other
provisions relating to the same class of stock.
COMMON STOCK
The Common Stock shall have the following voting powers, designations,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations or restrictions thereof:
1. DIVIDENDS. Whenever the full dividends upon any outstanding Preferred
Stock for all past dividend periods shall have been paid and the full dividends
thereon for the then current respective dividend periods shall have been paid,
or declared and a sum sufficient for the respective payments thereof set apart,
the holders of shares of the Common Stock shall be entitled to receive such
dividends and distributions in equal amounts per share, payable in cash or
otherwise, as may be declared thereon by the Board of Directors from time to
time out of assets or funds of the Corporation legally available therefor.
2. RIGHTS ON LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, after the
payment or setting apart for payment to the holders of any outstanding Preferred
Stock of the full preferential amounts to which such holders are entitled as
herein provided or referred to, all of the remaining assets of the Corporation
shall belong to and be distributable in equal amounts per share to the holders
of the Common Stock. For purposes of this paragraph 2, a consolidation or merger
of the Corporation with any other corporation, or the sale, transfer or lease of
all or substantially all its assets shall not constitute or be deemed a
liquidation, dissolution or winding-up of the Corporation.
3. VOTING. Except as otherwise provided by the laws of the State of
Delaware or by this Article Fourth, each share of Common Stock shall entitle the
holder thereof to one vote.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to provide for the issuance of
shares of Preferred Stock in series and, by
<PAGE>
filing a certificate pursuant to the applicable law of the State of Delaware
(hereinafter referred to as a "Preferred Stock Designation"), to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
(a) the designation of the series, which may be by distinguishing number,
letter or title;
(b) the number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the
Preferred Stock Designation) increase or decrease (but not below the
number of shares thereof then outstanding);
(c) whether dividends, if any, shall be cumulative or noncumulative and
the dividend rate of the series;
(d) the dates at which dividends, if any, shall be payable;
(e) the redemption rights and price or prices, if any, for shares of the
series;
(f) the terms and amount of any sinking fund provided for the purchase or
redemption of shares of the series;
(g) the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(h) whether the shares of the series shall be convertible into shares of
any other class or series, or any other security, of the Corporation or
any other corporation, and, if so, the specification of such other class
or series or such other security, the conversion price or prices or rate
or rates, any adjustments thereof, the date or dates as of which such
shares shall be convertible and all other terms and conditions upon which
such conversion may be made;
(i) restrictions on the issuance of shares of the same series or of any
other class or series; and
(j) the voting rights, if any, of the holders of shares of the series.
Except as may be provided in this Certificate of Incorporation or in a
Preferred Stock Designation, the Common Stock shall have the exclusive right to
vote for the election of directors and for all other purposes, and holders of
Preferred Stock shall not be entitled to receive notice of any meeting of
shareowners at which they are not entitled to vote. The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such holders is required pursuant to any Preferred Stock Designation.
The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation shall have
notice thereof, except as expressly provided by applicable law.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. A series of Preferred Stock, without par value,
is hereby created and shall be designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be 1,500,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
PROVIDED, that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the
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number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
2. DIVIDENDS AND DISTRIBUTIONS.
2.1. Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock and of
any other junior stock of the Corporation, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the second Monday of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
2.2. The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph 2.1 immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
2.3. Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of
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shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall
have the following voting rights:
3.1. Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the shareowners of the Corporation. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
3.2. Except as otherwise provided herein, in any other Preferred Stock
Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of shareowners of the Corporation.
3.3. Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
4. CERTAIN RESTRICTIONS.
4.1. Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in paragraph 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(a) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(b) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(c) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
or
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<PAGE>
(d) redeem or purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
4.2. The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subparagraph (c) of paragraph
4.1, purchase or otherwise acquire such shares at such time and in such manner.
5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein or in any other
Preferred Stock Designation creating a series of Preferred Stock or any similar
stock or as otherwise required by law.
6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(i) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common Stock, or
(ii) to the holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (i) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common
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Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
8. NO REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemable.
9. RANK. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.
10. AMENDMENT. The Certificate of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the shareowners of the Corporation shall not
be subject to the payment of corporate debts to any extent whatever.
SEVENTH: Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the number of
directors of the Corporation shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority of the whole
Board. A director need not be a shareowner. The election of directors of the
Corporation need not be by ballot unless the by-laws so require.
The directors, other than those who may be elected by the holders of any
series of Preferred Stock or any other series or class of stock, as provided
herein or in any Preferred Stock Designation, shall be divided into three
classes, as nearly equal in number as possible. One class of directors shall be
initially elected for a term expiring at the annual meeting of shareowners to be
held in 2000, another class shall be initially elected for a term expiring at
the annual meeting of shareowners to be held in 2001, and another class shall be
initially elected for a term expiring at the annual meeting of shareowners to be
held in 2002. Members of each class shall hold office until their successors are
duly elected and qualified. At each annual meeting of the shareowners of the
Corporation, commencing with the 2000 annual meeting, the successors of the
class of directors whose term expires at that meeting shall be elected by a
plurality vote of all votes cast for the election of directors at such meeting
to hold office for a term expiring at the annual meeting of shareowners held in
the third year following the year of their election.
Subject to the rights of the holders of any series of Preferred Stock, and
unless the Board of Directors otherwise determines, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of shareowners at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the whole Board of Directors shall shorten the term of
any incumbent director.
Subject to the rights of the holders of any series of Preferred Stock or any
other series or class of stock, as provided herein or in any Preferred Stock
Designation, to elect additional directors under specific circumstances, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80 percent of the voting power
of the then outstanding capital stock of the Corporation (the "Capital Stock")
entitled to vote generally in the election of directors (the "Voting Stock"),
voting together as a single class.
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No director of the Corporation shall be liable to the Corporation or its
shareowners for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareowners, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. This paragraph
shall not eliminate or limit the liability of a director for any act or omission
occurring prior to the effective date of its adoption. No repeal or modification
of this paragraph, directly or by adoption of an inconsistent provision of this
Certificate of Incorporation, by the shareowners of the Corporation shall be
effective with respect to any cause of action, suit, claim or other matter that,
but for this paragraph, would accrue or arise prior to such repeal or
modification.
EIGHTH: Unless otherwise determined by the Board of Directors, no holder of
stock of the Corporation shall, as such holder, have any right to purchase or
subscribe for any stock of any class which the Corporation may issue or sell,
whether or not exchangeable for any stock of the Corporation of any class or
classes and whether out of unissued shares authorized by the Certificate of
Incorporation of the Corporation as originally filed or by any amendment thereof
or out of shares of stock of the Corporation acquired by it after the issue
thereof.
NINTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its shareowners or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or shareowner thereof, or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of section 291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the shareowners or class of shareowners of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the shareowners or class of
shareowners of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the shareowners or class of shareowners, of this Corporation, as the case
may be, and also on this Corporation.
TENTH:
1. AMENDMENT OF CERTIFICATE OF INCORPORATION. From time to time any of the
provisions of the Certificate of Incorporation may be amended, altered or
repealed, and other provisions authorized by the statutes of the State of
Delaware at the time in force may be added or inserted in the manner at the time
prescribed by said statutes, and all rights at any time conferred upon the
shareowners of the Corporation by its Certificate of Incorporation are granted
subject to the provisions of this Article Tenth. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend or
repeal Article Seventh, this Article Tenth or Article Twelfth or adopt any
provision inconsistent with any of the foregoing articles.
2. BY-LAWS. The Board of Directors is expressly authorized to make, alter,
amend and repeal the by-laws of the Corporation, in any manner not inconsistent
with the laws of the State of Delaware or of the Certificate of Incorporation of
the Corporation, subject to the power of the holders of the Capital Stock to
alter or repeal the by-laws made by the Board of Directors; PROVIDED, that any
such
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amendment or repeal by shareowners shall require the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding Voting
Stock, voting together as a single class.
ELEVENTH: The shareowner vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this Article Eleventh.
1. HIGHER VOTE FOR BUSINESS COMBINATIONS. In addition to any affirmative
vote required by law, this Certificate of Incorporation or the by-laws of the
Corporation, and except as otherwise expressly provided in Section 2 of this
Article Eleventh, a Business Combination shall not be consummated without the
affirmative vote of the holders of at least 80% of the voting power of the then
outstanding shares of the Voting Stock, voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be specified,
by law or in any agreement with any national securities exchange or otherwise.
2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of Section 1 of this
Article Eleventh shall not be applicable to a Business Combination if the
conditions specified in either of the following paragraphs A or B are met.
A. Approval by Continuing Directors. The Business Combination shall have
been approved by at least two-thirds of the Continuing Directors (as
hereinafter defined), whether such approval is made prior to or subsequent
to the date on which the Interested Shareowner (as hereinafter defined)
became an Interested Shareowner (the "Determination Date").
B. Price and Procedure Requirements. Each of the seven conditions
specified in the following subparagraphs (i) through (vii) shall have been
met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination (the "Consummation Date") of any consideration other than
cash to be received per share by holders of Common Stock in such Business
Combination shall be an amount at least equal to the higher amount
determined under clauses (a) and (b) below (the requirements of this
paragraph B(i) shall be applicable with respect to all shares of Common
Stock outstanding, whether or not the Interested Shareowner has
previously acquired any shares of the Common Stock): (a) the highest per
share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested
Shareowner for any shares of Common Stock acquired beneficially by it
(1) within the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Shareowner, whichever is higher, plus interest compounded
annually from the Determination Date through the Consummation Date at the
prime rate of interest of Morgan Guaranty Trust Company of New York (or
of such other major bank headquartered in New York City selected by at
least two-thirds of the Continuing Directors) from time to time in effect
in New York City, less the aggregate amount of any cash dividends paid,
and the Fair Market Value of any dividends paid in other than cash, per
share of Common Stock from the Determination Date through the
Consummation Date in an amount up to but not exceeding the amount of such
interest payable per share of Common Stock; and (b) the Fair Market Value
per share of Common Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of any consideration other than cash to be received
per share by holders of shares of any class or series of outstanding
Capital Stock, other than the Common Stock, in such Business Combination
shall be an amount at least equal to the highest amount determined under
clauses (a), (b) and (c) below (the requirements of this paragraph
B(ii) shall be applicable with respect to all shares of every class or
series of outstanding
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Capital Stock, other than the Common Stock, whether or not the Interested
Shareowner has previously acquired any shares of a particular class or
series of Capital Stock):
(a) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or
on behalf of the Interested Shareowner for any shares of such class
or series of Capital Stock acquired beneficially by it (1) within the
two-year period immediately prior to the Announcement Date or (2) in
the transaction in which it became an Interested Shareowner,
whichever is higher, plus interest compounded annually from the
Determination Date through the Consummation Date at the prime rate of
interest of Morgan Guaranty Trust Company of New York (or of such
other major bank headquartered in New York City selected by at least
two-thirds of the Continuing Directors) from time to time in effect
in New York City, less the aggregate amount of any cash dividends
paid, and the Fair Market Value of any dividends paid in other than
cash, per share of such class or series of Capital Stock from the
Determination Date through the Consummation Date in an amount up to
but not exceeding the amount of such interest payable per share of
such class or series of Capital Stock; and
(b) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(c) the highest preferential amount per share to which the
holders of shares of such class or series of Capital Stock would be
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation,
regardless of whether the Business Combination to be consummated
constitutes such an event.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock (including Common Stock)
shall be in cash or in the same form as previously has been paid by or on
behalf of the Interested Shareowner in its direct or indirect acquisition
of beneficial ownership of shares of such class or series of Capital
Stock. If the consideration so paid for shares of any class or series of
Capital Stock varied as to form, the form of consideration for such class
or series of Capital Stock shall be either cash or the form used to
acquire beneficial ownership of the largest number of shares of such
class or series of Capital Stock previously acquired by the Interested
Shareowner.
(iv) After such Interested Shareowner has become an Interested
Shareowner and prior to the consummation of such Business Combination,
such Interested Shareowner shall not have become the beneficial owner of
any additional shares of Capital Stock except as part of the transaction
that results in such Interested Shareowner becoming an Interested
Shareowner and except in a transaction that, after giving effect thereto,
would not result in any increase in the Interested Shareowner's
percentage beneficial ownership of any class or series of Capital Stock;
and, except as approved by at least two-thirds of the Continuing
Directors: (a) there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding
Capital Stock; (b) there shall have been no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock); and
(c) there shall have been an increase in the annual rate of dividends
paid on the Common Stock as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or
any similar transaction which has the effect of reducing the number of
outstanding shares of Common Stock.
(v) After such Interested Shareowner has become an Interested
Shareowner, such Interested Shareowner shall not have received the
benefit, directly or indirectly (except
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proportionately as a shareowner of the Corporation), of any loans,
advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all shareowners of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to
such Act or subsequent provisions). The proxy or information statement
shall contain on the first page thereof, in a prominent place, any
statement as to the advisability of the Business Combination that the
Continuing Directors, or any of them, may choose to make and, if deemed
advisable by at least two-thirds of the Continuing Directors, the opinion
of an investment banking firm selected for and on behalf of the
Corporation by at least two-thirds of the Continuing Directors as to the
fairness of the terms of the Business Combination from a financial point
of view to the holders of the outstanding shares of Capital Stock other
than the Interested Shareowner and its Affiliates or Associates (as
hereinafter defined).
(vii) Such Interested Shareowner shall not have made any material
change in the Corporation's business or equity capital structure without
the approval of at least two-thirds of the Continuing Directors.
Any Business Combination to which Section 1 of this Article Eleventh shall
not apply by reason of this Section 2 shall require only such affirmative vote
as is required by law, any other provision of this Certificate of Incorporation,
the by-laws of the Corporation or any agreement with any national securities
exchange.
3. CERTAIN DEFINITIONS. For the purposes of this Article Eleventh:
A. A "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with (i) any Interested Shareowner or (ii) any
other corporation (whether or not itself an Interested Shareowner) which
is, or after such merger or consolidation would be, an Affiliate or
Associate of an Interested Shareowner;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Shareowner or any Affiliate or Associate of any
Interested Shareowner involving any assets or securities of the
Corporation, any Subsidiary or any Interested Shareowner or any
Affiliate or Associate of any Interested Shareowner having an aggregate
Fair Market Value of $25,000,000 or more; or
(iii) the adoption of any plan or proposal for the liquidation or dissolution
of the Corporation proposed by or on behalf of any Interested
Shareowner or any Affiliate or Associate of any Interested Shareowner;
or
(iv) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Shareowner) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Shareowner or any Affiliate or Associate of any Interested
Shareowner; or
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(v) any agreement, contract, arrangement or other understanding providing
for any one or more of the actions specified in clauses (i) through
(iv) above.
B. A "person" shall mean any individual, firm, corporation or other entity
and shall include any group composed of any person and any other person with
whom such person or any Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of Capital Stock.
C. "Interested Shareowner" shall mean any person (other than the Corporation
or any Subsidiary and other than any profit-sharing, employee stock ownership or
other employee benefit plan of the Corporation, any Subsidiary or Rockwell
International Corporation or any trustee of or fiduciary with respect to any
such plan when acting in such capacity) who or which:
(i) is the beneficial owner of Voting Stock having 10% or more of the votes
entitled to be cast by the holders of all then outstanding shares of
Voting Stock; or
(ii) is an Affiliate or Associate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock having 10% or more of the votes
entitled to be cast by the holders of all then outstanding shares of
Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Shareowner, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of 1933;
PROVIDED, HOWEVER, that Rockwell International Corporation shall not be an
Interested Shareowner as a result of its ownership of Capital Stock of the
Corporation prior to the distribution of the shares of Capital Stock of the
Corporation to the holders of capital stock of Rockwell International
Corporation (the "Distribution").
D. A person shall be a "beneficial owner" of any Capital Stock:
(i) which such person or any Affiliate or Associate of such person
beneficially owns, directly or indirectly; or
(ii) which such person or any Affiliate or Associate of such person has,
directly or indirectly, (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other
person with which such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares of Capital
Stock.
E. For the purposes of determining whether a person is an Interested
Shareowner pursuant to paragraph C of this Section 3, the number of shares of
Capital Stock deemed to be outstanding shall include shares deemed owned by the
Interested Shareowner through application of paragraph D of this Section 3 but
shall not include any other shares of Capital Stock that may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
F. "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in
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effect on November 19, 1998 (the term "registrant" in such Rule 12b-2 meaning in
this case the Corporation).
G. "Subsidiary" means any corporation of which a majority of any class of
equity security is beneficially owned by the Corporation; provided, however,
that for the purposes of the definition of Interested Shareowner set forth in
paragraph C of this Section 3, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security is beneficially
owned by the Corporation.
H. "Continuing Director" means any member of the Board of Directors of the
Corporation (the "Board") who is not an Affiliate or Associate or representative
of the Interested Shareowner and was a member of the Board prior to the time
that the Interested Shareowner became an Interested Shareowner, and any
successor of a Continuing Director who is not an Affiliate or Associate or
representative of the Interested Shareowner and is recommended or elected to
succeed a Continuing Director by at least two-thirds of the Continuing Directors
then members of the Board.
I. "Fair Market Value" means: (i) in the case of cash, the amount of such
cash; (ii) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period immediately preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined in good
faith by at least two-thirds of the Continuing Directors; and (iii) in the case
of property other than cash or stock, the fair market value of such property on
the date in question as determined in good faith by at least two-thirds of the
Continuing Directors.
J. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
paragraphs B(i) and (ii) of Section 2 of this Article Eleventh shall include the
shares of Common Stock and/or the shares of any other class or series of Capital
Stock retained by the holders of such shares.
4. POWERS OF CONTINUING DIRECTORS. Any determination as to compliance with
this Article Eleventh, including without limitation (A) whether a person is an
Interested Shareowner, (B) the number of shares of Capital Stock or other
securities beneficially owned by any person, (C) whether a person is an
Affiliate or Associate of another, (D) whether the requirements of paragraph B
of Section 2 have been met with respect to any Business Combination, and
(E) whether the assets that are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $25,000,000 or more shall be made only upon action by not
less than two-thirds of the Continuing Directors of the Corporation; and the
good faith determination of at least two-thirds of the Continuing Directors on
such matters shall be conclusive and binding for all the purposes of this
Article Eleventh.
5. NO EFFECT ON FIDUCIARY OBLIGATIONS. Nothing contained in this
Article Eleventh shall be construed to relieve the Board of Directors or any
Interested Shareowner from any fiduciary obligation imposed by law.
6. AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of this
Certificate of Incorporation or the by-laws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Certificate of Incorporation or the by-laws of the
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Corporation), the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of Voting Stock, voting together as a
single class, shall be required to amend or repeal, or adopt any provisions
inconsistent with, this Article Eleventh; provided, however, that the preceding
provisions of this Section 6 shall not apply to any amendment to this
Article Eleventh, and such amendment shall require only such affirmative vote as
is required by law and any other provisions of this Certificate of Incorporation
or the by-laws of the Corporation, if such amendment shall have been approved by
at least two-thirds of the members of the Board who are persons who would be
eligible to serve as Continuing Directors.
TWELFTH: From and after the time of the Distribution, any action required or
permitted to be taken by the shareowners shall be taken only at an annual or
special meeting of such shareowners and not by consent in writing. Special
meetings of the shareowners for any purpose or purposes shall be called only by
the Board of Directors pursuant to a resolution adopted by a majority of the
whole Board.
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APPENDIX D
BY-LAWS OF
CONEXANT SYSTEMS, INC.
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICE IN DELAWARE; RESIDENT AGENT. The address of
the Corporation's registered office in the State of Delaware and the name and
address of its resident agent in charge thereof are as filed with the Secretary
of State of the State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places either within or without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation requires.
ARTICLE II.
MEETINGS OF SHAREOWNERS
Section 1. PLACE OF MEETINGS. All meetings of the shareowners of the
Corporation shall be held at such place, within or without the State of
Delaware, as may from time to time be designated by resolution passed by the
Board of Directors.
Section 2. ANNUAL MEETING. An annual meeting of the shareowners for the
election of directors and for the transaction of such other proper business,
notice of which was given in the notice of meeting, shall be held on a date and
at a time as may from time to time be designated by resolution passed by the
Board of Directors.
Section 3. SPECIAL MEETINGS. A special meeting of the shareowners for any
purpose or purposes shall be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the whole Board.
Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law,
written notice of each meeting of the shareowners, whether annual or special,
shall be mailed, postage prepaid, not less than ten nor more than sixty days
before the date of the meeting, to each shareowner entitled to vote at such
meeting, at the shareowner's address as it appears on the records of the
Corporation. Every such notice shall state the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called. Notice of any adjourned meeting of the shareowners shall
not be required to be given, except when expressly required by law.
Section 5. LIST OF SHAREOWNERS. The Secretary shall, from information
obtained from the transfer agent, prepare and make, at least ten days before
every meeting of shareowners, a complete list of the shareowners entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each shareowner and the number of shares registered in the name of each
shareowner. Such list shall be open to the examination of any shareowner, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any shareowner
who is present. The stock ledger shall be the only evidence as to who are the
shareowners entitled to examine the stock ledger, the list referred to in this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of shareowners.
Section 6. QUORUM. At each meeting of the shareowners, the holders of a
majority of the issued and outstanding stock of the Corporation present either
in person or by proxy shall constitute a quorum for the transaction of business
except where otherwise provided by law or by the Certificate of Incorporation or
by these by-laws for a specified action. Except as otherwise provided by law, in
the absence of a quorum, a majority in interest of the shareowners of the
Corporation present in person or
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by proxy and entitled to vote shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
shareowners holding the requisite amount of stock shall be present or
represented. At any such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at a meeting as
originally called, and only those shareowners entitled to vote at the meeting as
originally called shall be entitled to vote at any adjournment or adjournments
thereof. The absence from any meeting of the number of shareowners required by
law or by the Certificate of Incorporation or by these by-laws for action upon
any given matter shall not prevent action at such meeting upon any other matter
or matters which may properly come before the meeting, if the number of
shareowners required in respect of such other matter or matters shall be
present.
Section 7. ORGANIZATION. At every meeting of the shareowners the Chairman
of the Board, or in the absence of the Chairman of the Board, a director or an
officer of the Corporation designated by the Board, shall act as Chairman of the
meeting. The Secretary, or, in the Secretary's absence, an Assistant Secretary,
shall act as Secretary at all meetings of the shareowners. In the absence from
any such meeting of the Secretary and the Assistant Secretaries, the Chairman
may appoint any person to act as Secretary of the meeting.
Section 8. NOTICE OF SHAREOWNER BUSINESS AND NOMINATIONS.
(A) ANNUAL MEETINGS OF SHAREOWNERS. (1) Nominations of persons for election
to the Board of Directors of the Corporation and the proposal of business to be
considered by the shareowners may be made at an annual meeting of shareowners
(a) pursuant to the Corporation's notice of meeting, (b) by or at the direction
of the Board of Directors or (c) by any shareowner of the Corporation who was a
shareowner of record at the time of giving of notice provided for in this
by-law, who is entitled to vote at the meeting and who complies with the notice
procedures set forth in this by-law.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareowner pursuant to clause (c) of paragraph
(A)(1) of this by-law, the shareowner must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for shareowner action. To be timely, a
shareowner's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on
the 90th day nor earlier than the close of business on the 120th day prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the case of the annual meeting to be held in 2000 or in the
event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the shareowner to
be timely must be so delivered not earlier than the close of business on the
120th day prior to such annual meeting and not later than the close of
business on the later of the 90th day prior to such annual meeting or the
10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time
period for the giving of a shareowner's notice as described above. Such
shareowner's notice shall set forth (a) as to each person whom the
shareowner proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
Rule 14a-11 thereunder (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the shareowner proposes to bring
before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareowner and
the beneficial owner, if any, on whose behalf the proposal is made; and
(c) as to the shareowner giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i) the name and address
of
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such shareowner, as they appear on the Corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such shareowner and such
beneficial owner.
Notwithstanding anything in the second sentence of paragraph (A)(2) of this
by-law to the contrary, in the event that the number of directors to be elected
to the Board of Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a shareowner's
notice required by this by-law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(B) SPECIAL MEETINGS OF SHAREOWNERS. Only such business shall be conducted
at a special meeting of shareowners as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
shareowners at which directors are to be elected pursuant to the Corporation's
notice of meeting (a) by or at the direction of the Board of Directors or
(b) provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any shareowner of the Corporation who is a
shareowner of record at the time of giving of notice provided for in this
by-law, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this by-law. In the event the Corporation calls a
special meeting of shareowners for the purpose of electing one or more directors
to the Board of Directors, any such shareowner may nominate a person or persons
(as the case may be), for election to such position(s) as specified in the
Corporation's notice of meeting, if the shareowner's notice required by
paragraph (A)(2) of this by-law shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the close of
business on the 120th day prior to such special meeting and not later than the
close of business on the later of the 90th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a shareowner's notice as described above.
(C) GENERAL. (1) Only such persons who are nominated in accordance with the
procedures set forth in this by-law shall be eligible to serve as directors and
only such business shall be conducted at a meeting of shareowners as shall have
been brought before the meeting in accordance with the procedures set forth in
this by-law. Except as otherwise provided by law, the Certificate of
Incorporation or these by-laws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this by-law and, if any proposed
nomination or business is not in compliance with this by-law, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this by-law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this by-law, a
shareowner shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this by-law. Nothing in this by-law shall be deemed to
affect any rights (i) of shareowners to request inclusion of proposals in
the Corporation's proxy statement
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pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any
series of Preferred Stock to elect directors under specified circumstances.
Section 9. BUSINESS AND ORDER OF BUSINESS. At each meeting of the
shareowners such business may be transacted as may properly be brought before
such meeting, except as otherwise provided by law or in these by-laws. The order
of business at all meetings of the shareowners shall be as determined by the
Chairman of the meeting, unless otherwise determined by a majority in interest
of the shareowners present in person or by proxy at such meeting and entitled to
vote thereat.
Section 10. VOTING. Except as otherwise provided by law, the Certificate
of Incorporation or these by-laws, each shareowner shall at every meeting of the
shareowners be entitled to one vote for each share of stock held by such
shareowner. Any vote on stock may be given by the shareowner entitled thereto in
person or by proxy appointed by an instrument in writing, subscribed (or
transmitted by electronic means and authenticated as provided by law) by such
shareowner or by the shareowner's attorney thereunto authorized, and delivered
to the Secretary; provided, however, that no proxy shall be voted after three
years from its date unless the proxy provides for a longer period. Except as
otherwise provided by law, the Certificate of Incorporation or these by-laws, at
all meetings of the shareowners, all matters shall be decided by the vote (which
need not be by ballot) of a majority in interest of the shareowners present in
person or by proxy and entitled to vote thereat, a quorum being present.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by or under the direction of its Board of
Directors.
SECTION 2. NUMBER, QUALIFICATIONS, AND TERM OF OFFICE. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the number of directors of the
Corporation shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the whole Board. A
director need not be a shareowner.
The directors, other than those who may be elected by the holders of any
series of Preferred Stock or any other series or class of stock, as provided
herein or in any Preferred Stock Designation (as defined in the Certificate of
Incorporation), shall be divided into three classes, as nearly equal in number
as possible. One class of directors shall be initially elected for a term
expiring at the annual meeting of shareowners to be held in 2000, another class
shall be initially elected for a term expiring at the annual meeting of
shareowners to be held in 2001, and another class shall be initially elected for
a term expiring at the annual meeting of shareowners to be held in 2002. Members
of each class shall hold office until their successors are elected and shall
have qualified. At each annual meeting of the shareowners of the Corporation,
commencing with the 2000 annual meeting, the successors of the class of
directors whose term expires at that meeting shall be elected by a plurality
vote of all votes cast for the election of directors at such meeting to hold
office for a term expiring at the annual meeting of shareowners held in the
third year following the year of their election.
SECTION 3. ELECTION OF DIRECTORS. At each meeting of the shareowners for
the election of directors, at which a quorum is present, the directors shall be
elected by a plurality vote of all votes cast for the election of directors at
such meeting.
SECTION 4. QUORUM AND MANNER OF ACTING. A majority of the members of the
Board of Directors shall constitute a quorum for the transaction of business at
any meeting, and the act of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors unless
otherwise provided by law, the Certificate of Incorporation or these by-laws. In
the absence of a quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum shall be obtained. Notice of any
adjourned meeting need not be given. The directors shall act only as a board and
the individual directors shall have no power as such.
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SECTION 5. PLACE OF MEETINGS. The Board of Directors may hold its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
SECTION 6. FIRST MEETING. Promptly after each annual election of directors,
the Board of Directors shall meet for the purpose of organization, the election
of officers and the transaction of other business, at the same place as that at
which the annual meeting of shareowners was held or as otherwise determined by
the Board. Notice of such meeting need not be given. Such meeting may be held at
any other time or place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such places and at such times as the Board shall from time to
time determine. If any day fixed for a regular meeting shall be a legal holiday
at the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day not a legal holiday. Notice of regular meetings need not
be given.
SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board and shall
be called by the Chairman of the Board or the Secretary at the written request
of three directors. Notice of each such meeting stating the time and place of
the meeting shall be given to each director by mail, telephone, other electronic
transmission or personally. If by mail, such notice shall be given not less than
five days before the meeting; and if by telephone, other electronic transmission
or personally, not less than two days before the meeting. A notice mailed at
least two weeks before the meeting need not state the purpose thereof except as
otherwise provided in these by-laws. In all other cases the notice shall state
the principal purpose or purposes of the meeting. Notice of any meeting of the
Board need not be given to a director, however, if waived by the director in
writing before or after such meeting or if the director shall be present at the
meeting, except when the director attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 9. ORGANIZATION. At each meeting of the Board of Directors, the
Chairman of the Board, or, in the absence of the Chairman of the Board, a
director or an officer of the Corporation designated by the Board shall act as
Chairman of the meeting. The Secretary, or, in the Secretary's absence, any
person appointed by the Chairman of the meeting, shall act as Secretary of the
meeting.
SECTION 10. ORDER OF BUSINESS. At all meetings of the Board of Directors,
business shall be transacted in the order determined by the Board.
SECTION 11. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice to the Chairman of the Board or the Secretary of
the Corporation. The resignation of any director shall take effect at the time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 12. COMPENSATION. Each director shall be paid such compensation, if
any, as shall be fixed by the Board of Directors.
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SECTION 13. INDEMNIFICATION. (A) The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation or any of its majority-owned
subsidiaries or is or was serving at the request of the Corporation as a
director, officer, employee or agent (except in each of the foregoing situations
to the extent any agreement, arrangement or understanding of agency contains
provisions that supersede or abrogate indemnification under this section) of
another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
or her conduct was unlawful.
(B) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation or any of its majority-owned subsidiaries, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent (except in each of the foregoing situations to the extent any agreement,
arrangement or understanding of agency contains provisions that supersede or
abrogate indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
(C) To the extent that a director, officer, employee or agent of the
Corporation or any of its majority-owned subsidiaries has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (A) and (B), or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by or on behalf of such person in connection
therewith. If any such person is not wholly successful in any such action, suit
or proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters therein, the Corporation shall
indemnify such person against all expenses (including attorneys' fees) actually
and reasonably incurred by or on behalf of such person in connection with each
claim, issue or matter that is successfully resolved. For purposes of this
subsection and without limitation, the termination of any claim, issue or matter
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
(D) Notwithstanding any other provision of this section, to the extent any
person is a witness in, but not a party to, any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of the
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Corporation or any of its majority-owned subsidiaries, or is or was serving at
the request of the Corporation as a director, officer, employee or agent (except
in each of the foregoing situations to the extent any agreement, arrangement or
understanding of agency contains provisions that supersede or abrogate
indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
such person shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by or on behalf of such person in
connection therewith.
(E) Indemnification under subsections (A) and (B) shall be made only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in subsections
(A) and (B). Such determination shall be made (1) if a Change of Control (as
hereinafter defined) shall not have occurred, (a) with respect to a person who
is a present or former director or officer of the Corporation, (i) by the Board
of Directors by a majority vote of the Disinterested Directors (as hereinafter
defined), even though less than a quorum, or (ii) if there are no Disinterested
Directors or, even if there are Disinterested Directors, a majority of such
Disinterested Directors so directs, by (x) Independent Counsel (as hereinafter
defined) in a written opinion to the Board of Directors, a copy of which shall
be delivered to the claimant, or (y) the shareowners of the Corporation; or
(b) with respect to a person who is not a present or former director or officer
of the Corporation, by the chief executive officer of the Corporation or by such
other officer of the Corporation as shall be designated from time to time by the
Board of Directors; or (2) if a Change of Control shall have occurred, by
Independent Counsel selected by the claimant in a written opinion to the Board
of Directors, a copy of which shall be delivered to the claimant, unless the
claimant shall request that such determination be made by or at the direction of
the Board of Directors (in the case of a claimant who is a present or former
director or officer of the Corporation) or by an officer of the Corporation
authorized to make such determination (in the case of a claimant who is not a
present or former director or officer of the Corporation), in which case it
shall be made in accordance with clause (1) of this sentence. Any claimant shall
be entitled to be indemnified against the expenses (including attorneys' fees)
actually and reasonably incurred by such claimant in cooperating with the person
or entity making the determination of entitlement to indemnification
(irrespective of the determination as to the claimant's entitlement to
indemnification) and, to the extent successful, in connection with any
litigation or arbitration with respect to such claim or the enforcement thereof.
(F) If a Change of Control shall not have occurred, or if a Change of
Control shall have occurred and a director, officer, employee or agent requests
pursuant to clause (2) of the second sentence in subsection (E) that the
determination as to whether the claimant is entitled to indemnification be made
by or at the direction of the Board of Directors (in the case of a claimant who
is a present or former director or officer of the Corporation) or by an officer
of the Corporation authorized to make such determination (in the case of a
claimant who is not a present or former director or officer of the Corporation),
the claimant shall be conclusively presumed to have been determined pursuant to
subsection (E) to be entitled to indemnification if (1) in the case of a
claimant who is a present or former director or officer of the Corporation,
(a)(i) within fifteen days after the next regularly scheduled meeting of the
Board of Directors following receipt by the Corporation of the request therefor,
the Board of Directors shall not have resolved by majority vote of the
Disinterested Directors to submit such determination to (x) Independent Counsel
for its determination or (y) the shareowners for their determination at the next
annual meeting, or any special meeting that may be held earlier, after such
receipt, and (ii) within sixty days after receipt by the Corporation of the
request therefor (or within ninety days after such receipt if the Board of
Directors in good faith determines that additional time is required by it for
the determination and, prior to expiration of such sixty-day period, notifies
the claimant thereof), the Board of Directors shall not have made the
determination by a majority vote of the Disinterested Directors, or (b) after a
resolution of the Board of Directors, timely made pursuant to clause (a)(i)(y)
above, to submit the determination to the shareowners, the shareowners
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meeting at which the determination is to be made shall not have been held on or
before the date prescribed (or on or before a later date, not to exceed sixty
days beyond the original date, to which such meeting may have been postponed or
adjourned on good cause by the Board of Directors acting in good faith), or
(2) in the case of a claimant who is not a present or former director or officer
of the Corporation, within sixty days after receipt by the Corporation of the
request therefor (or within ninety days after such receipt if an officer of the
Corporation authorized to make such determination in good faith determines that
additional time is required for the determination and, prior to expiration of
such sixty-day period, notifies the claimant thereof), an officer of the
Corporation authorized to make such determination shall not have made the
determination; provided, however, that this sentence shall not apply if the
claimant has misstated or failed to state a material fact in connection with his
or her request for indemnification. Such presumed determination that a claimant
is entitled to indemnification shall be deemed to have been made (I) at the end
of the sixty-day or ninety-day period (as the case may be) referred to in clause
(1)(a)(ii) or (2) of the immediately preceding sentence or (II) if the Board of
Directors has resolved on a timely basis to submit the determination to the
shareowners, on the last date within the period prescribed by law for holding
such shareowners meeting (or a postponement or adjournment thereof as permitted
above).
(G) Expenses (including attorneys' fees) incurred in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding to a present or former director or officer of the Corporation,
promptly after receipt of a request therefor stating in reasonable detail the
expenses incurred, and to a person who is not a present or former director or
officer of the Corporation as authorized by the chief executive officer of the
Corporation or such other officer of the Corporation as shall be designated from
time to time by the Board of Directors; provided that in each case the
Corporation shall have received an undertaking by or on behalf of the present or
former director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation as authorized in this section.
(H) The Board of Directors shall establish reasonable procedures for the
submission of claims for indemnification pursuant to this section, determination
of the entitlement of any person thereto and review of any such determination.
Such procedures shall be set forth in an appendix to these by-laws and shall be
deemed for all purposes to be a part hereof.
(I) For purposes of this section,
(1) "Change of Control" means any of the following occurring at any time
after the distribution of the shares of capital stock of the Corporation to the
holders of capital stock of Rockwell International Corporation (the
"Distribution"):
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Corporation (the "Outstanding Corporation Common Stock")
or (ii) the combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities"); provided, however, that
for purposes of this subparagraph (a), the following acquisitions shall not
constitute a Change of Control: (w) any acquisition directly from the
Corporation, (x) any acquisition by the Corporation, (y) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Corporation, Rockwell International Corporation or any corporation
controlled by the Corporation or Rockwell International Corporation or (z)
any acquisition pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Paragraph 13(I)(1); or
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(b) Individuals who, as of the date of the Distribution, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided, however,
that any individual becoming a director subsequent to that date whose
election, or nomination for election by the Corporation's shareowners, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors;
or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Corporation or the acquisition of assets of another entity (a "Corporate
Transaction"), in each case, unless, following such Corporate Transaction,
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (ii) no Person (excluding
any employee benefit plan (or related trust) of the Corporation, of Rockwell
International Corporation or of such corporation resulting from such
Corporate Transaction) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Corporate Transaction
and (iii) at least a majority of the members of the board of directors of
the corporation resulting from such Corporate Transaction were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board of Directors, providing for such Corporate
Transaction; or
(d) Approval by the Corporation's shareowners of a complete liquidation
or dissolution of the Corporation.
(2) "Disinterested Director" means a director of the Corporation who is not
and was not a party to an action, suit or proceeding in respect of which
indemnification is sought by a director, officer, employee or agent.
(3) "Independent Counsel" means a law firm, or a member of a law firm, that
(i) is experienced in matters of corporation law; (ii) neither presently is, nor
in the past five years has been, retained to represent the Corporation, the
director, officer, employee or agent claiming indemnification or any other party
to the action, suit or proceeding giving rise to a claim for indemnification
under this section, in any matter material to the Corporation, the claimant or
any such other party; and (iii) would not, under applicable standards of
professional conduct then prevailing, have a conflict of interest in
representing either the Corporation or such director, officer, employee or agent
in an action to determine the Corporation's or such person's rights under this
section.
(J) The indemnification and advancement of expenses herein provided, or
granted pursuant hereto, shall not be deemed exclusive of any other rights to
which any of those indemnified or eligible
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for advancement of expenses may be entitled under any agreement, vote of
shareowners or Disinterested Directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person. Notwithstanding any amendment,
alteration or repeal of this section or any of its provisions, or of any of the
procedures established by the Board of Directors pursuant to subsection
(H) hereof, any person who is or was a director, officer, employee or agent of
the Corporation or any of its majority-owned subsidiaries or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation or of any partnership, joint venture, employee benefit plan
or other enterprise shall be entitled to indemnification in accordance with the
provisions hereof and thereof with respect to any action taken or omitted prior
to such amendment, alteration or repeal except to the extent otherwise required
by law.
(K) No indemnification shall be payable pursuant to this section with
respect to any action against the Corporation commenced by an officer, director,
employee or agent unless the Board of Directors shall have authorized the
commencement thereof or unless and to the extent that this section or the
procedures established pursuant to subsection (H) shall specifically provide for
indemnification of expenses relating to the enforcement of rights under this
section and such procedures.
ARTICLE IV.
COMMITTEES
SECTION 1. APPOINTMENT AND POWERS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more directors of the
Corporation (or in the case of a special-purpose committee, one or more
directors of the Corporation), which, to the extent provided in said resolution
or in these by-laws and not inconsistent with Section 141 of the Delaware
General Corporation Law, as amended, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
SECTION 2. TERM OF OFFICE AND VACANCIES. Each member of a committee shall
continue in office until a director to succeed him or her shall have been
elected and shall have qualified, or until he or she ceases to be a director or
until he or she shall have resigned or shall have been removed in the manner
hereinafter provided. Any vacancy in a committee shall be filled by the vote of
a majority of the whole Board of Directors at any regular or special meeting
thereof.
SECTION 3. ALTERNATES. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
SECTION 4. ORGANIZATION. Unless otherwise provided by the Board of
Directors, each committee shall appoint a chairman. Each committee shall keep a
record of its acts and proceedings and report the same from time to time to the
Board of Directors.
SECTION 5. RESIGNATIONS. Any regular or alternate member of a committee may
resign at any time by giving written notice to the Chairman of the Board or the
Secretary of the Corporation. Such resignation shall take effect at the time of
the receipt of such notice or at any later time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
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SECTION 6. REMOVAL. Any regular or alternate member of a committee may be
removed with or without cause at any time by resolution passed by a majority of
the whole Board of Directors at any regular or special meeting.
SECTION 7. MEETINGS. Regular meetings of each committee, of which no notice
shall be necessary, shall be held on such days and at such places as the
chairman of the committee shall determine or as shall be fixed by a resolution
passed by a majority of all the members of such committee. Special meetings of
each committee will be called by the Secretary at the request of any two members
of such committee, or in such other manner as may be determined by the
committee. Notice of each special meeting of a committee shall be mailed to each
member thereof at least two days before the meeting or shall be given personally
or by telephone or other electronic transmission at least one day before the
meeting. Every such notice shall state the time and place, but need not state
the purposes of the meeting. No notice of any meeting of a committee shall be
required to be given to any alternate.
SECTION 8. QUORUM AND MANNER OF ACTING. Unless otherwise provided by
resolution of the Board of Directors, a majority of a committee (including
alternates when acting in lieu of regular members of such committee) shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of such
committee. The members of each committee shall act only as a committee and the
individual members shall have no power as such.
SECTION 9. COMPENSATION. Each regular or alternate member of a committee
shall be paid such compensation, if any, as shall be fixed by the Board of
Directors.
ARTICLE V.
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a Chairman of
the Board of Directors, who shall be chosen from the members of the Board of
Directors, one or more Vice Presidents (one or more of whom may be Executive
Vice Presidents, Senior Vice Presidents or otherwise as may be designated by the
Board), a Secretary and a Treasurer, all of whom shall be elected by the Board
of Directors. Any two or more offices may be held by the same person. The Board
of Directors may also from time to time elect such other officers as it deems
necessary.
SECTION 2. TERM OF OFFICE. Each officer shall hold office until his or her
successor shall have been duly elected and qualified in his or her stead, or
until his or her death or until he or she shall have resigned or shall have been
removed in the manner hereinafter provided.
SECTION 3. ADDITIONAL OFFICERS; AGENTS. The Chairman of the Board may from
time to time appoint and remove such additional officers and agents as may be
deemed necessary. Such persons shall hold office for such period, have such
authority, and perform such duties as in these by-laws provided or as the
Chairman of the Board may from time to time prescribe. The Board of Directors or
the Chairman of the Board may from time to time authorize any officer to appoint
and remove agents and employees and to prescribe their powers and duties.
SECTION 4. SALARIES. Unless otherwise provided by resolution passed by a
majority of the whole Board, the salaries of all officers elected by the Board
of Directors shall be fixed by the Board of Directors.
SECTION 5. REMOVAL. Except where otherwise expressly provided in a contract
authorized by the Board of Directors, any officer may be removed, either with or
without cause, by the vote of a majority of the Board at any regular or special
meeting or, except in the case of an officer elected by the Board, by any
superior officer upon whom the power of removal may be conferred by the Board or
by these by-laws.
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SECTION 6. RESIGNATIONS. Any officer elected by the Board of Directors may
resign at any time by giving written notice to the Chairman of the Board or the
Secretary. Any other officer may resign at any time by giving written notice to
the Chairman of the Board. Any such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 7. VACANCIES. A vacancy in any office because of death,
resignation, removal or otherwise, shall be filled for the unexpired portion of
the term in the manner provided in these by-laws for regular election or
appointment to such office.
SECTION 8. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors shall be chief executive officer of the Corporation and, subject to
the control of the Board of Directors, shall have general and overall charge of
the business and affairs of the Corporation and of its officers. The Chairman of
the Board shall keep the Board of Directors appropriately informed on the
business and affairs of the Corporation. The Chairman of the Board shall preside
at all meetings of the shareowners and the Board of Directors and shall enforce
the observance of the rules of order for the meetings of the Board of Directors
and the shareowners and the by-laws of the Corporation.
SECTION 9. EXECUTIVE AND SENIOR VICE PRESIDENTS. One or more Executive or
Senior Vice Presidents shall, subject to the control of the Chairman of the
Board, have lead accountability for components or functions of the Corporation
as and to the extent designated by the Chairman of the Board. Each Executive or
Senior Vice President shall keep the Chairman of the Board appropriately
informed on the business and affairs of the designated components or functions
of the Corporation.
SECTION 10. VICE PRESIDENTS. The Vice Presidents shall perform such duties
as may from time to time be assigned to them or any of them by the Chairman of
the Board.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be kept in
books provided for the purpose the minutes of the meetings of the shareowners,
of the Board of Directors and of any committee constituted pursuant to
Article IV of these by-laws. The Secretary shall be custodian of the corporate
seal and see that it is affixed to all documents as required and attest the
same. The Secretary shall perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him or her.
SECTION 12. ASSISTANT SECRETARIES. At the request of the Secretary, or in
the Secretary's absence or disability, the Assistant Secretary designated by the
Secretary shall perform all the duties of the Secretary and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them.
SECTION 13. TREASURER. The Treasurer shall have charge of and be
responsible for the receipt, disbursement and safekeeping of all funds and
securities of the Corporation. The Treasurer shall deposit all such funds in the
name of the Corporation in such banks, trust companies or other depositories as
shall be selected in accordance with the provisions of these by-laws. From time
to time and whenever requested to do so, the Treasurer shall render statements
of the condition of the finances of the Corporation to the Board of Directors.
The Treasurer shall perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her.
SECTION 14. ASSISTANT TREASURERS. At the request of the Treasurer, or in
the Treasurer's absence or disability, the Assistant Treasurer designated by the
Treasurer shall perform all the duties of the Treasurer and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer. The Assistant Treasurers shall perform such other duties as from time
to time may be assigned to them.
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SECTION 15. CERTAIN AGREEMENTS. The Board of Directors shall have power to
authorize or direct the proper officers of the Corporation, on behalf of the
Corporation, to enter into valid and binding agreements in respect of
employment, incentive or deferred compensation, stock options, and similar or
related matters, notwithstanding the fact that a person with whom the
Corporation so contracts may be a member of its Board of Directors. Any such
agreement may validly and lawfully bind the Corporation for a term of more than
one year, in accordance with its terms, notwithstanding the fact that one of the
elements of any such agreement may involve the employment by the Corporation of
an officer, as such, for such term.
ARTICLE VI.
AUTHORIZATIONS
SECTION 1. CONTRACTS. The Board of Directors, except as in these by-laws
otherwise provided, may authorize any officer, employee or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
SECTION 2. LOANS. No loan shall be contracted on behalf of the Corporation
and no negotiable paper shall be issued in its name, unless authorized by the
Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, employee or
employees, of the Corporation as shall from time to time be determined in
accordance with authorization of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board of Directors may from time to time designate, or
as may be designated by any officer or officers of the Corporation to whom such
power may be delegated by the Board, and for the purpose of such deposit the
officers and employees who have been authorized to do so in accordance with the
determinations of the Board may endorse, assign and deliver checks, drafts, and
other orders for the payment of money which are payable to the order of the
Corporation.
SECTION 5. PROXIES. Except as otherwise provided in these by-laws or in the
Certificate of Incorporation, and unless otherwise provided by resolution of the
Board of Directors, the Chairman of the Board or any other officer may from time
to time appoint an attorney or attorneys or agent or agents of the Corporation,
in the name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as a shareowner or otherwise in any other
corporation any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporations, or to consent in writing to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such vote or giving such consent, and may execute or cause to
be executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, all such written proxies or other instruments as such
officer may deem necessary or proper in the premises.
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ARTICLE VII.
SHARES AND THEIR TRANSFER
SECTION 1. SHARES OF STOCK. Certificates for shares of the stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors. They shall be numbered in the order of their issue, by class and
series, and shall be signed by the Chairman of the Board or a Vice President,
and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, of the Corporation. If a share certificate is countersigned (1) by a
transfer agent other than the Corporation or its employee, or (2) by a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
share certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if such person were such officer, transfer agent, or
registrar at the date of issue. The Board of
Directors may by resolution or resolutions provide that some or all of any
or all classes or series of the shares of stock of the Corporation shall be
uncertificated shares. Notwithstanding the preceding sentence, every holder of
uncertificated shares, upon request, shall be entitled to receive from the
Corporation a certificate representing the number of shares registered in such
shareowner's name on the books of the Corporation.
SECTION 2. RECORD OWNERSHIP. A record of the name and address of each
holder of the shares of the Corporation, the number of shares held by such
shareowner, the number or numbers of any share certificate or certificates
issued to such shareowner and the number of shares represented thereby, and the
date of issuance of the shares held by such shareowner shall be made on the
Corporation's books. The Corporation shall be entitled to treat the holder of
record of any share of stock (including any holder registered in a book-entry or
direct registration system maintained by the Corporation or a transfer agent or
a registrar designated by the Board of Directors) as the holder in fact thereof
and accordingly shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, except as required by law.
SECTION 3. TRANSFER OF STOCK. Shares of stock shall be transferable on the
books of the Corporation by the holder of record of such stock in person or by
such person's attorney or other duly constituted representative, pursuant to
applicable law and such rules and regulations as the Board of Directors shall
from time to time prescribe. Any shares represented by a certificate shall be
transferable upon surrender of such certificate with an assignment endorsed
thereon or attached thereto duly executed and with such guarantee of signature
as the Corporation may reasonably require.
SECTION 4. LOST, STOLEN AND DESTROYED CERTIFICATES. The Corporation may
issue a new certificate of stock or may register uncertificated shares, if then
authorized by the Board of Directors, in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or destroyed
certificate, or such person's legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate, the
issuance of such new certificate or the registration of such uncertificated
shares.
SECTION 5. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The Corporation
shall, if and whenever the Board of Directors shall so determine, maintain one
or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board of Directors, where the shares of the stock of the
Corporation shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares of
the stock of the Corporation, in respect of which a registrar and transfer agent
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shall have been designated, shall be valid unless countersigned by such transfer
agent and registered by such registrar. The Board of Directors may also make
such additional rules and regulations as it may deem expedient concerning the
issue, transfer and registration of shares of stock of the Corporation and
concerning the registration of pledges of uncertificated shares.
SECTION 6. FIXING RECORD DATE. For the purpose of determining the
shareowners entitled to notice of or to vote at any meeting of shareowners or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed (1) the record date for determining shareowners entitled to notice
of or to vote at a meeting of shareowners shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held and (2) the record date for determining shareowners for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of shareowners
of record entitled to notice of or to vote at a meeting of shareowners shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 7. EXAMINATION OF BOOKS BY SHAREOWNERS. The Board of Directors
shall, subject to the laws of the State of Delaware, have power to determine
from time to time, whether and to what extent and under what conditions and
regulations the accounts and books of the Corporation, or any of them, shall be
open to the inspection of the shareowners; and no shareowner shall have any
right to inspect any book or document of the Corporation, except as conferred by
the laws of the State of Delaware, unless and until authorized so to do by
resolution of the Board of Directors or of the shareowners of the Corporation.
ARTICLE VIII.
NOTICE
SECTION 1. MANNER OF GIVING WRITTEN NOTICE. Any notice in writing required
by law or by these by-laws to be given to any person may be delivered
personally, may be transmitted by electronic means or may be given by depositing
the same in the post office or letter box in a postpaid envelope addressed to
such person at such address as appears on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be mailed,
and notice by other means shall be deemed given when actually delivered (and in
the case of notice transmitted by electronic means, when authenticated if and as
required by law).
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given to
any person, a waiver thereof by such person in writing or transmitted by
electronic means (and authenticated if and as required by law), whether before
or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE IX.
SEAL
The corporate seal shall have inscribed thereon the name of the Corporation,
the year of its organization and the words "Corporate Seal" and "Delaware".
ARTICLE X.
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of October
in each year.
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APPENDIX
PROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE III, SECTION 13 OF THE BY-LAWS.
SECTION 1. PURPOSE. The Procedures for Submission and Determination of
Claims for Indemnification Pursuant to Article III, Section 13 of the by-laws
(the "Procedures") are to implement the provisions of Article III, Section 13 of
the by-laws of the Corporation (the "by-laws") in compliance with the
requirement of subsection (H) thereof.
SECTION 2. DEFINITIONS. For purposes of these Procedures:
(A) All terms that are defined in Article III, Section 13 of the by-laws
shall have the meanings ascribed to them therein when used in these Procedures
unless otherwise defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in, a Proceeding; and shall
also include such retainers as counsel may reasonably require in advance of
undertaking the representation of an indemnitee in a Proceeding.
(C) "Indemnitee" includes any person who was or is, or is threatened to be
made, a witness in or a party to any Proceeding by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation or
any of its majority-owned subsidiaries or is or was serving at the request of
the Corporation as a director, officer, employee or agent (except in each of the
foregoing situations to the extent any agreement, arrangement or understanding
of agency contains provisions that supersede or abrogate indemnification under
Article III, Section 13 of the by-laws) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise.
(D) "Proceeding" includes any action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee unless the Board of Directors shall have authorized
the commencement thereof.
SECTION 3. SUBMISSION AND DETERMINATION OF CLAIMS.
(A) To obtain indemnification or advancement of Expenses under Article III,
Section 13 of the by-laws, an Indemnitee shall submit to the Secretary of the
Corporation a written request therefor, including therein or therewith such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to permit a determination as to whether and what extent
the Indemnitee is entitled to indemnification or advancement of Expenses, as the
case may be. The Secretary shall, promptly upon receipt of a request for
indemnification, advise the Board of Directors (if the Indemnitee is a present
or former director or officer of the Corporation) or the officer of the
Corporation authorized to make the determination as to whether an Indemnitee is
entitled to indemnification (if the Indemnitee is not a present or former
director or officer of the Corporation) thereof in writing if a determination in
accordance with Article III, Section 13(E) of the by-laws is required.
(B) Upon written request by an Indemnitee for indemnification pursuant to
Section 3(A) hereof, a determination with respect to the Indemnitee's
entitlement thereto in the specific case, if required by the by-laws, shall be
made in accordance with Article III, Section 13(E) of the by-laws, and, if it is
so determined that the Indemnitee is entitled to indemnification, payment to the
Indemnitee shall be made within ten days after such determination. The
Indemnitee shall cooperate with the person, persons or entity making such
determination, with respect to the Indemnitee's entitlement to
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indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to the Indemnitee and reasonably necessary to such determination.
(C) If entitlement to indemnification is to be made by Independent Counsel
pursuant to Article III, Section 13(E) of the by-laws, the Independent Counsel
shall be selected as provided in this Section 3(C). If a Change of Control shall
not have occurred, the Independent Counsel shall be selected by the Board of
Directors, and the Corporation shall give written notice to the Indemnitee
advising the Indemnitee of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by the Indemnitee (unless the Indemnitee shall request that such
selection be made by the Board of Directors, in which event the immediately
preceding sentence shall apply), and the Indemnitee shall give written notice to
the Corporation advising it of the identity of the Independent Counsel so
selected. In either event, the Indemnitee or the Corporation, as the case may
be, may, within seven days after such written notice of selection shall have
been given, deliver to the Corporation or to the Indemnitee, as the case may be,
a written objection to such selection. Such objection may be asserted only on
the ground that the Independent Counsel so selected does not meet the
requirements of "Independent Counsel" as defined in Article III, Section 13 of
the by-laws, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is made, the Independent
Counsel so selected may not serve as Independent Counsel unless and until a
court has determined that such objection is without merit. If, within twenty
days after the next regularly scheduled Board of Directors meeting following
submission by the Indemnitee of a written request for indemnification pursuant
to Section 3(A) hereof, no Independent Counsel shall have been selected and not
objected to, either the Corporation or the Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent jurisdiction for
resolution of any objection which shall have been made by the Corporation or the
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the Court or by such
other person as the Court shall designate, and the person with respect to whom
an objection is favorably resolved or the person so appointed shall act as
Independent Counsel under Article III, Section 13(E) of the by-laws. The
Corporation shall pay any and all reasonable fees and expenses (including
without limitation any advance retainers reasonably required by counsel) of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Article III, Section 13(E) of the by-laws, and the
Corporation shall pay all reasonable fees and expenses (including without
limitation any advance retainers reasonably required by counsel) incident to the
procedures of Article III, Section 13(E) of the by-laws and this Section 3(C),
regardless of the manner in which Independent Counsel was selected or appointed.
Upon the delivery of its opinion pursuant to Article III, Section 13 of the
by-laws or, if earlier, the due commencement of any judicial proceeding or
arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a determination
with respect to entitlement to indemnification under the by-laws, the person,
persons or entity making such determination shall presume that an Indemnitee is
entitled to indemnification under the by-laws if the Indemnitee has submitted a
request for indemnification in accordance with Section 3(A) hereof, and the
Corporation shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
SECTION 4. REVIEW AND ENFORCEMENT OF DETERMINATION.
(A) In the event that (1) advancement of Expenses is not timely made
pursuant to Article III, Section 13(G) of the by-laws, (2) payment of
indemnification is not made pursuant to Article III, Section 13(C) or (D) of the
by-laws within ten days after receipt by the Corporation of written request
therefor, (3) a determination is made pursuant to Article III, Section 13(E) of
the by-laws that an
D-17
<PAGE>
Indemnitee is not entitled to indemnification under the by-laws, (4) the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Article III, Section 13(E) of the by-laws and such
determination shall not have been made and delivered in a written opinion within
ninety days after receipt by the Corporation of the written request for
indemnification, or (5) payment of indemnification is not made within ten days
after a determination has been made pursuant to Article III, Section 13(E) of
the by-laws that an Indemnitee is entitled to indemnification or within ten days
after such determination is deemed to have been made pursuant to Article III,
Section 13(F) of the by-laws, the Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of the Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, the Indemnitee, at
his or her option, may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association. The
Indemnitee shall commence such proceeding seeking an adjudication or an award in
arbitration within one year following the date on which the Indemnitee first has
the right to commence such proceeding pursuant to this Section 4(A). The
Corporation shall not oppose the Indemnitee's right to seek any such
adjudication or award in arbitration.
(B) In the event that a determination shall have been made pursuant to
Article III, Section 13(E) of the by-laws that an Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 4 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and the Indemnitee shall not be prejudiced by reason
of that adverse determination. If a Change of Control shall have occurred, the
Corporation shall have the burden of proving in any judicial proceeding or
arbitration commenced pursuant to this Section 4 that the Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been made
pursuant to Article III, Section 13(E) or (F) of the by-laws that an Indemnitee
is entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Section 4, absent (1) a misstatement or omission of a material fact in
connection with the Indemnitee's request for indemnification, or (2) a
prohibition of such indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 4 that the
procedures and presumptions of these Procedures are not valid, binding and
enforceable, and shall stipulate in any such judicial proceeding or arbitration
that the Corporation is bound by all the provisions of these Procedures.
(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to
enforce the Indemnitee's rights under, or to recover damages for breach of,
Article III, Section 13 of the by-laws or these Procedures in a judicial
proceeding or arbitration, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
expenses (of the types described in the definition of Expenses in Section 2 of
these Procedures) actually and reasonably incurred in such judicial proceeding
or arbitration, but only if the Indemnitee prevails therein. If it shall be
determined in such judicial proceeding or arbitration that the Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
Expenses sought, the expenses incurred by the Indemnitee in connection with such
judicial proceeding or arbitration shall be appropriately prorated.
SECTION 5. AMENDMENTS. These Procedures may be amended at any time and from
time to time in the same manner as any by-law of the Corporation in accordance
with the Certificate of Incorporation; provided, however, that notwithstanding
any amendment, alteration or repeal of these Procedures or any provision hereof,
any Indemnitee shall be entitled to utilize these Procedures with respect to any
claim for indemnification arising out of any action taken or omitted prior to
such amendment, alteration or repeal except to the extent otherwise required by
law.
D-18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's By-Laws further provide:
- that the Registrant will indemnify any person who is or was a director or
officer, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses (including attorneys' fees)
reasonably incurred by such person;
- that the Registrant must advance to all indemnified parties the expenses
(including attorney's fees) incurred in defending any proceeding provided
that indemnified parties (if they are directors of officers) must provide
the Registrant an undertaking to repay such advances if indemnification is
determined to be unavailable;
- that the rights conferred in the By-Laws are not exclusive; and
- that the Registrant may not retroactively amend the Certification of
Incorporation provisions relating to indemnity.
The indemnification provision in the By-Laws may be sufficiently broad to
permit indemnification of the Registrant's directors and officers for
liabilities arising under the Securities Act.
The Registrant has also obtained directors' and officers' liability
insurance.
Under Section 5.7 of the merger agreement, from and for a period of six
years after the effective time of the merger, the Registrant is required to
maintain in effect the current provisions regarding directors' and officers'
indemnification contained in Maker's certificate of incorporation and by-laws
and in any agreements between any of such directors and officers and Maker. The
Registrant is also, from and for a period of six years after the effective time
of the merger, required to maintain the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
Maker, provided that the Registrant may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT TITLE
- ------- ------------------------------------------------------------
<C> <S>
2.01 Agreement and Plan of Merger, dated as of December 18, 1999,
among Conexant Systems, Inc., Merlot Acquisition Corp. and
Maker Communications, Inc. (included as Appendix A to the
proxy statement/prospectus). The Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
4.01 Rights Agreement, dated as of November 30, 1998, by and
between the Registrant and ChaseMellon Shareholder Services,
L.L.C., as rights agent, filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-8
(Registration No. 333-68755), is incorporated herein by
reference.
4.02 Indenture, dated as of May 1, 1999, between the Registrant
and The First National Bank of Chicago, as trustee,
including the form of the Registrant's 4 1/4% Convertible
Subordinated Notes Due May 1, 2006 attached as Exhibit A
thereto, filed as Exhibit 4.1 to the Registrant's
Registration Statement on Form S-3 (Registration No.
333-82399), is incorporated herein by reference.
4.03 Registration Rights Agreement, dated as of May 12, 1999, by
and among the Registrant and Morgan Stanley & Co.
Incorporated, Credit Suisse First Boston Corporation and
Lehman Brothers, Inc., filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3
(Registration No. 333-82399), is incorporated herein by
reference.
4.04 Indenture, dated as of February 1, 2000, between the
Registrant and Bank One Trust Company, National Association,
as trustee, including the form of the Registrant's 4%
Convertible Subordinated Notes Due February 1, 2007 attached
as Exhibit A thereto.
5.01 Opinion of Latham & Watkins as to the legality of the
securities being registered.
8.01 Opinion of Latham & Watkins as to certain U.S. federal
income tax matters.
8.02 Opinion of Hutchins, Wheeler & Dittmar, A Professional
Corporation, as to certain U.S. federal income tax matters.
23.01 Consent of Deloitte & Touche LLP.
23.02 Consent of Arthur Andersen LLP.
23.03 Consent of Deutsche Bank Securities, Inc.
23.04 Consents of Latham & Watkins (included in Exhibits 5.01 and
8.01 above).
23.05 Consent of Hutchins, Wheeler & Dittmer, A Professional
Corporation (included in Exhibit 8.02 above).
24.01 Power of Attorney (included on signature page of
registration statement).
99.01 Voting Agreements, dated as of December 18, 1999, among the
Registrant, Maker Communications, Inc. and each of William
N. Giudice, Tecumseh Limited Partnership I, Paul Bergantino,
Bergantino 1999 Grantor Retained Annuity Trust DTD 4/5/99,
Bergantino 1999 Irrevocable Trust DTD 4/5/99, Michael
Rubino, Thomas Medrek, Bessemer Venture Partners IV L.P.,
Bessec Ventures IV L.P. and Greylock Equity Limited
Partnership.
99.02 Form of Maker Proxy Card.
</TABLE>
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities and Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(c) That every prospectus: (i) that is filed pursuant to paragraph (b)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(d) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of this
registration statement through the date of responding to the request.
(e) To supply, by means of a post-effective amendment, all information
concerning a transaction and the company being acquired involved therein that
was not the subject of and included in this registration statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Conexant Systems, Inc., has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Newport Beach, State of California, on this 1(st) day of February, 2000.
<TABLE>
<S> <C> <C>
CONEXANT SYSTEMS, INC.
By: /s/ Dwight W. Decker
-----------------------------------------
Dwight W. Decker,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints
Dwight W. Decker, Balakrishnan S. Iyer and Dennis E. O'Reilly, and each of them,
his true and lawful attorneys-in-fact and agents, each with the power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ Dwight W. Decker
------------------------------------------- Chairman and Chief Executive February 1, 2000
Dwight W. Decker Officer
PRINCIPAL FINANCIAL OFFICER:
/s/ Balakrishnan S. Iyer
------------------------------------------- Senior Vice President and February 1, 2000
Balakrishnan S. Iyer Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/ Steven M. Thomson
------------------------------------------- Vice President and February 1, 2000
Steven M. Thomson Controller
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
ADDITIONAL DIRECTORS:
/s/ F. Craig Farrill
------------------------------------------- Director February 2, 2000
F. Craig Farrill
/s/ Donald R. Beall
------------------------------------------- Director February 1, 2000
Donald R. Beall
/s/ Jerre L. Stead
------------------------------------------- Director February 2, 2000
Jerre L. Stead
------------------------------------------- Director
Richard M. Bressler
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT TITLE
- --------------------- ------------------------------------------------------------
<C> <S>
4.04 Indenture, dated as of February 1, 2000, between the
Registrant and Bank One Trust Company, National Association,
as trustee, including the form of the Registrant's 4%
Convertible Subordinated Notes Due February 1, 2007 attached
as Exhibit A thereto.
5.01 Opinion of Latham & Watkins as to the legality of the
securities being registered.
8.01 Opinion of Latham & Watkins as to certain U.S. federal
income tax matters.
8.02 Opinion of Hutchins, Wheeler & Dittmar, A Professional
Corporation, as to certain U.S. federal income tax matters.
23.01 Consent of Deloitte & Touche LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of Deutsche Bank Securities, Inc.
99.01 Voting Agreements, dated as of December 18, 1999, among the
Registrant, Maker Communications, Inc. and each of
William N. Giudice, Tecumseh Limited Partnership I, Paul
Bergantino, Bergantino 1999 Grantor Retained Annuity Trust
DTD 4/5/99, Bergantino 1999 Irrevocable Trust DTD 4/5/99,
Michael Rubino, Thomas Medrek, Bessemer Venture Partners IV
L.P., Bessec Ventures IV L.P. and Greylock Equity Limited
Partnership.
99.02 Form of Maker Proxy Card
</TABLE>
<PAGE>
Exhibit 4.04
------------------------------------------------------------
CONEXANT SYSTEMS, INC.
To
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
---------------------------
INDENTURE
Dated as of
February 1, 2000
---------------------------
4% Convertible Subordinated Notes Due 2007
------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE ONE - DEFINITIONS
Section 1.1 Definitions.......................................................2
Affiliate..................................................................2
Board of Directors.........................................................2
Business Day...............................................................3
Closing Price..............................................................3
Commission.................................................................3
Common Stock...............................................................3
Company....................................................................3
Company Notice.............................................................4
Conexant Credit Agreement..................................................4
Conversion Price...........................................................4
Corporate Trust Office.....................................................4
Custodian..................................................................4
default....................................................................4
Defaulted Interest.........................................................4
Depositary.................................................................4
Designated Senior Indebtedness.............................................5
Event of Default...........................................................5
Exchange Act...............................................................5
Fundamental Change.........................................................5
Global Note................................................................6
Headquarters Lease Documentation...........................................6
Indebtedness...............................................................6
Indenture..................................................................8
Initial Purchaser..........................................................8
Institutional Accredited Investor..........................................8
Liquidated Damages.........................................................8
Non-Payment Default........................................................8
Note or Notes..............................................................8
Note register..............................................................8
Note registrar.............................................................8
Noteholder.................................................................8
Notice Date................................................................9
Officers' Certificate......................................................9
Opinion of Counsel.........................................................9
Optional Redemption........................................................9
outstanding................................................................9
Payment Blockage Notice...................................................10
Person....................................................................10
Portal Market.............................................................10
Predecessor Note..........................................................10
i
<PAGE>
PAGE
QIB.......................................................................10
Registration Rights Agreement.............................................10
Representative............................................................10
Responsible Officer.......................................................11
Restricted Securities.....................................................11
Rights....................................................................11
Rights Agreement..........................................................11
Rule 144A.................................................................11
Securities Act............................................................11
Senior Indebtedness.......................................................11
Significant Subsidiary....................................................12
Subsidiary................................................................12
Trading Day...............................................................12
Trigger Event.............................................................12
Trust Indenture Act.......................................................12
Trustee...................................................................13
ARTICLE TWO - ISSUE, DESCRIPTION,
EXECUTION, REGISTRATION AND EXCHANGE OF
NOTES
Section 2.1 Designation Amount and Issue of Notes............................13
Section 2.2 Form of Notes....................................................13
Section 2.3 Date and Denomination of Notes;
Payments of Interest........................................14
Section 2.4 Execution of Notes...............................................17
Section 2.5 Exchange and Registration of Transfer
of Notes; Restrictions on Transfer; Depositary.............18
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes.......................27
Section 2.7 Temporary Notes..................................................29
Section 2.8 Cancellation of Notes Paid, Etc..................................30
Section 2.9 CUSIP Numbers....................................................30
ARTICLE THREE - REDEMPTION OF NOTES
Section 3.1 Initial Prohibition on Redemption;
Optional Redemption by the Company..........................30
Section 3.2 Notice of Redemptions; Selection of Notes........................31
Section 3.3 Payment of Notes Called for Redemption...........................34
Section 3.4 Conversion Arrangement on Call for Redemption....................35
Section 3.5 Redemption at Option of Holders..................................36
ii
<PAGE>
ARTICLE FOUR - SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination.......................................39
Section 4.2 Payments to Noteholders..........................................39
Section 4.3 Subrogation of Notes.............................................43
Section 4.4 Authorization to Effect Subordination............................45
Section 4.5 Notice to Trustee................................................45
Section 4.6 Trustee's Relation to Senior Indebtedness........................46
Section 4.7 No Impairment of Subordination...................................47
Section 4.8 Certain Conversions Not Deemed Payment...........................47
Section 4.9 Article Applicable to Paying Agents..............................48
Section 4.10 Senior Indebtedness Entitled to Rely............................48
Section 4.11 Reliance on Judicial Order or
Certificate of Liquidating Agent............................48
ARTICLE FIVE - PARTICULAR COVENANTS OF
THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest.......................49
Section 5.2 Maintenance of Office or Agency..................................49
Section 5.3 Appointments to Fill Vacancies in Trustee's Office...............50
Section 5.4 Provisions as to Paying Agent....................................50
Section 5.5 Existence........................................................52
Section 5.6 Maintenance of Properties........................................52
Section 5.7 Payment of Taxes and Other Claims................................52
Section 5.8 Rule 144A Information Requirement................................53
Section 5.9 Stay, Extension and Usury Laws...................................53
Section 5.10 Compliance Certificate..........................................54
Section 5.11 Amendment of the Company's Rights Plan..........................54
ARTICLE SIX - NOTEHOLDERS' LISTS AND
REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' Lists...............................................55
Section 6.2 Preservation and Disclosure of Lists.............................56
Section 6.3 Reports by Trustee...............................................56
Section 6.4 Reports by Company...............................................57
ARTICLE SEVEN - REMEDIES OF THE TRUSTEE
AND NOTEHOLDERS ON AN EVENT OF DEFAULT
Section 7.1 Events of Default................................................57
Section 7.2 Payments of Notes on Default; Suit Therefor......................60
iii
<PAGE>
PAGE
Section 7.3 Application of Monies Collected by Trustee.......................63
Section 7.4 Proceedings by Noteholder........................................64
Section 7.5 Proceedings by Trustee...........................................65
Section 7.6 Remedies Cumulative and Continuing...............................65
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders.........................66
Section 7.8 Notice of Defaults...............................................66
Section 7.9 Undertaking to Pay Costs.........................................67
ARTICLE EIGHT - THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee...........................68
Section 8.2 Reliance on Documents, Opinions, Etc.............................70
Section 8.3 No Responsibility for Recitals, Etc..............................71
Section 8.4 Trustee, Paying Agents, Conversion
Agents or Registrar May Own Notes...........................71
Section 8.5 Monies to be Held in Trust.......................................71
Section 8.6 Compensation and Expenses of Trustee.............................72
Section 8.7 Officers' Certificate as Evidence................................73
Section 8.8 Conflicting Interests of Trustee.................................73
Section 8.9 Eligibility of Trustee...........................................73
Section 8.10 Resignation or Removal of Trustee...............................74
Section 8.11 Acceptance by Successor Trustee.................................76
Section 8.12 Succession by Merger, Etc.......................................76
Section 8.13 Preferential Collection of Claims...............................77
Section 8.14 Trustee's Application for Instructions from the Company.........77
ARTICLE NINE - THE NOTEHOLDERS
Section 9.1 Action by Noteholders............................................78
Section 9.2 Proof of Execution by Noteholders................................79
Section 9.3 Who Are Deemed Absolute Owners...................................79
Section 9.4 Company-Owned Notes Disregarded..................................79
Section 9.5 Revocation of Consents; Future Holders Bound.....................80
ARTICLE TEN - MEETINGS OF NOTEHOLDERS
Section 10.1 Purpose of Meetings.............................................81
Section 10.2 Call of Meetings by Trustee.....................................81
Section 10.3 Call of Meetings by Company or Noteholders......................82
Section 10.4 Qualifications for Voting.......................................82
Section 10.5 Regulations.....................................................82
Section 10.6 Voting..........................................................83
Section 10.7 No Delay of Rights by Meeting...................................84
iv
<PAGE>
PAGE
ARTICLE ELEVEN - SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders..........84
Section 11.2 Supplemental Indenture with Consent of Noteholders..............86
Section 11.3 Effect of Supplemental Indenture................................87
Section 11.4 Notation on Notes...............................................88
Section 11.5 Evidence of Compliance of Supplemental Indenture to be
Furnished to Trustee.......................................88
ARTICLE TWELVE - CONSOLIDATION, MERGER,
SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc., on Certain Terms.................89
Section 12.2 Successor Corporation to be Substituted.........................89
Section 12.3 Opinion of Counsel to be Given Trustee..........................90
ARTICLE THIRTEEN - SATISFACTION AND
DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture..........................................91
Section 13.2 Deposited Monies to be Held in Trust by Trustee.................92
Section 13.3 Paying Agent to Repay Monies Held...............................92
Section 13.4 Return of Unclaimed Monies......................................92
Section 13.5 Reinstatement...................................................93
ARTICLE FOURTEEN - IMMUNITY OF
INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations................93
ARTICLE FIFTEEN - CONVERSION OF NOTES
Section 15.1 Right to Convert................................................94
Section 15.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for
Interest or Dividends......................................94
Section 15.3 Cash Payments in Lieu of Fractional Shares......................97
Section 15.4 Conversion Price................................................97
v
<PAGE>
PAGE
Section 15.5 Adjustment of Conversion Price..................................97
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale......112
Section 15.7 Taxes on Shares Issued.........................................113
Section 15.8 Reservation of Shares; Shares to be Fully Paid;
Compliance with Governmental Requirements; Listing
of Common Stock............................................113
Section 15.9 Responsibility of Trustee......................................115
Section 15.10 Notice to Holders Prior to Certain Actions....................115
ARTICLE SIXTEEN - MISCELLANEOUS
PROVISIONS
Section 16.1 Provisions Binding on Company's Successors.....................117
Section 16.2 Official Acts by Successor Corporation.........................117
Section 16.3 Addresses for Notices, Etc.....................................117
Section 16.4 Governing Law..................................................118
Section 16.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee....................................118
Section 16.6 Legal Holidays.................................................119
Section 16.7 Trust Indenture Act............................................119
Section 16.8 No Security Interest Created...................................119
Section 16.9 Benefits of Indenture..........................................120
Section 16.10 Table of Contents, Headings, Etc..............................120
Section 16.11 Authenticating Agent..........................................120
Section 16.12 Execution in Counterparts.....................................121
Section 16.13 Severability..................................................121
vi
<PAGE>
Reconciliation and Tie Between the Trust Indenture Act of 1939 and
Indenture, dated as of February 1, 2000, between Conexant Systems, Inc. and Bank
One Trust Company, National Association, as Trustee.
TRUST INDENTURE ACT SECTION INDENTURE SECTION
Section 310(a)(1)...................................... 8.9
(a)(2)........................................ 8.9
(a)(3)........................................ Not Applicable
(a)(4)........................................ Not Applicable
(a)(5)........................................ 8.9
(b)........................................... 8.8; 8.9; 8.10; 8.11
Section 311(a)......................................... 8.13
(b)........................................... 8.13
(b)(2)........................................ 8.13
Section 312(a)......................................... 6.1; 6.2(a)
(b)........................................... 6.2(b)
(c)........................................... 6.2(c)
Section 313(a)......................................... 6.3(a)
(b)........................................... 6.3(a)
(c)........................................... 6.3(a)
(d)........................................... 6.3(b)
Section 314(a)......................................... 6.4
(b)........................................... Not Applicable
(c)(1)........................................ 16.5
(c)(2)........................................ 16.5
(c)(3)........................................ Not Applicable
(d)........................................... Not Applicable
(e)........................................... 16.5
Section 315(a)......................................... 8.1
(b)........................................... 7.8
(c)........................................... 8.1
(d)........................................... 8.1
(d)(1)........................................ 8.1(a)
(d)(2)........................................ 8.1(b)
(d)(3)........................................ 8.1(c)
(e)........................................... 7.9
Section 316(a)......................................... 7.7
(a)(1)(A)..................................... 7.7
(a)(1)(B)..................................... 7.7
(a)(2)........................................ Not Applicable
(b)........................................... 7.4
Section 317(a)(1)...................................... 7.5
(a)(2)........................................ 7.5
(b)........................................... 5.4
Section 318(a)......................................... 16.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
vii
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INDENTURE
INDENTURE, dated as of February 1, 2000, between Conexant Systems,
Inc., a Delaware corporation (hereinafter called the "Company") having its
principal office at 4311 Jamboree Road, Newport Beach, California 92660-3095,
and Bank One Trust Company, National Association, a national banking
association, as trustee hereunder (hereinafter called the "Trustee") having its
principal corporate office at 1 Bank One Plaza, Suite IL1-0126, Chicago,
Illinois, 60670 - 0126
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 4% Convertible Subordinated Notes due 2007
(hereinafter called the "Notes"), in an aggregate principal amount not to exceed
$500,000,000 (or $650,000,000 if the purchase right set forth in Section 2 of
the Purchase Agreement dated January 28, 2000 (as amended from time to time by
the parties thereto) by and between the Company and the Initial Purchaser is
exercised in full) and, to provide the terms and conditions upon which the Notes
are to be authenticated, issued and delivered, the Company has duly authorized
the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repayment upon a
Fundamental Change, and a form of conversion notice to be borne by the Notes are
to be substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated,
<PAGE>
issued and delivered, and in consideration of the premises and of the purchase
and acceptance of the Notes by the holders thereof, the Company covenants and
agrees with the Trustee for the equal and proportionate benefit of the
respective holders from time to time of the Notes (except as otherwise provided
below), as follows:
ARTICLE ONE
DEFINITIONS
Section 1.1 DEFINITIONS. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein", "hereof", "hereunder", and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in The City of New
York or the city
2
<PAGE>
in which the Corporate Trust Office is located are authorized or obligated by
law or executive order to close or be closed.
"CLOSING PRICE" has the meaning specified in Section 15.5(h)(1).
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"COMMON STOCK" means any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 15.6, however, shares issuable on conversion of Notes shall include
only shares of the class designated as common stock of the Company at the date
of this Indenture (namely, the Common Stock, par value $1 per share) or shares
of any class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption by the
Company; provided, however, that if at any time there shall be more than one
such resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"COMPANY" means the corporation named as the "Company" in the first
paragraph of this Indenture, and, subject to the provisions of Article Twelve,
shall include its successors and assigns.
"COMPANY NOTICE" has the meaning specified in Section 3.5(b).
"CONEXANT CREDIT AGREEMENT" means the Credit Agreement dated as of
December 21, 1998 among the Company,
3
<PAGE>
certain subsidiaries of the Company from time to time party thereto, the lenders
from time to time party thereto (the "Lenders"), the Issuing Banks (as defined
therein) and Credit Suisse First Boston, as Administrative Agent and Collateral
Agent for the Lenders, as such agreement may be amended, modified, restated or
supplemented from time to time and any deferral, renewal, extension, refunding,
refinancing or replacement thereof.
"CONVERSION PRICE" has the meaning specified in Section 15.4.
"CORPORATE TRUST OFFICE" or other similar term, means the designated
office of the Trustee at which at any particular time its corporate trust
business shall be administered, which office is, at the date as of which this
Indenture is dated, located at 1 Bank One Plaza, Suite IL1-0126, Chicago,
Illinois, 60670-0126.
"CUSTODIAN" means Bank One Trust Company, National Association, as
custodian with respect to the Notes in global form, or any successor entity
thereto.
"DEFAULT" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.
"DEFAULTED INTEREST" has the meaning specified in
Section 2.3.
"DEPOSITARY" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.5(d) as the
Depositary with respect to such Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) any Senior Indebtedness
outstanding from time to time under the Conexant Credit Agreement and (ii) any
other Senior Indebtedness with respect to which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes
of this Indenture (provided that such instrument, agreement or other document
may place limitations and conditions on the right of such Senior Indebtedness to
4
<PAGE>
exercise the rights of Designated Senior Indebtedness). If any payment made to
any holder of any Designated Senior Indebtedness or its Representative with
respect to such Designated Senior Indebtedness is rescinded or must otherwise be
returned by such holder or Representative upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the reinstated Indebtedness of the
Company arising as a result of such rescission or return shall constitute
Designated Senior Indebtedness effective as of the date of such rescission or
return.
"EVENT OF DEFAULT" means any event specified in Section 7.1(a), (b),
(c), (d) or (e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.
"FUNDAMENTAL CHANGE" means the occurrence of any transaction or event
in connection with which all or substantially all of the Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock listed (or, upon consummation of or immediately following such transaction
or event, which will be listed) on a United States national securities exchange
or approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.
"GLOBAL NOTE" has the meaning set forth in Section 2.5(b).
"HEADQUARTERS LEASE DOCUMENTATION" means the following (individually
and collectively):
(i) the Lease dated as of August 18, 1998 between Deutsche
Bank AG, New York Branch, as Agent Lessor for the Lessors named
therein, and the Company, as Lessee, (the "Lease");
(ii) the Guarantee dated as of August 18, 1998 made by
Rockwell International Corporation in favor of Deutsche Bank AG, New
York Branch and/or Grand Cayman Branch, in its individual capacity, as
Agent Lessor and
5
<PAGE>
as Agent and various financial institutions referred to therein as
Lessors or as Lenders (the "Guarantee");
(iii) the Participation Agreement dated as of August 18, 1998,
among the Company, as Lessee, Deutsche Bank AG, New York Branch and/or
Cayman Islands Branch, as Agent Lessor, Lessor, Agent for the Lenders
and Lender and Deutsche Bank Securities Inc., as Arranger (the
"Participation Agreement"); and
(iv) the other operative agreements referred to in any of the
Lease, the Guarantee or the Participation Agreement;
in each case as amended, modified, supplemented or restated from time to time.
"INDEBTEDNESS" means, with respect to any Person, and without
duplication: (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof), other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services; (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances; (c) all obligations and
liabilities (contingent or otherwise) in respect of leases of such Person
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person and all obligations and other liabilities (contingent or otherwise) under
the Headquarters Lease Documentation and any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to
6
<PAGE>
purchase such leased property; (d) all obligations of such Person (contingent or
otherwise) with respect to an interest rate or other swap, cap or collar
agreement or other similar instrument or agreement or foreign currency hedge,
exchange, purchase or similar instrument or agreement; (e) all direct or
indirect guaranties or similar agreements by such Person in respect of, and
obligations or liabilities (contingent or otherwise) of such Person to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (d); (f) any indebtedness or other obligations described
in clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured thereby shall
have been assumed by such Person; and (g) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (f). For purposes of clause (c) of this definition, the phrase "all
obligations and other liabilities (continent or otherwise) under the
Headquarters Lease Documentation" shall mean the "Lease Payment Obligations" as
such term is defined in the Lease referred to in the definition of Headquarters
Lease Documentation, without regard to whether such Lease Payment Obligations
are paid pursuant to the Lease or the Guarantee referred to in the definition of
Headquarters Lease Documentation, but without duplication of any obligation,
liability or payment in respect of any amount constituting Lease Payment
Obligations under the Lease or the Guarantee.
"INDENTURE" means this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"LIQUIDATED DAMAGES" has the meaning specified for "Liquidated Damages
Amount" in Section 2(e) of the Registration Rights Agreement.
7
<PAGE>
"NON-PAYMENT DEFAULT" has the meaning specified in Section 4.2(ii).
"NOTE" or "NOTES" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including the Global Note.
"NOTE REGISTER" has the meaning specified in Section 2.5(a).
"NOTE REGISTRAR" has the meaning specified in Section 2.5(a).
"NOTEHOLDER" or "HOLDER" as applied to any Note, or other similar
terms (but excluding the term "beneficial holder"), means any Person in whose
name at the time a particular Note is registered on the Note registrar's books.
"NOTICE DATE" has the meaning specified in Section 3.1(b).
"OFFICERS' CERTIFICATE", when used with respect to the Company, means
a certificate signed by both (a) the Chairman of the Board, the Chief Executive
Officer, the President or any Vice President (whether or not designated by a
number or numbers or word or words added before or after the title "Vice
President") and (b) the Treasurer or any Assistant Treasurer, the Controller or
any Assistant Controller, or the Secretary or any Assistant Secretary of the
Company.
"OPINION OF COUNSEL" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or other counsel
reasonably acceptable to the Trustee.
"OPTIONAL REDEMPTION" has the meaning specified in Section 3.1(b).
"OUTSTANDING", when used with reference to Notes and subject to the
provisions of Section 9.4, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
8
<PAGE>
(b) Notes, or portions thereof, (i) for the redemption of
which monies in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or
(ii) which shall have been otherwise defeased in accordance with
Article Thirteen;
(c) Notes in lieu of which, or in substitution for which,
other Notes shall have been authenticated and delivered pursuant to the
terms of Section 2.6; and
(d) Notes converted into Common Stock pursuant to Article
Fifteen and Notes deemed not outstanding pursuant to Article Three.
"PAYMENT BLOCKAGE NOTICE" has the meaning
specified in Section 4.2(ii).
"PERSON" means a corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a joint stock company, a
trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.
"PORTAL MARKET" means The Portal Market operated
by the National Association of Securities Dealers, Inc. or
any successor thereto.
"PREDECESSOR NOTE" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note, and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note that it replaces.
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement, dated as of February 1, 2000, among the Company and the Initial
Purchasers, as amended from time to time in accordance with its terms.
"REPRESENTATIVE" means (a) the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness or (b) with respect to any
Senior Indebtedness that does not have any such trustee, agent or other
9
<PAGE>
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners of
such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting
with the consent of the required Persons necessary to bind such holders or
owners of such Senior Indebtedness and (ii) in the case of all other such Senior
Indebtedness, the holder or owner of such Senior Indebtedness.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means an
officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer this Indenture.
"RESTRICTED SECURITIES" has the meaning specified
in Section 2.5(d).
"RIGHTS" has the meaning specified in Section
5.11.
"RIGHTS AGREEMENT" has the meaning specified in
Section 5.11.
"RULE 144A" means Rule 144A as promulgated under
the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.
"SENIOR INDEBTEDNESS" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether outstanding
on the date of this Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Notes or
10
<PAGE>
expressly provides that such Indebtedness is "pari passu" or "junior" to the
Notes. Notwithstanding the foregoing, the term "Senior Indebtedness" shall not
include the Company's 4 1/4% Convertible Subordinated Notes due 2006 or any
Indebtedness of the Company to any subsidiary of the Company, a majority of the
voting stock of which is owned, directly or indirectly, by the Company. If any
payment made to any holder of any Senior Indebtedness or its Representative with
respect to such Senior Indebtedness is rescinded or must otherwise be returned
by such holder or Representative upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the reinstated Indebtedness of the
Company arising as a result of such rescission or return shall constitute Senior
Indebtedness effective as of the date of such rescission or return.
"SIGNIFICANT SUBSIDIARY" means, as of any date of determination, a
Subsidiary of the Company that would constitute a "significant subsidiary" as
such term is defined under Rule 1-02 of Regulation S-X of the Commission.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more subsidiaries of such Person (or any combination
thereof).
"TRADING DAY" has the meaning specified in Section 15.5(h)(5).
"TRIGGER EVENT" has the meaning specified in Section 15.5(d).
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended, as it was in force at the date of this Indenture, except as provided in
Sections 11.3 and 15.6; provided, however, that, in the event the Trust
Indenture Act of 1939 is amended after the date hereof, the term "Trust
Indenture Act" shall mean, to the extent
11
<PAGE>
required by such amendment, the Trust Indenture Act of 1939 as so amended.
"TRUSTEE" means Bank One Trust Company, National Association, and its
successors and any corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party and any successor trustee at
the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in Sections
2.5 and 3.5 and Article Fifteen.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES
Section 2.1 DESIGNATION AMOUNT AND ISSUE OF Notes. The Notes shall be
designated as "4% Convertible Subordinated Notes due 2007". Notes not to exceed
the aggregate principal amount of $500,000,000 (or $650,000,000 if the purchase
right set forth in Section 2 of the Purchase Agreement dated January 28, 2000
(as amended from time to time by the parties thereto) by and between the Company
and the Initial Purchaser is exercised in full) (except pursuant to Sections
2.5, 2.6, 3.3, 3.5 and 15.2 hereof) upon the execution of this Indenture, or
from time to time thereafter, may be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Notes to or upon the written order of the Company, signed by (a)
its Chairman of the Board, Chief Executive Officer, President or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title "Vice President") and (b) its Treasurer or any
Assistant Treasurer, its Controller or any Assistant Controller or its Secretary
or any Assistant Secretary, without any further action by the Company hereunder.
Section 2.2 FORM OF NOTES. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may
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<PAGE>
approve (execution thereof to be conclusive evidence of such approval) and as
are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any securities exchange or automated
quotation system on which the Notes may be listed, or to conform to usage.
Any Note in global form shall represent such of the outstanding Notes
as shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the holder of such Notes in
accordance with this Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the holder of such
Note.
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 DATE AND DENOMINATION OF NOTES; PAYMENTS OF INTEREST. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
Exhibit A hereto. Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve (12) 30-day months.
The Person in whose name any Note (or its Predecessor Note) is
registered on the Note register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the interest
payable on such interest payment date, except (i) that the interest payable upon
redemption (unless the
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date of redemption is an interest payment date) will be payable to the Person to
whom principal is payable and (ii) as set forth in the next succeeding sentence.
In the case of any Note (or portion thereof) that is converted into Common Stock
during the period from (but excluding) a record date to (but excluding) the next
succeeding interest payment date either (x) if such Note (or portion thereof)
has been called for redemption on a redemption date which occurs during such
period, or is to be redeemed in connection with a Fundamental Change on a
Repurchase Date (as defined in Section 3.5) that occurs during such period, the
Company shall not be required to pay interest on such interest payment date in
respect of any such Note (or portion thereof) except to the extent required to
be paid upon redemption of such Note or portion thereof pursuant to Section 3.3
or 3.5 hereof or (y) if such Note (or portion thereof) has not been called for
redemption on a redemption date that occurs during such period and is not to be
redeemed in connection with a Fundamental Change on a Repurchase Date that
occurs during such period, such Note (or portion thereof) that is submitted for
conversion during such period shall be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted, as provided in the penultimate paragraph of Section 15.2
hereof. Interest shall be payable at the office of the Company maintained by the
Company for such purposes in the Borough of Manhattan, City of New York, which
shall initially be an office or agency of the Trustee and may, as the Company
shall specify to the paying agent in writing by each record date, be paid either
(i) by check mailed to the address of the Person entitled thereto as it appears
in the Note register (provided that the holder of Notes with an aggregate
principal amount in excess of $5,000,000 shall, at the written election of such
holder, be paid by wire transfer in immediately available funds) or (ii) by
transfer to an account maintained by such Person located in the United States;
provided, however, that payments to the Depositary will be made by wire transfer
of immediately available funds to the account of the Depositary or its nominee.
The term "record date" with respect to any interest payment date shall mean the
January 15 or July 15 preceding the relevant February 1 or August 1,
respectively.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any February 1 or August 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the
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relevant record date by virtue of his having been such Noteholder, and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than twenty-five (25)
days after the receipt by the Trustee of such notice, unless the
Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Person entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a special record date for the payment of such Defaulted
Interest which shall be not more than fifteen (15) days and not less
than ten (10) days prior to the date of the proposed payment, and not
less than ten (10) days after the receipt by the Trustee of the notice
of the proposed payment, the Trustee shall promptly notify the Company
of such special record date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class
postage prepaid, to each Noteholder at his address as it appears in the
Note register, not less than ten (10) days prior to such special record
date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Notes (or
their respective Predecessor Notes) were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2) of this Section 2.3.
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(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, and upon such notice as may be required
by such exchange or automated quotation system, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Section 2.4 EXECUTION OF NOTES. The Notes shall be signed in the name
and on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, Chief Executive Officer, President or any Vice President
(whether or not designated by a number or numbers or word or words added before
or after the title "Vice President") and attested by the manual or facsimile
signature of its Secretary or any of its Assistant Secretaries or its Treasurer
or any of its Assistant Treasurers (which may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Notes as shall bear
thereon a certificate of authentication substantially in the form set forth on
the form of Note attached as Exhibit A hereto, manually executed by the Trustee
(or an authenticating agent appointed by the Trustee as provided by Section
16.11), shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this
Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company, and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
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Section 2.5 EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES;
RESTRICTIONS ON TRANSFER; DEPOSITARY.
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the "Note register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. The Note register shall be in
written form or in any form capable of being converted into written form within
a reasonably prompt period of time. The Trustee is hereby appointed "Note
registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in accordance with
Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 5.2. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes which
the Noteholder making the exchange is entitled to receive bearing registration
numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
All Notes presented or surrendered for registration of transfer or for
exchange, redemption or conversion shall (if so required by the Company or the
Note registrar) be duly endorsed, or be accompanied by a written
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instrument or instruments of transfer in form satisfactory to the Company, and
the Notes shall be duly executed by the Noteholder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
Neither the Company nor the Trustee nor any Note registrar shall be
required to exchange or register a transfer of (a) any Notes for a period of
fifteen (15) days next preceding any selection of Notes to be redeemed, (b) any
Notes or portions thereof called for redemption pursuant to Section 3.2, (c) any
Notes or portions thereof surrendered for conversion pursuant to Article Fifteen
or (d) any Notes or portions thereof tendered for redemption (and not withdrawn)
pursuant to Section 3.5.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Notes that, upon
initial issuance are beneficially owned by QIBs or as a result of a sale or
transfer after initial issuance are beneficially owned by QIBs, will be
represented by one or more Notes in global form registered in the name of the
Depositary or the nominee of the Depositary (the "Global Note"), except as
otherwise specified below. The transfer and exchange of beneficial interests in
any such Global Note shall be effected through the Depositary in accordance with
this Indenture and the procedures of the Depositary therefor. The Trustee shall
make appropriate endorsements to reflect increases or decreases in the principal
amounts of any such Global Note as set forth on the face of the Note ("Principal
Amount") to reflect any such transfers. Except as provided below, beneficial
owners of a Global Note shall not be entitled to have certificates registered in
their names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and will not be considered holders of such
Global Note.
(c) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A, and upon receipt of the
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definitive Note or Notes being so transferred, together with a certification,
substantially in the form on the reverse of the Note, from the transferor that
the transfer is being made in compliance with Rule 144A (or other evidence
satisfactory to the Trustee), the Trustee shall make an endorsement on the
Global Note to reflect an increase in the aggregate Principal Amount of the
Notes represented by such Global Note, and the Trustee shall cancel such
definitive Note or Notes in accordance with the standing instructions and
procedures of the Depositary, the aggregate Principal Amount of the Notes
represented by such Global Note to be increased accordingly; provided, however,
that no definitive Note, or portion thereof, in respect of which the Company or
an Affiliate of the Company held any beneficial interest shall be included in
such Global Note until such definitive Note is freely tradable in accordance
with Rule 144(k) under the Securities Act, provided further that the Trustee
shall issue Notes in definitive form upon any transfer of a beneficial interest
in the Global Note to the Company or any Affiliate of the Company.
Upon any sale or transfer of a Note to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to
restrictions on transfer substantially in the form set forth in Exhibit B to
this Indenture. Upon any transfer of a beneficial interest in the Global Note to
an Institutional Accredited Investor, the Trustee shall make an endorsement on
the Global Note to reflect a decrease in the aggregate Principal Amount of the
Notes represented by such Global Note, and the Company shall execute a
definitive Note or Notes in exchange therefore, and the Trustee, upon receipt of
such definitive Note or Notes and the written order of the Company, shall
authenticate and deliver such, definitive Note or Notes.
Any Note in global form may be endorsed with or have incorporated in
the text thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the Depositary
or by the National Association of Securities Dealers, Inc. in order for the
Notes to be tradeable on The Portal Market or as may be required for the Notes
to be tradeable on any other market developed for trading of securities pursuant
to Rule 144A or required to comply with
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any applicable law or any regulation thereunder or with the rules and
regulations of any securities exchange or automated quotation system upon which
the Notes may be listed or traded or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular Notes are subject.
(d) Every Note that bears or is required under this Section 2.5(d) to
bear the legend set forth in this Section 2.5(d) (together with any Common Stock
issued upon conversion of the Notes and required to bear the legend set forth in
Section 2.5(e), collectively, the "Restricted Securities") shall be subject to
the restrictions on transfer set forth in this Section 2.5(d) (including those
set forth in the legend set forth below) unless such restrictions on transfer
shall be waived by written consent of the Company, and the holder of each such
Restricted Security, by such Noteholder's acceptance thereof, agrees to be bound
by all such restrictions on transfer. As used in Sections 2.5(d) and 2.5(e), the
term "transfer" encompasses any sale, pledge, loan, transfer or other
disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.5(e), if applicable)
shall bear a legend in substantially the following form, unless such Note has
been sold pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time of
such transfer), or unless otherwise agreed by the Company in writing, with
written notice thereof to the Trustee:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
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(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) ("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL
NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
NOTE EXCEPT (A) TO CONEXANT SYSTEMS, INC. OR ANY SUBSIDIARY THEREOF,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO
SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(E) ABOVE),
IT WILL FURNISH TO BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE
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(OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A
U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO BANK
ONE TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE (2)(E) ABOVE
OR UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN,
THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note for exchange to the
Note registrar in accordance with the provisions of this Section 2.5, be
exchanged for a new Note or Notes, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 2.5(c) and in this
Section 2.5(d)), a Note in global form may not be transferred as a whole or in
part except by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to act
as Depositary with respect to the Notes in global form. Initially, the Global
Note shall be issued to the Depositary, registered in
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the name of Cede & Co., as the nominee of the Depositary, and deposited with the
Custodian for Cede & Co.
If at any time the Depositary for a Note in global form notifies the
Company that it is unwilling or unable to continue as Depositary for such Note,
the Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within ninety (90) days
after the Company receives such notice, the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate for the authentication and
delivery of Notes, will authenticate and deliver, Notes in certificated form, in
aggregate principal amount equal to the principal amount of such Note in global
form, in exchange for such Note in global form.
If a Note in certificated form is issued in exchange for any portion
of a Note in global form after the close of business at the office or agency
where such exchange occurs on any record date and before the opening of business
at such office or agency on the next succeeding interest payment date, interest
will not be payable on such interest payment date in respect of such
certificated Note, but will be payable on such interest payment date, subject to
the provisions of Section 2.3, only to the Person to whom interest in respect of
such portion of such Note in global form is payable in accordance with the
provisions of this Indenture.
Notes in certificated form issued in exchange for all or a part of a
Note in global form pursuant to this Section 2.5 shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such Notes in certificated form to the Persons in whose names such Notes
in certificated form are so registered.
At such time as all interests in a Note in global form have been
redeemed, converted, canceled, exchanged for Notes in certificated form, or
transferred to a transferee who receives Notes in certificated form thereof,
such Note in global form shall, upon receipt thereof, be canceled by the Trustee
in accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if any
interest in a Note in global form is exchanged for Notes in
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certificated form, redeemed, converted, repurchased or canceled, or transferred
to a transferee who receives Notes in certificated form therefor or any Note in
certificated form is exchanged or transferred for part of a Note in global form,
the principal amount of such Note in global form shall, in accordance with the
standing procedures and instructions existing between the Depositary and the
Custodian, be appropriately reduced or increased, as the case may be, and an
endorsement shall be made on such Note in global form, by the Trustee or the
Custodian, at the direction of the Trustee, to reflect such reduction or
increase.
(e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
Note shall bear a legend in substantially the following form, unless such Common
Stock has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer) or such Common Stock has been issued upon conversion of
Notes that have been transferred pursuant to a registration statement that has
been declared effective under the Securities Act, or unless otherwise agreed by
the Company in writing with written notice thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
THE HOLDER HEREOF AGREES THAT, UNTIL THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE COMMON STOCK EVIDENCED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1)
IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED
HEREBY EXCEPT (A) TO CONEXANT SYSTEMS, INC. OR ANY SUBSIDIARY THEREOF,
(B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) THAT PRIOR TO
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SUCH TRANSFER, FURNISHES TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER
AGENT OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), (D) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT
(AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2)
PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (1)(E)
ABOVE), IT WILL FURNISH TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS
TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL
DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(E) ABOVE) A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER
WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C. (OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(E)
ABOVE OR UPON ANY TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY AFTER
THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES"
AND "U.S. PERSON" HAVE THE
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MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.5(e).
(f) Any Note or Common Stock issued upon the conversion or exchange of
a Note that, prior to the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
is purchased or owned by the Company or any Affiliate thereof may not be resold
by the Company or such Affiliate unless registered under the Securities Act or
resold pursuant to an exemption from the registration requirements of the
Securities Act in a transaction which results in such Notes or Common Stock, as
the case may be, no longer being "restricted securities" (as defined under Rule
144).
Section 2.6 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Note, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Company, to the Trustee
and, if applicable, to such authenticating agent such security or indemnity as
may be required by them to save each of them harmless for any loss, liability,
cost or expense caused by or connected with such substitution, and, in every
case of destruction, loss or theft, the applicant shall also furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof.
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Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described in
the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or has been tendered for redemption (and not withdrawn) or
is to be converted into Common Stock shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Note, pay or
authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Note), as the case
may be, if the applicant for such payment or conversion shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
for any loss, liability, cost or expense caused by or connected with such
substitution, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company, the Trustee and, if applicable, any paying
agent or conversion agent evidence to their satisfaction of the destruction,
loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Note is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
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Section 2.7 TEMPORARY NOTES. Pending the preparation of Notes in
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the Notes in certificated form, but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined
by the Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Notes in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Notes in
certificated form (other than in the case of Notes in global form) and thereupon
any or all temporary Notes (other than any such Note in global form) may be
surrendered in exchange therefor, at each office or agency maintained by the
Company pursuant to Section 5.2 and the Trustee or such authenticating agent
shall authenticate and make available for delivery in exchange for such
temporary Notes an equal aggregate principal amount of Notes in certificated
form. Such exchange shall be made by the Company at its own expense and without
any charge therefor. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits and subject to the same limitations
under this Indenture as Notes in certificated form authenticated and delivered
hereunder.
Section 2.8 CANCELLATION OF NOTES PAID, ETC. All Notes surrendered for
the purpose of payment, redemption, conversion, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by
it, and no Notes shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Trustee shall dispose of such
canceled Notes in accordance with its customary procedures. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.
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Section 2.9 CUSIP NUMBERS. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Noteholders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.1 (a) INITIAL PROHIBITION ON REDEMPTION. Except as otherwise
provided in Section 3.5, the Notes may not be redeemed by the Company, in whole
or in part, at any time prior to February 6, 2003.
(b) OPTIONAL REDEMPTION BY THE COMPANY. At any time on or after
February 6, 2003, and prior to maturity, the Notes may be redeemed at the option
of the Company (an "Optional Redemption"), in whole or in part, upon notice as
set forth in Section 3.2 (the "Notice Date"), at the following Optional
Redemption prices (expressed as percentages of the principal amount), together
in each case with accrued and unpaid interest, if any (including Liquidated
Damages, if any) to, but excluding, the date fixed for redemption:
Period Redemption Price
- ------ ----------------
Beginning on February 6, 2003 and ending on 102.286%
January 31, 2004
Beginning on February 1, 2004 and ending on 101.714%
January 31, 2005
Beginning on February 1, 2005 and ending on 101.143%
January 31, 2006
Beginning on February 1, 2006 and ending on 100.571%
January 31, 2007
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and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
Section 3.2 NOTICE OF REDEMPTIONS; SELECTION OF NOTES. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and it or, at its written request received by the Trustee not fewer
than forty-five (45) days prior (or such shorter period of time as may be
acceptable to the Trustee) to the date fixed for redemption, the Trustee in the
name of and at the expense of the Company, shall mail or cause to be mailed a
notice of such redemption not fewer than thirty (30) nor more than sixty (60)
days prior to the date fixed for redemption to the holders of Notes so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Note register; provided, however, that if the Company shall give such notice, it
shall also give written notice, and written notice of the Notes to be redeemed,
to the Trustee. The Company may not give notice of any redemption of the Notes
if a default in payment of interest or premium, if any, on the Notes has
occurred and is continuing. Such mailing shall be by first class mail. The
notice if mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the holder receives such notice. In any
case, failure to give such notice by mail or any defect in the notice to the
holder of any Note designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Note.
Concurrently with the mailing of any such notice of redemption, the Company
shall issue a press release announcing such redemption, the form and content of
which press release shall be determined by the Company in its sole discretion.
The failure to issue any such press release or any defect therein shall not
affect the validity of the redemption notice or any of the proceedings for the
redemption of any Note called for redemption.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the CUSIP number or numbers of the Notes being
redeemed, the date fixed for redemption (which shall be a Business Day), the
redemption price at which Notes are to be redeemed, the place or places of
payment, that payment will be made upon
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presentation and surrender of such Notes, that interest accrued to the date
fixed for redemption will be paid as specified in said notice, and that on and
after said date interest thereon or on the portion thereof to be redeemed will
cease to accrue. Such notice shall also state the current Conversion Price and
the date on which the right to convert such Notes or portions thereof into
Common Stock will expire. If fewer than all the Notes are to be redeemed, the
notice of redemption shall identify the Notes to be redeemed (including CUSIP
numbers, if any). In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that, on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.2, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money in immediately available funds sufficient to
redeem on the redemption date all the Notes (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock) at the appropriate redemption price, together with accrued interest to,
but excluding, the date fixed for redemption; provided, however, that if such
payment is made on the redemption date it must be received by the Trustee or
paying agent, as the case may be, by 10:00 a.m. New York City time on such date.
The Company shall be entitled to retain any interest, yield or gain on amounts
deposited with the Trustee or any paying agent pursuant to this Section 3.2 in
excess of amounts required hereunder to pay the redemption price together with
accrued interest to, but excluding, the date fixed for redemption. If any Note
called for redemption is converted pursuant hereto prior to such redemption, any
money deposited with the Trustee or any paying agent or so segregated and held
in trust for the redemption of such Note shall be paid to the Company upon its
written request, or, if then held by the Company, shall be discharged from such
trust. Whenever any Notes are to be redeemed, the Company will give the Trustee
written notice in the form of an Officers' Certificate not fewer than forty five
(45) days (or such shorter period of time as may be acceptable to the Trustee)
prior to the redemption date as to the aggregate principal amount of Notes to be
redeemed.
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If less than all of the outstanding Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof of the Global Note or the
Notes in certificated form to be redeemed (in principal amounts of $1,000 or
integral multiples thereof) by lot, on a pro rata basis or by another method the
Trustee deems fair and appropriate. If any Note selected for partial redemption
is submitted for conversion in part after such selection, the portion of such
Note submitted for conversion shall be deemed (so far as may be) to be the
portion to be selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is submitted for conversion in part before
the mailing of the notice of redemption.
Upon any redemption of less than all of the outstanding Notes, the
Company and the Trustee may (but need not), solely for purposes of determining
the pro rata allocation among such Notes as are unconverted and outstanding at
the time of redemption, treat as outstanding any Notes surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3 PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date fixed for
redemption and at the place or places stated in such notice at the applicable
redemption price, together with interest accrued to (but excluding) the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Notes at the redemption price, together with
interest accrued to said date) interest on the Notes or portion of Notes so
called for redemption shall cease to accrue and, after the close of business on
the Business Day next preceding the date fixed for redemption, such Notes shall
cease to be convertible into Common Stock and, except as provided in Sections
8.5 and 13.4, to be entitled to any benefit or security under this Indenture,
and the holders thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid
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interest to (but excluding) the date fixed for redemption. On presentation and
surrender of such Notes at a place of payment in said notice specified, the said
Notes or the specified portions thereof shall be paid and redeemed by the
Company at the applicable redemption price, together with interest accrued
thereon to (but excluding) the date fixed for redemption; provided, however,
that if the applicable redemption date is an interest payment date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holders of such Notes registered as such on the relevant record date instead
of the holders surrendering such Notes for redemption on such date.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of redemption during the continuance of a default in payment
of interest or premium, if any, on the Notes. If any Note called for redemption
shall not be so paid upon surrender thereof for redemption, the principal and
premium, if any, shall, until paid or duly provided for, bear interest from the
date fixed for redemption at the rate borne by the Note and such Note shall
remain convertible into Common Stock until the principal and premium, if any,
and interest shall have been paid or duly provided for.
Section 3.4 CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article Three, the obligation of the
Company to pay the redemption price of such Notes, together with interest
accrued to (but excluding) the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which will be filed
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with the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article Fifteen) surrendered by such purchasers for conversion, all
as of immediately prior to the close of business on the date fixed for
redemption (and the right to convert any such Notes shall be extended through
such time), subject to payment of the above amount as aforesaid. At the
direction of the Company, the Trustee shall hold and dispose of any such amount
paid to it in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee's prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Notes shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture.
Section 3.5 REDEMPTION AT OPTION OF HOLDERS.
(a) If there shall occur a Fundamental Change at any time prior to
maturity of the Notes, then each Noteholder shall have the right, at such
holder's option, to require the Company to redeem all of such holder's Notes, or
any portion thereof that is an integral multiple of $1,000 principal amount, on
the date (the "Repurchase Date") that is thirty (30) days after the date of the
Company Notice (as defined in Section 3.5(b) below) of such Fundamental Change
(or, if such 30th day is not a Business Day, the immediately preceding Business
Day) at a redemption price equal to 100% of the principal amount thereof,
together with accrued interest to (but excluding) the Repurchase Date; provided,
however, that, if such Repurchase Date is a February 1 or August 1, then the
interest payable on such date shall be paid to the holders of record of the
Notes on the next preceding January 15 or July 15, respectively.
Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company's written direction to the Trustee, the Trustee
shall authenticate and deliver to the holder thereof, at the expense of the
Company, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented.
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(b) On or before the tenth day after the occurrence of a Fundamental
Change, the Company or at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree in
writing to a shorter period), the Trustee in the name of and at the expense of
the Company, shall mail or cause to be mailed to all holders of record on the
date of the Fundamental Change a notice (the "Company Notice") of the occurrence
of such Fundamental Change and of the redemption right at the option of the
holders arising as a result thereof. Such notice shall be mailed in the manner
and with the effect set forth in the first paragraph of Section 3.2 (without
regard for the time limits set forth therein). If the Company shall give such
notice, the Company shall also deliver a copy of the Company Notice to the
Trustee at such time as it is mailed to Noteholders. Concurrently with the
mailing of any Company Notice, the Company shall issue a press release
announcing such Fundamental Change referred to in the Company Notice, the form
and content of which press release shall be determined by the Company in its
sole discretion. The failure to issue any such press release or any defect
therein shall not affect the validity of the Company Notice or any proceedings
for the redemption of any Note which any Noteholder may elect to have the
Company repurchase as provided in this Section 3.5.
Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Notes, that the holder must exercise the redemption right on
or prior to the close of business on the Repurchase Date (the "Fundamental
Change Expiration Time"), that the holder shall have the right to withdraw any
Notes surrendered prior to the Fundamental Change Expiration Time, a description
of the procedure which a Noteholder must follow to exercise such redemption
right and to withdraw any surrendered Notes, the place or places where the
holder is to surrender such holder's Notes, and the amount of interest accrued
on each Note to the Repurchase Date.
No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders' redemption rights or affect the validity of
the proceedings for the repurchase of the Notes pursuant to this Section 3.5.
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(c) For a Note to be so redeemed at the option of the holder, the
Company must receive at the office or agency of the Company maintained for that
purpose or, at the option of such holder, the Corporate Trust Office, such Note
with the form entitled "Option to Elect Repayment Upon A Fundamental Change" on
the reverse thereof duly completed, together with such Notes duly endorsed for
transfer, on or before the Fundamental Change Expiration Time. All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Note for repayment shall be determined by the Company, whose determination shall
be final and binding absent manifest error.
(d) On or prior to the Repurchase Date, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money sufficient to repay on the Repurchase Date all
the Notes to be redeemed on such date at the appropriate redemption price,
together with accrued interest to (but excluding) the Repurchase Date; provided,
however, that if such payment is made on the Repurchase Date it must be received
by the Trustee or paying agent, as the case may be, by 10:00 a.m. New York City
time, on such date. Payment for Notes surrendered for redemption (and not
withdrawn) prior to the Fundamental Change Expiration Time will be made promptly
(but in no event more than five (5) Business Days) following the Repurchase Date
by mailing checks for the amount payable to the holders of such Notes entitled
thereto as they shall appear on the registry books of the Company.
(e) In the case of a reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.6 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive stock, securities or other property or assets (including cash), which
includes shares of Common Stock of the Company or shares of common stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
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resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of the Notes to cause the Company to repurchase the Notes following a
Fundamental Change, including without limitation the applicable provisions of
this Section 3.5 and the definitions of Common Stock and Fundamental Change, as
appropriate, as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provisions apply to such other
Person if different from the Company and the common stock issued by such Person
(in lieu of the Company and the Common Stock of the Company).
(f) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act to the extent then applicable in
connection with the redemption rights of the holders of Notes in the event of a
Fundamental Change.
ARTICLE FOUR
SUBORDINATION OF NOTES
Section 4.1 AGREEMENT OF SUBORDINATION. The Company covenants and
agrees, and each holder of Notes issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article Four, and each Person holding any Note, whether upon
original issue or upon registration of transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on all Notes (including, but not limited
to, the redemption price with respect to the Notes called for redemption in
accordance with Section 3.2 or submitted for redemption in accordance with
Section 3.5, as the case may be, as provided in this Indenture) issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full in cash or other
payment satisfactory to the holders of Senior Indebtedness of all Senior
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Indebtedness, whether outstanding at the date of this Indenture or thereafter
incurred.
No provision of this Article Four shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2 PAYMENTS TO NOTEHOLDERS. No payment shall be made with
respect to the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on the Notes (including, but not limited to, the redemption
price with respect to the Notes to be called for redemption in accordance with
Section 3.2 or submitted for redemption in accordance with Section 3.5, as the
case may be, as provided in this Indenture), except payments and distributions
made by the Trustee as permitted by the first or second paragraph of Section
4.5, if:
(i) a default in the payment of principal, premium, if any, interest,
rent or other obligations in respect of Senior Indebtedness occurs and is
continuing beyond any applicable period of grace (a "Payment Default"); or
(ii) a default, other than a Payment Default, on any Designated Senior
Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a
holder of Designated Senior Indebtedness, a Representative of Designated
Senior Indebtedness or the Company (a "Non-Payment Default").
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 4.2 unless and until (A) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium, if any,
and interest (including Liquidated Damages, if any) on the Notes that have come
due have been paid in full in cash. No Non-Payment Default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice.
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The Company may and shall resume payments on and distributions in
respect of the Notes upon:
(1) in the case of a Payment Default, the date upon which any such
Payment Default is cured or waived or ceases to exist, or
(2) in the case of a Non-Payment Default, the earlier of (a) the date
upon which such default is cured or waived or ceases to exist or (b) 179
days after the applicable Payment Blockage Notice is received by the
Trustee,
unless this Article Four otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, or payment thereof in
accordance with its terms provided for in cash or other payment satisfactory to
the holders of such Senior Indebtedness before any payment is made on account of
the principal of, premium, if any, or interest (including Liquidated Damages, if
any) on the Notes (except payments made pursuant to Article Thirteen from monies
deposited with the Trustee pursuant thereto prior to commencement of proceedings
for such dissolution, winding up, liquidation or reorganization), and upon any
such dissolution or winding up or liquidation or reorganization of the Company
or bankruptcy, insolvency, receivership or other proceeding, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Notes or
the Trustee would be entitled, except for the provisions of this Article Four,
shall (except as aforesaid) be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the holders of the Notes or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held
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by such holders, or as otherwise required by law or a court order) or their
Representative or Representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all Senior Indebtedness in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holders of the
Notes or to the Trustee.
For purposes of this Article Four, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Four with
respect to the Notes to the payment of all Senior Indebtedness which may at the
time be outstanding. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article Twelve shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 4.2 if such other
Person shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions stated in Article Twelve.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on the Notes (including, but not limited to, the
redemption price with respect to the Notes called for redemption in accordance
with Section 3.2 or submitted for redemption at the option of the holder in
accordance with Section 3.5, as the case may be, as provided in this Indenture),
except payments and distributions made by the Trustee as permitted by the first
or second paragraph of Section 4.5, until all Senior Indebtedness has been paid
in full in cash or other payment satisfactory to the holders of Senior
Indebtedness or such acceleration is rescinded in accordance with the terms of
this Indenture. If payment of the Notes is accelerated
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because of an Event of Default, the Company or the Trustee shall promptly notify
holders of Senior Indebtedness of the acceleration.
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing provisions in this Section
4.2, shall be received by the Trustee or the holders of the Notes before all
Senior Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, or provision is made for such payment
thereof in accordance with its terms in cash or other payment satisfactory to
the holders of such Senior Indebtedness, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness or their Representative or Representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of any Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject
to the further provisions of Section 4.5.
Section 4.3 SUBROGATION OF NOTES. Subject to the payment in full of
all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article Four
(equally and ratably with the holders of all indebtedness of the Company that by
its express terms, is subordinated to other indebtedness of the Company to
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal,
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premium, if any, and interest (including Liquidated Damages, if any) on the
Notes shall be paid in full, and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the holders of the Notes or the Trustee would be
entitled except for the provisions of this Article Four, and no payment over
pursuant to the provisions of this Article Four, to or for the benefit of the
holders of Senior Indebtedness by holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness, and
the holders of the Notes, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness, and no payments or distributions of cash,
property or securities to or for the benefit of the holders of the Notes
pursuant to the subrogation provisions of this Article Four, which would
otherwise have been paid to the holders of Senior Indebtedness, shall be deemed
to be a payment by the Company to or for the account of the Notes. It is
understood that the provisions of this Article Four are and are intended solely
for the purposes of defining the relative rights of the holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article Four or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the holders of the Notes the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on the Notes as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Notes and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Four of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Four, the Trustee, subject to the provisions of Section 8.1, and
the holders of the Notes shall be entitled to rely upon any order or decree
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made by any court of competent jurisdiction in which such bankruptcy,
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the holders of the Notes, for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon and all other facts pertinent thereto or to this Article Four.
Section 4.4 AUTHORIZATION TO EFFECT Subordination. Each holder of a
Note, by its acceptance thereof, authorizes and directs the Trustee on the
holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article Four and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
7.2 hereof at least thirty (30) days before the expiration of the time to file
such claim, the holders of any Senior Indebtedness or their representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Notes.
Section 4.5 NOTICE TO TRUSTEE. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article Four.
Notwithstanding the provisions of this Article Four or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
Four, unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an Officers' Certificate) or a Representative or a holder or holders of
Senior Indebtedness or from any trustee thereof, and before the receipt of any
such written notice, the Trustee, subject to the provisions of Section 8.1,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if on a date not less than two
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Business Days prior to the date upon which by the terms hereof any such monies
may become payable for any purpose (including, without limitation, the payment
of the principal of, or premium, if any, or interest (including Liquidated
Damages, if any) on any Note) the Trustee shall not have received, with respect
to such monies, the notice provided for in this Section 4.5, then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to apply monies received to the purpose for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it on or after such prior date.
Notwithstanding anything in this Article Four to the contrary, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section 13.1, and any such payment shall not be subject to
the provisions of Section 4.1 or 4.2.
The Trustee, subject to the provisions of Section 8.1, shall be
entitled to rely on the delivery to it of a written notice by a Representative
or a person representing himself to be a holder of Senior Indebtedness (or a
trustee on behalf of such holder) to establish that such notice has been given
by a Representative or a holder of Senior Indebtedness or a trustee on behalf of
any such holder or holders. The Trustee shall not be required to make any
payment or distribution to or on behalf of a holder of Senior Indebtedness
pursuant to this Article Four unless it has received satisfactory evidence as to
the amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Four.
Section 4.6 TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. The Trustee, in
its individual capacity, shall be entitled to all the rights set forth in this
Article Four in respect of any Senior Indebtedness at any time held by it, to
the same extent as any other holder of Senior Indebtedness, and nothing in
Section 8.13 or elsewhere in this Indenture shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Four, and no implied
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covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and,
subject to the provisions of Section 8.1, the Trustee shall not be liable to any
holder of Senior Indebtedness (i) for any failure to make any payments or
distributions to such holder or (ii) if it shall pay over or deliver to holders
of Notes, the Company or any other Person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article Four or
otherwise.
Section 4.7 NO IMPAIRMENT OF SUBORDINATION. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 CERTAIN CONVERSIONS NOT DEEMED PAYMENT. For the purposes
of this Article Four only, (1) the issuance and delivery of junior securities
upon conversion of Notes in accordance with Article Fifteen shall not be deemed
to constitute a payment or distribution on account of the principal of, premium,
if any, or interest (including Liquidated Damages, if any) on Notes or on
account of the purchase or other acquisition of Notes, and (2) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares
pursuant to Section 15.3), property or securities (other than junior securities)
upon conversion of a Note shall be deemed to constitute payment on account of
the principal of, premium, if any, or interest (including Liquidated Damages, if
any) on such Note. For the purposes of this Section 4.8, the term "junior
securities" means (a) shares of any stock of any class of the Company or (b)
securities of the Company that are subordinated in right of payment to all
Senior Indebtedness that may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article Four. Nothing
contained in this Article Four or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Indebtedness) and
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the Noteholders, the right, which is absolute and unconditional, of the Holder
of any Note to convert such Note in accordance with Article Fifteen.
Section 4.9 ARTICLE APPLICABLE TO PAYING Agents. If at any time any
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article Four shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article Four in addition to
or in place of the Trustee; provided, however, that the first paragraph of
Section 4.5 shall not apply to the Company or any Affiliate of the Company if it
or such Affiliate acts as paying agent.
The Trustee shall not be responsible for the actions or inactions of
any other paying agents (including the Company if acting as its own paying
agent) and shall have no control of any funds held by such other paying agents.
Section 4.10 SENIOR INDEBTEDNESS ENTITLED TO Rely. The holders of
Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article Four, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
Section 4.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets of the Company referred to in
this Article Four, the Trustee and the Noteholders shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Noteholders,
for the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
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or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Four.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article Three), and interest (including Liquidated
Damages, if any), on each of the Notes at the places, at the respective times
and in the manner provided herein and in the Notes.
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain
an office or agency in the Borough of Manhattan, the City of New York, where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee at 14 Wall
Street, 8th floor, Window 2, New York, New York 10005, Attention: Corporate
Trust Administration.
The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Note registrar, Custodian and conversion agent and the Corporate Trust Office of
the Trustee at 14 Wall Street, 8th floor, Window 2, New York, New York 10005,
Attention: Corporate Trust Administration
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as the office or agency of the Company for each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11. If co-registrars have been appointed in
accordance with this Section, the Trustee shall mail such notices only to the
Company and the holders of Notes it can identify from its records.
Section 5.3 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 PROVISIONS AS TO PAYING AGENT.
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, the Company will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section 5.4:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, or interest on the Notes
(whether such sums have been paid to it by the Company or by any other
obligor on the Notes) in trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any failure by the Company
(or by any other obligor on the Notes) to make any payment of the principal
of and premium, if any, or interest on the Notes when the same shall be due
and payable; and
(3) that at any time during the continuance of an Event of Default,
upon request of the Trustee, it will forthwith pay to the Trustee all sums
so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a sum
(in funds which are immediately available on the due date for such payment)
sufficient to pay such principal, premium, if any, or
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interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of any failure to take such action; provided,
however, that if such deposit is made on the due date, such deposit shall be
received by the paying agent by 10:00 a.m. New York City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, set aside, segregate and
hold in trust for the benefit of the holders of the Notes a sum sufficient to
pay such principal, premium, if any, or interest (including Liquidated Damages,
if any) so becoming due and will promptly notify the Trustee of any failure to
take such action and of any failure by the Company (or any other obligor under
the Notes) to make any payment of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes when the same shall become
due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.4 is subject to
Sections 13.3 and 13.4.
The Trustee shall not be responsible for the actions of any other
paying agents (including the Company if acting as its own paying agent) and
shall have no control of any funds held by such other paying agents.
Section 5.5 EXISTENCE. Subject to Article Twelve, the Company will do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Company
shall determine that the
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preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Noteholders.
Section 5.6 MAINTENANCE OF PROPERTIES. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Significant Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any subsidiary and
not disadvantageous in any material respect to the Noteholders.
Section 5.7 PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Significant Subsidiary or upon the income,
profits or property of the Company or any Significant Subsidiary, (ii) all
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon the property of the Company or any Significant Subsidiary
and (iii) all stamps and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or therein in connection with
the issuance, transfer, exchange or conversion of any Notes or with respect to
this Indenture; provided, however, that, in the case of clauses (i) and (ii),
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (A) if the failure to do so
will not, in the aggregate, have a material adverse impact on the Company, or
(B) if the amount, applicability or validity is being contested in good faith by
appropriate proceedings.
Section 5.8 RULE 144A INFORMATION REQUIREMENT. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under
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the Securities Act (or any successor provision), the Company covenants and
agrees that it shall, during any period in which it is not subject to Section 13
or 15(d) under the Exchange Act, make available to any holder or beneficial
holder of Notes or any Common Stock issued upon conversion thereof which
continue to be Restricted Securities in connection with any sale thereof and any
prospective purchaser of Notes or such Common Stock designated by such holder or
beneficial holder, the information required pursuant to Rule 144A(d)(4) under
the Securities Act upon the request of any holder or beneficial holder of the
Notes or such Common Stock and it will take such further action as any holder or
beneficial holder of such Notes or such Common Stock may reasonably request, all
to the extent required from time to time to enable such holder or beneficial
holder to sell its Notes or Common Stock without registration under the
Securities Act within the limitation of the exemption provided by Rule 144A, as
such Rule may be amended from time to time. Upon the request of any holder or
any beneficial holder of the Notes or such Common Stock, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.
Section 5.9 STAY, EXTENSION AND USURY LAWS. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest (including Liquidated Damages, if any) on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.10 COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in
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the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying all such
defaults and the nature and the status thereof of which the signer may have
knowledge.
The Company will deliver to the Trustee, forthwith (and in any event
within five Business Days) upon becoming aware of (i) any default in the
performance or observance of any covenant, agreement or condition contained in
this Indenture, or (ii) any Event of Default, an Officers' Certificate
specifying with particularity such default or Event of Default and further
stating what action the Company has taken, is taking or proposes to take with
respect thereto.
Any notice required to be given under this Section 5.10 shall be
delivered to a Responsible Officer of the Trustee at its Corporate Trust Office.
Section 5.11 AMENDMENT OF THE COMPANY'S RIGHTS PLAN. The Company shall
use all reasonable efforts (i) to amend its Rights Agreement with ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, dated as of November 30, 1998
(the "Rights Agreement") to provide, and (ii) to cause any future shareholder
rights plans of the Company to provide, that upon conversion of the Notes into
Common Stock as provided in Article Fifteen of this Indenture, to the extent
that the Rights Agreement (or any such future shareholder rights plan) and any
rights granted thereunder remain in effect and outstanding at the time of such
conversion, holders of the Notes will receive, in addition to Common Stock, the
Rights (as described in the Rights Agreement or any similar securities as
described in any such future shareholder rights plan), whether or not such
Rights have separated from the Common Stock at the time of conversion, subject
to such exceptions as are set forth in the Rights Agreement and apply to all
holders of Common Stock or Rights other than any Acquiring Person (as defined in
the Rights Agreement) or such customary exceptions as may be set forth in any
such future shareholder rights plan; provided, however, that nothing in this
Indenture shall obligate the Company to maintain in effect the Rights Agreement
or any Rights or to adopt (or maintain in effect if adopted) any other
shareholder rights plan.
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ARTICLE SIX
NOTEHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 6.1 NOTEHOLDERS' LISTS. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semiannually, not more
than fifteen (15) days after each January 15 and July 15 in each year beginning
with July 15, 2000, and at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the holders of Notes as of a date not more than fifteen (15) days (or such other
date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list need be furnished by the Company to the Trustee so long as the Trustee is
acting as the sole Note registrar.
Section 6.2 PRESERVATION AND DISCLOSURE OF LISTS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Notes contained in the most recent list furnished to it as provided in Section
6.1 or maintained by the Trustee in its capacity as Note registrar or
co-registrar in respect of the Notes, if so acting. The Trustee may destroy any
list furnished to it as provided in Section 6.1 upon receipt of a new list so
furnished.
(b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Notes made pursuant to the
Trust Indenture Act.
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Section 6.3 REPORTS BY TRUSTEE.
(a) Within sixty (60) days after May 15 of each year commencing with
the year 2001, the Trustee shall transmit to holders of Notes such reports dated
as of May 15 of the year in which such reports are made concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and automated
quotation system upon which the Notes are listed and with the Company. The
Company will promptly notify the Trustee in writing when the Notes are listed on
any stock exchange or automated quotation system or delisted therefrom.
Section 6.4 REPORTS BY COMPANY. The Company shall file with the
Trustee (and the Commission if at any time after the Indenture becomes qualified
under the Trust Indenture Act), and transmit to holders of Notes, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Notes are governed by such
Act; provided, however, that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within fifteen (15) days after the same is
so required to be filed with the Commission. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS ON AN EVENT OF DEFAULT
Section 7.1 EVENTS OF DEFAULT. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary
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or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest
(including Liquidated Damages, if any) upon any of the Notes as and
when the same shall become due and payable, and continuance of such
default for a period of thirty (30) days, whether or not such payment
is permitted under Article Four hereof; or
(b) default in the payment of the principal of or premium, if
any, on any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption
pursuant to Article Three, by acceleration or otherwise, whether or not
such payment is permitted under Article Four hereof; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Notes or in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere
in this Section 7.1 specifically dealt with) continued for a period of
sixty (60) days after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been given to the
Company by the Trustee, or the Company and a Responsible Officer of the
Trustee by the holders of at least twenty-five percent (25%) in
aggregate principal amount of the Notes at the time outstanding
determined in accordance with Section 9.4; or
(d) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or any Significant Subsidiary or
its or such Significant Subsidiary's debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any Significant Subsidiary or any substantial
part of the property of the Company or any Significant Subsidiary, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or any
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Significant Subsidiary, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they
become due; or
(e) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or any Significant
Subsidiary or its or such Significant Subsidiary's debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any Significant Subsidiary
or any substantial part of the property of the Company or any
Significant Subsidiary, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of ninety (90)
consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(d) or (e) with respect to the Company), unless the principal of
all of the Notes shall have already become due and payable, either the Trustee
or the holders of not less than twenty-five percent (25%) in aggregate principal
amount of the Notes then outstanding hereunder determined in accordance with
Section 9.4, by notice in writing to the Company (and to the Trustee if given by
Noteholders), may declare the principal of and premium, if any, on all the Notes
and the interest accrued thereon (including Liquidated Damages, if any) to be
due and payable immediately, and upon any such declaration the same shall become
and shall be immediately due and payable, anything in this Indenture or in the
Notes contained to the contrary notwithstanding. If an Event of Default
specified in Section 7.1(d) or (e) with respect to the Company occurs, the
principal of all the Notes and the interest accrued thereon shall (including
Liquidated Damages, if any) be immediately and automatically due and payable
without necessity of further action. This provision, however, is subject to the
conditions that if, at any time after the principal of the Notes shall have been
so declared due and payable, and before any judgment or decree for the payment
of the monies due shall have been obtained or entered as hereinafter provided,
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments
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of interest upon (including Liquidated Damages, if any) all Notes and the
principal of and premium, if any, on any and all Notes which shall have become
due otherwise than by acceleration (with interest on overdue installments of
interest (including Liquidated Damages, if any) (to the extent that payment of
such interest is enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the Notes, to the date of such payment or
deposit) and amounts due to the Trustee pursuant to Section 8.6, and if any and
all defaults under this Indenture, other than the nonpayment of principal of and
premium, if any, and accrued interest on (including Liquidated Damages, if any)
Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.7, then and in every such case the holders of a
majority in aggregate principal amount of the Notes then outstanding, by written
notice to the Company and to the Trustee, may waive all defaults or Events of
Default and rescind and annul such declaration and its consequences; but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify a Responsible Officer of the Trustee, promptly
(and in any event within five Business Days) upon becoming aware thereof, of any
Event of Default.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.
Section 7.2 PAYMENTS OF NOTES ON DEFAULT; SUIT THEREFOR. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon (including Liquidated Damages, if any) any of the
Notes as and when the same shall become due and payable, and such default shall
have continued for a period of thirty (30) days, or (b) in case default shall be
made in the payment of the principal of or premium, if any, on any of the Notes
as and when the same shall have become due
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and payable, whether at maturity of the Notes or in connection with any
redemption, by or under this Indenture declaration or otherwise, then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Notes, the whole amount that then shall have become due and
payable on all such Notes for principal and premium, if any, or interest
(including Liquidated Damages, if any), as the case may be, with interest upon
the overdue principal and premium, if any, and (to the extent that payment of
such interest is enforceable under applicable law) upon the overdue installments
of interest (including Liquidated Damages, if any) at the rate borne by the
Notes, and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation to
the Trustee, its agents, attorneys and counsel, and all other amounts due the
Trustee under Section 8.6. Until such demand by the Trustee, the Company may pay
the principal of and premium, if any, and interest on (including Liquidated
Damages, if any) the Notes to the registered holders, whether or not the Notes
are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or
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claims for the whole amount of principal, premium, if any, and interest
(including Liquidated Damages, if any) owing and unpaid in respect of the Notes,
and, in case of any judicial proceedings, to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee and of the Noteholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Notes, its or their
creditors, or its or their property, and to collect and receive any monies or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of any amounts due the Trustee under Section 8.6, and
any receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
custodian or similar official is hereby authorized by each of the Noteholders to
make such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due it for reasonable compensation, expenses, advances
and disbursements, including counsel fees incurred by it up to the date of such
distribution. To the extent that such payment of reasonable compensation,
expenses, advances and disbursements out of the estate in any such proceedings
shall be denied for any reason, payment of the same shall be secured by a lien
on, and shall be paid out of, any and all distributions, dividends, monies,
securities and other property which the holders of the Notes may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
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Section 7.3 APPLICATION OF MONIES COLLECTED BY TRUSTEE. Any monies
collected by the Trustee pursuant to this Article Seven shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 8.6;
SECOND: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on (including Liquidated Damages, if
any) the Notes in default in the order of the maturity of the
installments of such interest, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue
installments of interest (including Liquidated Damages, if any) at the
rate borne by the Notes, such payments to be made ratably to the
Persons entitled thereto;
THIRD: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid to the payment of the whole
amount then owing and unpaid upon the Notes for principal and premium,
if any, and interest (including Liquidated Damages, if any), with
interest on the overdue principal and premium, if any, and (to the
extent that such interest has been collected by the Trustee) upon
overdue installments of interest (including Liquidated Damages, if any)
at the rate borne by the Notes, and in case such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon
the Notes, then to the payment of such principal and premium, if any,
and interest (including Liquidated Damages, if any) without preference
or priority of principal and premium, if any, over interest (including
Liquidated Damages, if any), or of interest (including Liquidated
Damages, if any) over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of
any Note over any other Note, ratably to the aggregate of such
principal and premium, if any, and accrued and unpaid interest; and
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FOURTH: Subject to the provisions of Article Four, to the
payment of the remainder, if any, to the Company or any other Person
lawfully entitled thereto.
Section 7.4 PROCEEDINGS BY NOTEHOLDER. No holder of any Note shall
have any right by virtue of or by reference to any provision of this Indenture
to institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Notes then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.7; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other taker and
holder and the Trustee, that no one or more holders of Notes shall have any
right in any manner whatever by virtue of or by reference to any provision of
this Indenture to affect, disturb or prejudice the rights of any other holder of
Notes, or to obtain or seek to obtain priority over or preference to any other
such holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes (except as otherwise provided herein). For the protection and enforcement
of this Section 7.4, each and every Noteholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any
provision of any Note, the right of any holder of any Note to receive payment of
the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article Three), and accrued interest on (including
Liquidated Damages, if any) such Note, on or
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after the respective due dates expressed in such Note or in the event of
redemption, or to institute suit for the enforcement of any such payment on or
after such respective dates against the Company shall not be impaired or
affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.
Section 7.5 PROCEEDINGS BY TRUSTEE. In case of an Event of Default,
the Trustee may, in its discretion, proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as are
necessary to protect and enforce any of such rights, either by suit in equity or
by action at law or by proceeding in bankruptcy or otherwise, whether for the
specific enforcement of any covenant or agreement contained in this Indenture or
in aid of the exercise of any power granted in this Indenture, or to enforce any
other legal or equitable right vested in the Trustee by this Indenture or by
law.
Section 7.6 REMEDIES CUMULATIVE AND CONTINUING. Except as provided in
Section 2.6, all powers and remedies given by this Article Seven to the Trustee
or to the Noteholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein, and, subject to the provisions of Section
7.4, every power and remedy given by this Article Seven or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
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Section 7.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY
MAJORITY OF NOTEHOLDERS. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, (b) the Trustee
may take any other action which is not inconsistent with such direction and (c)
the Trustee may decline to take any action that would benefit some Noteholder to
the detriment of other Noteholders. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may, on behalf of the holders of all of the Notes, waive any
past default or Event of Default hereunder and its consequences except (i) a
default in the payment of interest (including Liquidated Damages, if any) or
premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock, (iii) a default in the payment
of redemption price pursuant to Article Three or (iv) a default in respect of a
covenant or provisions hereof which under Article Eleven cannot be modified or
amended without the consent of the holders of each or all Notes then outstanding
or affected thereby. Upon any such waiver, the Company, the Trustee and the
holders of the Notes shall be restored to their former positions and rights
hereunder; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by this Section
7.7, said default or Event of Default shall for all purposes of the Notes and
this Indenture be deemed to have been cured and to be not continuing; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
Section 7.8 NOTICE OF DEFAULTS. The Trustee shall, within ninety (90)
days after a Responsible Officer of the Trustee has actual knowledge of the
occurrence of a default, mail to all Noteholders, as the names and addresses of
such holders appear upon the Note register, notice of all defaults actually
known to a Responsible Officer, unless such defaults shall have been cured or
waived before the giving of such notice; provided, however, that except in the
case of default in the payment of the principal of, or
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premium, if any, or interest (including Liquidated Damages, if any) on any of
the Notes, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Noteholders.
Section 7.9 UNDERTAKING TO PAY COSTS. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; provided, however, that the provisions of this
Section 7.9 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than ten percent in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Note on or after the
due date expressed in such Note or to any suit for the enforcement of the right
to convert any Note in accordance with the provisions of Article Fifteen.
ARTICLE EIGHT
THE TRUSTEE
Section 8.1 DUTIES AND RESPONSIBILITIES OF TRUSTEE. The Trustee, prior
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
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No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture and the Trust Indenture Act, and the Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into
this Indenture and the Trust Indenture Act against the
Trustee; and
(2) in the absence of bad faith and willful
misconduct on the part of the Trustee, the Trustee may
conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the
case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless the Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
written direction of the holders of not less than a majority in
principal amount of the Notes at the time outstanding determined as
provided in Section 9.4 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture;
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(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions
of this Section;
(e) the Trustee shall not be liable in respect of any payment
(as to the correctness of amount, entitlement to receive or any other
matters relating to payment) or notice effected by the Company or any
paying agent or any records maintained by any co-registrar with respect
to the Notes; and
(f) if any party fails to deliver a notice relating to an
event the fact of which, pursuant to this Indenture, requires notice to
be sent to the Trustee, the Trustee may conclusively rely on its
failure to receive such notice as reason to act as if no such event
occurred.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2 RELIANCE ON DOCUMENTS, OPINIONS, Etc. Except as otherwise
provided in Section 8.1:
(a) the Trustee may conclusively rely and shall be fully
protected in acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon or other paper or document (whether in its
original or facsimile form) believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a copy
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thereof certified by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel of its own selection
and any advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted
by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Noteholders pursuant to the provisions
of this Indenture, unless such Noteholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney at the expense of the
Company and shall incur no liability or additional liability of any
kind by reason of such inquiry or investigation;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it with due care hereunder; and
(g) the rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right
to be indemnified, are extended to, and shall be enforceable by, the
Trustee in each of its capacities hereunder, and to each agent,
custodian and other Person employed to act hereunder.
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Section 8.3 NO RESPONSIBILITY FOR RECITALS, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 TRUSTEE, PAYING AGENTS, CONVERSION AGENTS OR REGISTRAR MAY
OWN NOTES. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5 MONIES TO BE HELD IN TRUST. Subject to the provisions of
Section 13.4 and Section 4.2, all monies received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as may be agreed in writing from time to time by the Company and the
Trustee.
Section 8.6 COMPENSATION AND EXPENSES OF Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) as mutually agreed
to from time to time in writing between the Company and the Trustee, and the
Company will pay or reimburse the Trustee upon its request for all expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct. The Company
also covenants to fully indemnify the Trustee (or
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any officer, director or employee of the Trustee) and any predecessor Trustee,
in any capacity under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any and all loss, liability, claim,
damage or expense (including taxes other than taxes based on the income of the
Trustee) incurred without negligence or willful misconduct on the part of the
Trustee or such officers, directors, employees and agent or authenticating
agent, as the case may be, and arising out of or in connection with the
acceptance or administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against any claim of
liability in the premises. The obligations of the Company under this Section 8.6
to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Notes upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular Notes.
The obligation of the Company under this Section shall survive the resignation
or removal of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(d) or (e) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
Section 8.7 OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee.
Section 8.8 CONFLICTING INTERESTS OF TRUSTEE. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the
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extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture.
Section 8.9 ELIGIBILITY OF TRUSTEE. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.9, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and to the holders of Notes. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment sixty (60) days after the mailing of
such notice of resignation to the Noteholders, the resigning Trustee may, upon
ten (10) business days' notice to the Company and the Noteholders, appoint a
successor identified in such notice or may petition, at the expense of the
Company, any court of competent jurisdiction for the appointment of a successor
trustee, or, if any Noteholder who has been a bona fide holder of a Note or
Notes for at least six (6) months may, subject to the provisions of Section 7.9,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
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(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six (6) months;
or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder; or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee; provided,
however, that if no successor Trustee shall have been appointed and have
accepted appointment sixty (60) days after either the Company or the Noteholders
has removed the Trustee, the Trustee so removed may petition any court of
competent jurisdiction for an appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and nominate a
successor trustee which shall be deemed appointed as successor trustee unless,
within ten (10) days after notice to the Company of such nomination, the Company
objects thereto, in which case the Trustee so removed or any Noteholder, or if
such Trustee so
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removed or any Noteholder fails to act, the Company, upon the terms and
conditions and otherwise as in Section 8.10(a) provided, may petition any court
of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
Section 8.11 ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amount then due it and its agents and counsel pursuant to
the provisions of Section 8.6, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act. Upon request of any such successor trustee, the Company shall execute any
and all instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers. Any trustee
ceasing to act shall, nevertheless, retain a lien upon all property and funds
held or collected by such trustee as such, except for funds held in trust for
the benefit of holders of particular Notes, to secure any amounts then due it
pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company (or the former trustee, at the expense of and at
the written direction of the Company) shall mail or cause to be mailed notice of
the succession of such trustee hereunder to the
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holders of Notes at their addresses as they shall appear on the Note register.
If the Company fails to mail such notice within ten (10) days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12 SUCCESSION BY MERGER, ETC. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee, such
corporation shall be qualified under the provisions of Section 8.8 and eligible
under the provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or any authenticating agent appointed by such successor
trustee may authenticate such Notes in the name of the successor trustee; and in
all such cases such certificates shall have the full force that is provided in
the Notes or in this Indenture; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or authenticate Notes
in the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 8.13 PREFERENTIAL COLLECTION OF CLAIMS. If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
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Section 8.14 TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY.
Any application by the Trustee for written instructions from the Company (other
than with regard to any action proposed to be taken or omitted to be taken by
the Trustee that affects the rights of the holders of the Notes or holders of
Senior Indebtedness under this Indenture, including, without limitation, under
Article Four hereof) may, at the option of the Trustee, set forth in writing any
action proposed to be taken or omitted by the Trustee under this Indenture and
the date on and/or after which such action shall be taken or such omission shall
be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than three (3) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
ARTICLE NINE
THE NOTEHOLDERS
Section 9.1 ACTION BY NOTEHOLDERS. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article Ten, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall
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be not more than fifteen (15) days prior to the date of commencement of
solicitation of such action.
Section 9.2 PROOF OF EXECUTION BY NOTEHOLDERS. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or its agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the registry of such Notes or by a
certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3 WHO ARE DEEMED ABSOLUTE OWNERS. The Company, the Trustee,
any paying agent, any conversion agent and any Note registrar may deem the
Person in whose name such Note shall be registered upon the Note register to be,
and may treat it as, the absolute owner of such Note (whether or not such Note
shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note registrar) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Note, for conversion of such Note and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor any
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Note.
Section 9.4 COMPANY-OWNED NOTES DISREGARDED. In determining whether
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or any
Affiliate of the Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such determination;
provided, however, that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action, only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good
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faith may be regarded as outstanding for the purposes of this Section 9.4 if the
pledgee shall establish to the satisfaction of the Trustee the pledgee's right
to vote such Notes and that the pledgee is not the Company, any other obligor on
the Notes or any Affiliate of the Company or any such other obligor. In the case
of a dispute as to such right, any decision by the Trustee taken upon the advice
of counsel shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described Persons, and, subject
to Section 8.1, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the purpose of any
such determination.
Section 9.5 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE TEN
MEETINGS OF NOTEHOLDERS
Section 10.1 PURPOSE OF MEETINGS. A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article Ten for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee
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permitted under this Indenture, or to consent to the waiving of any
default or Event of Default hereunder and its consequences, or to take
any other action authorized to be taken by Noteholders pursuant to any
of the provisions of Article Seven;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or under
applicable law.
Section 10.2 CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting and
the establishment of any record date pursuant to Section 9.1, shall be mailed to
holders of Notes at their addresses as they shall appear on the Note register.
Such notice shall also be mailed to the Company. Such notices shall be mailed
not less than twenty (20) nor more than ninety (90) days prior to the date fixed
for the meeting.
Any meeting of Noteholders shall be valid without notice if the
holders of all Notes then outstanding are present in person or by proxy or if
notice is waived before or after the meeting by the holders of all Notes
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.3 CALL OF MEETINGS BY COMPANY OR NOTEHOLDERS. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the Notes
then outstanding, shall have requested the Trustee to call a meeting of
Noteholders, by written request setting forth in reasonable detail the action
proposed to be taken
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at the meeting, and the Trustee shall not have mailed the notice of such meeting
within twenty (20) days after receipt of such request, then the Company or such
Noteholders may determine the time and the place for such meeting and may call
such meeting to take any action authorized in Section 10.1, by mailing notice
thereof as provided in Section 10.2.
Section 10.4 QUALIFICATIONS FOR VOTING. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting. The only persons who shall be entitled to be
present or to speak at any meeting of Noteholders shall be the persons entitled
to vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
Section 10.5 REGULATIONS. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of
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Notes held by him or instruments in writing as aforesaid duly designating him as
the proxy to vote on behalf of other Noteholders. Any meeting of Noteholders
duly called pursuant to the provisions of Section 10.2 or 10.3 may be adjourned
from time to time by the holders of a majority of the aggregate principal amount
of Notes represented at the meeting, whether or not constituting a quorum, and
the meeting may be held as so adjourned without further notice.
Section 10.6 VOTING. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the outstanding principal amount of the Notes held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Noteholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 10.2. The record shall show the principal amount of the
Notes voting in favor of or against any resolution. The record shall be signed
and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 NO DELAY OF RIGHTS BY MEETING. Nothing contained in this
Article Ten shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Noteholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of the Notes.
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ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
Section 11.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may, from time to time, and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of
the holders of Notes pursuant to the requirements of Section 15.6 and
the redemption obligations of the Company pursuant to the requirements
of Section 3.5(e);
(b) subject to Article Four, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
(c) to evidence the succession of another Person to the
Company, or successive successions, and the assumption by the successor
Person of the covenants, agreements and obligations of the Company
pursuant to Article Twelve;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors and the
Trustee shall consider to be for the benefit of the holders of Notes,
and to make the occurrence, or the occurrence and continuance, of a
default in any such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any
of the several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant,
restriction or condition, such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter
or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes
in coupon form (including Notes registrable as to principal only) and
to provide for
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exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture that may be
defective or inconsistent with any other provision contained herein or
in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture that shall
not materially adversely affect the interests of the holders of the
Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualifications of this Indenture under the Trust Indenture Act, or
under any similar federal statute hereafter enacted.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Notes at the time outstanding, notwithstanding any
of the provisions of Section 11.2.
Notwithstanding any other provision of the Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Liquidated Damages
thereunder may
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be amended, modified or waived in accordance with the provisions of the
Registration Rights Agreement.
Section 11.2 SUPPLEMENTAL INDENTURE WITH CONSENT OF NOTEHOLDERS. With
the consent (evidenced as provided in Article Nine) of the holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time and at any time, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or any supplemental indenture or of modifying in any manner the
rights of the holders of the Notes; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable on redemption
thereof, or impair the right of any Noteholder to institute suit for the payment
thereof, or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, or modify
the provisions of this Indenture with respect to the subordination of the Notes
in a manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to redeem any Note upon the happening of a Fundamental
Change in a manner adverse to the holder of Notes, or impair the right to
convert the Notes into Common Stock subject to the terms set forth herein,
including Section 15.6, in each case, without the consent of the holder of each
Note so affected, or (ii) reduce the aforesaid percentage of Notes, the holders
of which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary and authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may
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in its discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Noteholders under
this Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 EFFECT OF SUPPLEMENTAL INDENTURE. Any supplemental
indenture executed pursuant to the provisions of this Article Eleven shall
comply with the Trust Indenture Act, as then in effect, provided that this
Section 11.3 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to such supplemental indenture that any
such qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article Eleven, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.4 NOTATION ON NOTES. Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article Eleven may bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 16.11)
and delivered in exchange
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for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 11.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE
FURNISHED TO TRUSTEE. Prior to entering into any supplemental indenture, the
Trustee may request an Officers' Certificate and an Opinion of Counsel meeting
the requirements set forth in Section 16.5 as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article Eleven.
ARTICLE TWELVE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Subject
to the provisions of Section 12.2, nothing contained in this Indenture or in any
of the Notes shall prevent any consolidation or merger of the Company with or
into any other Person or Persons (whether or not affiliated with the Company),
or successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance or
lease (or successive sales, conveyances or leases) of all or substantially all
of the property of the Company, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and that shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; provided, however, that upon any such consolidation,
merger, sale, conveyance or lease, the due and punctual payment of the principal
of and premium, if any, and interest (including Liquidated Damages, if any) on
all of the Notes, according to their tenor and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by the Company, shall be expressly assumed, by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the Person (if other than the Company) formed by such consolidation, or into
which the Company shall have been merged, or by the Person that shall have
acquired or leased such property, and such supplemental indenture shall provide
for the applicable conversion rights set forth in Section 15.6.
Section 12.2 SUCCESSOR CORPORATION TO BE SUBSTITUTED. In case of any
such consolidation, merger,
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sale, conveyance or lease and upon the assumption by the successor Person, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Company, such successor Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as the party of this first part. Such successor Person thereupon may cause to be
signed, and may issue either in its own name or in the name of Conexant Systems,
Inc. any or all of the Notes, issuable hereunder that theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor Person instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver, or cause to be authenticated and delivered, any
Notes that previously shall have been signed and delivered by the officers of
the Company to the Trustee for authentication, and any Notes that such successor
Person thereafter shall cause to be signed and delivered to the Trustee for that
purpose. All the Notes so issued shall in all respects have the same legal rank
and benefit under this Indenture as the Notes theretofore or thereafter issued
in accordance with the terms of this Indenture as though all of such Notes had
been issued at the date of the execution hereof. In the event of any such
consolidation, merger, sale, conveyance or lease, the Person named as the
"Company" in the first paragraph of this Indenture or any successor that shall
thereafter have become such in the manner prescribed in this Article Twelve may
be dissolved, wound up and liquidated at any time thereafter and such Person
shall be released from its liabilities as obligor and maker of the Notes and
from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.
Section 12.3 OPINION OF COUNSEL TO BE GIVEN TRUSTEE. The Trustee shall
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article Twelve.
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ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 DISCHARGE OF INDENTURE. When (a) the Company shall
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes that have been destroyed, lost or stolen and in lieu of or
in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes that shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, accompanied by a verification report, as to
the sufficiency of the deposited amount, from an independent certified
accountant or other financial professional satisfactory to the Trustee, and if
the Company shall also pay or cause to be paid all other sums payable hereunder
by the Company, then this Indenture shall cease to be of further effect (except
as to (i) remaining rights of registration of transfer, substitution and
exchange and conversion of Notes, (ii) rights hereunder of Noteholders to
receive payments of principal of and premium, if any, and interest on, the Notes
and the other rights, duties and obligations of Noteholders, as beneficiaries
hereof with respect to the amounts, if any, so deposited with the Trustee and
(iii) the rights, obligations and immunities of the Trustee hereunder), and the
Trustee, on written demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as required by Section 16.5 and at the
cost and expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture; the Company, however, hereby
agrees to reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred by the Trustee and to compensate the Trustee for any
services thereafter
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reasonably and properly rendered by the Trustee in connection with this
Indenture or the Notes.
Section 13.2 DEPOSITED MONIES TO BE HELD IN TRUST BY TRUSTEE. Subject
to Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1,
provided such deposit was not in violation of Article Four, shall be held in
trust for the sole benefit of the Noteholders and not to be subject to the
subordination provisions of Article Four, and such monies shall be applied by
the Trustee to the payment, either directly or through any paying agent
(including the Company if acting as its own paying agent), to the holders of the
particular Notes for the payment or redemption of which such monies have been
deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
Section 13.3 PAYING AGENT TO REPAY MONIES HELD. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon written request of the Company, be
repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
Section 13.4 RETURN OF UNCLAIMED MONIES. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment that such holder may be entitled to collect
unless an applicable abandoned property law designates another Person.
Section 13.5 REINSTATEMENT. If the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or
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the paying agent is permitted to apply all such money in accordance with Section
13.2; provided, however, that if the Company makes any payment of interest on or
principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Notes to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.1 INDENTURE AND NOTES SOLELY CORPORATE OBLIGATIONS. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
ARTICLE FIFTEEN
CONVERSION OF NOTES
Section 15.1 RIGHT TO CONVERT. Subject to and upon compliance with the
provisions of this Indenture, including, without limitation, Article Four, the
holder of any Note shall have the right, at its option, at any time after the
original issuance of the Notes hereunder through the close of business on the
final maturity date of the Notes (except that, with respect to any Note or
portion of a Note that shall be called for redemption, such right shall
terminate, except as provided in Section 15.2, Section 3.2 or Section 3.4, at
the close of business on the Business Day next preceding the date fixed for
redemption of such Note or portion of a Note unless the Company shall default in
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payment due upon redemption thereof) to convert the principal amount of any such
Note, or any portion of such principal amount which is $1,000 or an integral
multiple thereof, into that number of fully paid and non-assessable shares of
Common Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided, together with any required
funds, in Section 15.2. A Note in respect of which a holder is exercising its
option to require redemption upon a Fundamental Change pursuant to Section 3.5
may be converted only if such holder withdraws its election to exercise in
accordance with Section 3.5. A holder of Notes is not entitled to any rights of
a holder of Common Stock until such holder has converted his Notes to Common
Stock, and only to the extent such Notes are deemed to have been converted to
Common Stock under this Article Fifteen.
Section 15.2 EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON
STOCK ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order to
exercise the conversion privilege with respect to any Note in certificated form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the
penultimate paragraph of this Section 15.2, and shall give written notice of
conversion in the form provided on the Notes (or such other notice which is
acceptable to the Company) to the office or agency that the holder elects to
convert such Note or the portion thereof specified in said notice. Such notice
shall also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, and shall be accompanied by transfer taxes,
if required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any
interest in a Note in global form, the beneficial holder must complete, or cause
to be completed,
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the appropriate instruction form for conversion pursuant to the Depository's
book-entry conversion program, deliver, or cause to be delivered, by book-entry
delivery an interest in such Note in global form, furnish appropriate
endorsements and transfer documents if required by the Company or the Trustee or
conversion agent, and pay the funds, if any, required by this Section 15.2 and
any transfer taxes if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Noteholder at the office or agency maintained by the Company for such
purpose pursuant to Section 5.2, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such Note or portion
thereof as determined by the Company in accordance with the provisions of this
Article Fifteen and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as provided in Section 15.3. In case any Note of a denomination
greater than $1,000 shall be surrendered for partial conversion, and subject to
Section 2.3, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of the Note so surrendered, without charge to him, a new
Note or Notes in authorized denominations in an aggregate principal amount equal
to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the Person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the
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Conversion Price in effect on the date upon which such Note shall be
surrendered.
No adjustment in respect of interest on any Note converted or
dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes.
Upon the conversion of an interest in a Note in global form, the
Trustee (or other conversion agent appointed by the Company), or the Custodian
at the direction of the Trustee (or other conversion agent appointed by the
Company), shall make a notation on such Note in global form as to the reduction
in the principal amount represented thereby. The Company shall notify the
Trustee in writing of any conversions of Notes effected through any conversion
agent other than the Trustee.
Section 15.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted thereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the holder of Notes. The current market price of a share of Common Stock shall
be the Closing Price on the last Business Day immediately preceding the day
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on which the Notes (or specified portions thereof) are deemed to have been
converted.
Section 15.4 CONVERSION PRICE. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article Fifteen.
Section 15.5 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make
a distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in
effect at the opening of business on the date following the date fixed
for the determination of stockholders entitled to receive such dividend
or other distribution by a fraction, the numerator of which shall be
the number of shares of the Common Stock outstanding at the close of
business on the date fixed for such determination, and the denominator
of which shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the
purpose of this paragraph (a), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of
the Company. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company. If any dividend or distribution of the type described in this
Section 15.5(a) is declared but not so paid or made, the Conversion
Price shall again be adjusted to the Conversion Price that would then
be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for
determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price per share less than the
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Current Market Price (as defined below) on the date fixed for
determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date fixed for determination of
stockholders entitled to receive such rights or warrants by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
determination of stockholders entitled to receive such rights or
warrants plus the number of shares that the aggregate offering price of
the total number of shares so offered would purchase at such Current
Market Price, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date fixed for determination
of stockholders entitled to receive such rights or warrants plus the
total number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be successively made
whenever any such rights or warrants are issued, and shall become
effective immediately after the opening of business on the day
following the date fixed for determination of stockholders entitled to
receive such rights or warrants. To the extent that shares of Common
Stock are not delivered after the expiration of such rights or
warrants, the Conversion Price shall be readjusted to the Conversion
Price that would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery
of only the number of shares of Common Stock actually delivered. In the
event that such rights or warrants are not so issued, the Conversion
Price shall again be adjusted to be the Conversion Price that would
then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been
fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock at less
than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such rights
or warrants and any amount payable on exercise or conversion thereof,
the value of such consideration, if other than cash, to be determined
by the Board of Directors.
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(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions
to which Section 15.5(a) applies) or evidences of its indebtedness or
assets (including securities, but excluding any rights or warrants
referred to in Section 15.5(b), and excluding any dividend or
distribution (x) paid exclusively in cash or (y) referred to in Section
15.5(a) (any of the foregoing hereinafter in this Section 15.5(d)
called the "Securities")), then, in each such case (unless the Company
elects to reserve such Securities for distribution to the Noteholders
upon the conversion of the Notes so that any such holder converting
Notes will receive upon such conversion, in addition to the shares of
Common Stock to which such holder is entitled, the amount and kind of
such Securities which such holder would have received if such holder
had converted its Notes into Common Stock immediately prior to the
Record Date (as defined in Section 15.5(h)(4) for such distribution of
the Securities)), the Conversion Price shall be reduced so that the
same shall be equal to the price determined by multiplying the
Conversion Price in effect on the Record Date with respect to such
distribution by a fraction, the numerator of which shall be the Current
Market Price per share of the Common Stock on such Record Date less the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the
Board of Directors) on the Record Date of the portion of the Securities
so distributed applicable to one share of
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Common Stock and the denominator of which shall be the Current Market
Price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following such
Record Date; provided, however, that in the event the then fair market
value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Noteholder shall have the right to receive upon
conversion the amount of Securities such holder would have received had
such holder converted each Note on the Record Date. In the event that
such dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price that would
then be in effect if such dividend or distribution had not been
declared. If the Board of Directors determines the fair market value of
any distribution for purposes of this Section 15.5(d) by reference to
the actual or when issued trading market for any securities, it must in
doing so consider the prices in such market over the same period used
in computing the Current Market Price of the Common Stock.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Company's capital stock (either initially or
under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events ("Trigger Event"): (i) are
deemed to be transferred with such shares of Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances
of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion
Price under this Section 15.5 will be required) until the occurrence of
the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any
is required) to the Conversion Price shall be made under this Section
15.5(d). If any such right or warrant, including any such existing
rights or warrants distributed prior to the date of this Indenture, are
subject to events, upon the occurrence of which such rights or warrants
become exercisable to purchase different securities, evidences
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of indebtedness or other assets, then the date of the occurrence of any
and each such event shall be deemed to be the date of distribution and
record date with respect to new rights or warrants with such rights
(and a termination or expiration of the existing rights or warrants
without exercise by any of the holders thereof). In addition, in the
event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event or other event (of the type described in
the preceding sentence) with respect thereto that was counted for
purposes of calculating a distribution amount for which an adjustment
to the Conversion Price under this Section 15.5 was made, (1) in the
case of any such rights or warrants that shall all have been redeemed
or repurchased without exercise by any holders thereof, the Conversion
Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be,
as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of
Common Stock with respect to such rights or warrants (assuming such
holder had retained such rights or warrants), made to all holders of
Common Stock as of the date of such redemption or repurchase, and (2)
in the case of such rights or warrants that shall have expired or been
terminated without exercise by any holders thereof, the Conversion
Price shall be readjusted as if such rights and warrants had not been
issued.
No adjustment of the Conversion Price shall be made pursuant
to this Section 15.5(d) in respect of rights or warrants distributed or
deemed distributed on any Trigger Event to the extent that such rights
or warrants are actually distributed, or reserved by the Company for
distribution to holders of Notes upon conversion by such holders of
Notes to Common Stock.
For purposes of this Section 15.5(d) and Sections 15.5(a) and
(b), any dividend or distribution to which this Section 15.5(d) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock (or both),
shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets or shares of capital stock other than
such shares of Common Stock or rights or warrants (and any Conversion
Price reduction required by this Section 15.5(d) with
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respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares
of Common Stock or such rights or warrants (and any further Conversion
Price reduction required by Sections 15.5(a) and (b) with respect to
such dividend or distribution shall then be made), except (A) the
Record Date of such dividend or distribution shall be substituted as
"the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "the date fixed for the
determination of stockholders entitled to receive such rights or
warrants" and "the date fixed for such determination" within the
meaning of Sections 15.5(a) and (b), and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding (x) any
quarterly cash dividend on the Common Stock to the extent the aggregate
cash dividend per share of Common Stock in any fiscal quarter does not
exceed the greater of (A) the amount per share of Common Stock of the
next preceding quarterly cash dividend on the Common Stock to the
extent that such preceding quarterly dividend did not require any
adjustment of the Conversion Price pursuant to this Section 15.5(e) (as
adjusted to reflect subdivisions, or combinations of the Common Stock),
and (B) 3.75% of the arithmetic average of the Closing Price
(determined as set forth in Section 15.5(h)) during the ten Trading
Days (as defined in Section 15.5(h)) immediately prior to the date of
declaration of such dividend, and (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary), then, in such case, the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such record date by a
fraction, the numerator of which shall be the Current Market Price of
the Common Stock on the record date less the amount of cash so
distributed (and not excluded as provided above) applicable to one
share of Common Stock, and the denominator of which shall be such
Current Market Price
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of the Common Stock, such reduction to be effective immediately prior
to the opening of business on the day following the record date;
provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the record
date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Noteholder shall have the right to receive upon
conversion the amount of cash such holder would have received had such
holder converted each Note on the record date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price that would then be
in effect if such dividend or distribution had not been declared. If
any adjustment is required to be made as set forth in this Section
15.5(e) as a result of a distribution that is a quarterly dividend,
such adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend
permitted to be excluded pursuant hereto. If an adjustment is required
to be made as set forth in this Section 15.5(e) above as a result of a
distribution that is not a quarterly dividend, such adjustment shall be
based upon the full amount of the distribution.
(f) In case a tender or exchange offer made by the Company or
any Subsidiary for all or any portion of the Common Stock shall expire
and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of consideration per
share of Common Stock having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) that as of the
last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it may be amended)
exceeds the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time, the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
Expiration Time by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the Current
Market Price of the Common
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Stock on the Trading Day next succeeding the Expiration Time and the
denominator of which shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the Trading
Day following the Expiration Time. In the event that the Company is
obligated to purchase shares pursuant to any such tender or exchange
offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price
that would then be in effect if such tender or exchange offer had not
been made.
(g) In case of a tender or exchange offer made by a Person
other than the Company or any Subsidiary for an amount that increases
the offeror's ownership of Common Stock to more than twenty-five
percent (25%) of the Common Stock outstanding and shall involve the
payment by such Person of consideration per share of Common Stock
having a fair market value (as determined by the Board of Directors,
whose determination shall be conclusive, and described in a resolution
of the Board of Directors) that as of the last time (the "Offer
Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it shall have been amended) that exceeds
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Offer Expiration Time, and in which, as of the Offer
Expiration Time the Board of Directors is not recommending rejection of
the offer, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the Offer Expiration Time by a fraction the
numerator of which shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Offer
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Expiration Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Offer Expiration Time and
the denominator of which shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Offer Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred
to as the "Accepted Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Accepted
Purchased Shares) at the Offer Expiration Time and the Current Market
Price of the Common Stock on the Trading Day next succeeding the Offer
Expiration Time, such reduction to become effective immediately prior
to the opening of business on the Trading Day following the Offer
Expiration Time. In the event that such Person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such Person
is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price that would then be
in effect if such tender or exchange offer had not been made.
Notwithstanding the foregoing, the adjustment described in this Section
15.5(g) shall not be made if, as of the Offer Expiration Time, the
offering documents with respect to such offer disclose a plan or
intention to cause the Company to engage in any transaction described
in Article Twelve.
(h) For purposes of this Section 15.5, the following terms
shall have the meaning indicated:
(1) "Closing Price" with respect to any security on
any day shall mean the closing sale price, regular way, on
such day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular
way, in each case as quoted on the Nasdaq National Market or,
if such security is not quoted or listed or admitted to
trading on such Nasdaq National Market, on the principal
national securities exchange or quotation system on which such
security is quoted or listed or admitted to trading or, if not
quoted or listed or admitted to
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trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of
such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors or, to the
extent permitted by applicable law, a duly authorized
committee thereof, whose determination shall be conclusive.
(2) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the ten
consecutive Trading Days immediately prior to the date in
question except as hereinafter provided for purposes of any
computation under Section 15.5(f) or (g); provided, however,
that (1) if the "ex" date (as hereinafter defined) for any
event (other than the issuance or distribution requiring such
computation and other than the tender or exchange offer
requiring such computation under Section 15.5(f) or (g)) that
requires an adjustment to the Conversion Price pursuant to
Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs during
such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (2) if the "ex" date
for any event (other than the issuance or distribution
requiring such computation and other than the tender or
exchange offer requiring such computation under Section
15.5(f) or (g)) that requires an adjustment to the Conversion
Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or
(g) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day
in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion
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Price is so required to be adjusted as a result of such other
event, and (3) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required
pursuant to clause (1) or (2) of this proviso, the Closing
Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors or, to
the extent permitted by applicable law, a duly authorized
committee thereof in a manner consistent with any
determination of such value for purposes of Section 15.5(d),
(f) or (g), whose determination shall be conclusive and
described in a resolution of the Board of Directors or such
duly authorized committee thereof, as the case may be) of the
evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as
of the close of business on the day before such "ex" date. For
purposes of any computation under Section 15.5(f) or (g), the
"Current Market Price" of the Common Stock on any date shall
be deemed to be the average of the daily Closing Prices per
share of Common Stock for such day and the next two succeeding
Trading Days; provided, however, that if the "ex" date for any
event (other than the tender or exchange offer requiring such
computation under Section 15.5(f) or (g)) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the
Expiration Time or Offer Expiration Time, as the case may be,
for the tender or exchange offer requiring such computation
and prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event
shall be adjusted as provided in clauses (1), (2) and (3) of
the proviso contained in the first sentence of this Section
15.5(h)(2). For purpose of this paragraph, the term "ex" date,
(1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular
way, on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right to
receive such issuance or distribution, (2) when used with
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respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades,
regular way, on such exchange or in such market after the time
at which such subdivision or combination becomes effective,
and (3) when used with respect to any tender or exchange offer
means the first date on which the Common Stock trades, regular
way, on such exchange or in such market after the Expiration
Time or the Offer Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is quoted on the Nasdaq National Market, a day on
which trades may be made thereon or (y) if the applicable
security is listed or admitted for trading on the New York
Stock Exchange or another national securities exchange, a day
on which the New York Stock Exchange or another national
securities exchange is open for business or (z) if the
applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on
which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 15.5(a), (b), (c),
(d), (e), (f) or (g) as the Board of Directors considers to be
advisable to avoid
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or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such
for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any
period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Board of Directors
shall have made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive.
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to holders of record of the Notes a
notice of the reduction at least fifteen (15) days prior to the date
the reduced Conversion Price takes effect, and such notice shall state
the reduced Conversion Price and the period during which it will be in
effect.
(j) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least one percent (1%) in such price; provided, however, that any
adjustments that by reason of this Section 15.5(j) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Article Fifteen
shall be made by the Company and shall be made to the nearest cent or
to the nearest one-hundredth (1/100) of a share, as the case may be. No
adjustment need be made for rights to purchase Common Stock pursuant to
a Company plan for reinvestment of dividends or interest. To the extent
the Notes become convertible into cash, assets, property or securities
(other than capital stock of the Company), no adjustment need be made
thereafter as to the cash, assets, property or such securities.
Interest will not accrue on the cash.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Unless
and until a Responsible Officer of
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the Trustee shall have received such Officers' Certificate, the Trustee
shall not be deemed to have knowledge of any adjustment of the
Conversion Price and may assume without inquiry that the last
Conversion Price of which it has knowledge is still in effect. Promptly
after delivery of such certificate, the Company shall prepare a notice
of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each Note at his last address
appearing on the Note register provided for in Section 2.5 of this
Indenture, within twenty (20) days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any
such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after (1) a record date
or Record Date for an event, (2) the date fixed for the determination
of stockholders entitled to receive a dividend or distribution pursuant
to Section 15.5(a), (3) a date fixed for the determination of
stockholders entitled to receive rights or warrants pursuant to Section
15.5(b), (4) the Expiration Time for any tender or exchange offer
pursuant to Section 15.5(f), or (5) the Offer Expiration Time for a
tender or exchange offer pursuant to Section 15.5(g) (each a
"Determination Date"), the Company may elect to defer until the
occurrence of the relevant Adjustment Event (as hereinafter defined)
(x) issuing to the holder of any Note converted after such
Determination Date and before the occurrence of such Adjustment Event,
the additional shares of Common Stock or other securities issuable upon
such conversion by reason of the adjustment required by such Adjustment
Event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (y) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section 15.3.
For purposes of this Section 15.5(l), the term "Adjustment Event" shall
mean:
(a) in any case referred to in clause (1) hereof, the
occurrence of such event,
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(b) in any case referred to in clause (2) hereof, the
date any such dividend or distribution is paid or made,
(c) in any case referred to in clause (3) hereof, the
date of expiration of such rights or warrants, and
(d) in any case referred to in clause (4) or clause
(5) hereof, the date a sale or exchange of Common Stock
pursuant to such tender or exchange offer is consummated and
becomes irrevocable.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
Section 15.6 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another Person as a result of which holders of
Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be entitled to receive stock, other securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, then the Company or the successor or purchasing Person, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Note shall be convertible
into the kind and amount of shares of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such
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Notes (assuming, for such purposes, a sufficient number of authorized shares of
Common Stock are available to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or conveyance
assuming such holder of Common Stock did not exercise his rights of election, if
any, as to the kind or amount of stock, other securities or other property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance (provided that, if the
kind or amount of stock, other securities or other property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance is not the same for each share of Common Stock
in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of stock, other securities or other property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article Fifteen.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7 TAXES ON SHARES ISSUED. The issue of stock certificates
on conversions of Notes shall be made without charge to the converting
Noteholder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in
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respect of any transfer involved in the issue and delivery of stock in any name
other than that of the holder of any Note converted, and the Company shall not
be required to issue or deliver any such stock certificate unless and until the
Person or Persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
Section 15.8 RESERVATION OF SHARES; SHARES TO BE FULLY PAID;
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS; LISTING OF COMMON STOCK. The Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.
The Company covenants that, if any shares of Common Stock to be
provided for the purpose of conversion of Notes hereunder require registration
with or approval of any governmental authority under any federal or state law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible, to the extent then permitted by the
rules and interpretations of the Securities and Exchange Commission (or any
successor thereto), endeavor to secure such registration or approval, as the
case may be.
The Company further covenants that, if at any time the Common Stock
shall be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system,
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list and keep listed, so long as the Common Stock shall be so listed on such
exchange or automated quotation system, all Common Stock issuable upon
conversion of the Note; provided, however, that, if the rules of such exchange
or automated quotation system permit the Company to defer the listing of such
Common Stock until the first conversion of the Notes into Common Stock in
accordance with the provisions of this Indenture, the Company covenants to list
such Common Stock issuable upon conversion of the Notes in accordance with the
requirements of such exchange or automated quotation system at such time.
Section 15.9 RESPONSIBILITY OF TRUSTEE. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine the Conversion Price or whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article Fifteen. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be
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obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
Section 15.10 NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Conversion Price
pursuant to Section 15.5; or
(b) the Company shall authorize the granting to the holders of all or
substantially all of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock of
the Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company or any Significant Subsidiary;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
ten (10) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution,
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liquidation or winding up. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
Section 16.1 PROVISIONS BINDING ON COMPANY'S SUCCESSORS. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 16.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.
Section 16.3 ADDRESSES FOR NOTICES, ETC. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Conexant Systems, Inc., 4311 Jamboree Road, Newport Beach,
California 92660-3095, Attention: Treasurer. Any notice, direction, request or
demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited, postage prepaid, by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at 1 Bank One Plaza, Suite
IL1-0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust
Administration (Conexant Systems, Inc. 4% Convertible Subordinated Notes due
2007).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
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Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 16.4 GOVERNING LAW. This Indenture and each Note shall be
deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of the State of New
York, without regard, to the extent permitted by law, to the conflict of laws
provisions thereof.
Section 16.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT;
CERTIFICATES TO TRUSTEE. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 16.6 LEGAL HOLIDAYS. In any case in which the date of maturity
of interest on or principal of
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the Notes or the date fixed for redemption of any Note will not be a Business
Day, then payment of such interest on or principal of the Notes need not be made
on such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the date of maturity or the date fixed for
redemption, and no interest shall accrue for the period from and after such
date.
Section 16.7 TRUST INDENTURE ACT. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided, however, that, unless otherwise required by law,
notwithstanding the foregoing, this Indenture and the Notes issued hereunder
shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3)
of Section 314 of the Trust Indenture Act as now in effect or as hereafter
amended or modified; provided further that this Section 16.7 shall not require
this Indenture or the Trustee to be qualified under the Trust Indenture Act
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act, nor shall it constitute any admission or acknowledgment by
any party to the Indenture that any such qualification is required prior to the
time such qualification is in fact required under the terms of the Trust
Indenture Act. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in an indenture
qualified under the Trust Indenture Act, such required provision shall control.
Section 16.8 NO SECURITY INTEREST CREATED. Nothing in this Indenture
or in the Notes, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction in which property of
the Company or its subsidiaries is located.
Section 16.9 BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
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Section 16.10 TABLE OF CONTENTS, HEADINGS, ETC. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11 AUTHENTICATING AGENT. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 16.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall either promptly appoint a
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successor authenticating agent or itself assume the duties and obligations of
the former authenticating agent under this Indenture and, upon such appointment
of a successor authenticating agent, if made, shall give written notice of such
appointment of a successor authenticating agent to the Company and shall mail
notice of such appointment of a successor authenticating agent to all holders of
Notes as the names and addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to
time such reasonable compensation for its services as shall be agreed upon in
writing between the Company and the authenticating agent.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11
shall be applicable to any authenticating agent.
Section 16.12 EXECUTION IN COUNTERPARTS. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
Section 16.13 SEVERABILITY. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, then (to the extent
permitted by law) the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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Bank One Trust Company, National Association, hereby accepts the
trusts in this Indenture declared and provided, upon the terms and conditions
herein above set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed.
CONEXANT SYSTEMS, INC.
By: /s/ Balakrishnan S. Iyer
----------------------------------------
Name: Balakrishnan S. Iyer
Title: Senior Vice President and
Chief Financial Officer
BANK ONE TRUST COMPANY, NATIONAL
ASSOCIATION,
as Trustee
By: /s/ Sharon K. McGrath
----------------------------------------
Name: Sharon K. McGrath
Title: Assistant Vice President
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EXHIBIT A
For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) (THE "DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY
FOR THE CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO CONEXANT SYSTEMS, INC. OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH
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TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
(2)(E) ABOVE), IT WILL FURNISH TO BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT;
AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO BANK ONE
TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR
OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY
PURSUANT TO CLAUSE (2)(E) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-2
<PAGE>
CONEXANT SYSTEMS, INC.
4% CONVERTIBLE SUBORDINATED NOTE DUE FEBRUARY 1, 2007
CUSIP: [207142 AD2 (144A)]
No.: __________ $___________________
Conexant Systems, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to
________________________________ or registered assigns, the principal sum of
____________________________________________________________________________
($___________) on February 1, 2007, at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, semi-annually on February 1 and August 1 of each year, commencing
August 1, 2000, on said principal sum at said office or agency, in like coin or
currency, at the rate per annum of 4%, from February 1 or August 1, as the case
may be, next preceding the date of this Note to which interest has been paid or
duly provided for, unless the date hereof is a date to which interest has been
paid or duly provided for, in which case from the date of this Note, or unless
no interest has been paid or duly provided for on the Notes, in which case from
February 2, 2000, until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the date hereof is after any
January 15 or July 15, as the case may be, and before the following February 1
or August 1, this Note shall bear interest from such February 1 or August 1;
provided, however, that if the Company shall default in the payment of interest
due on such February 1 or August 1, then this Note shall bear interest from the
next preceding February 1 or August 1 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from February 2, 2000. Except as otherwise provided in the Indenture, the
interest payable on the Note pursuant to the Indenture on any February 1 or
August 1 will be paid to the Person entitled thereto as it appears in the Note
register at the close of business on the record date, which shall be the January
15 or July 15 (whether or not a
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Business Day) next preceding such February 1 or November 1, as provided in the
Indenture; provided, however, that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest may, at the
option of the Company, be paid either (i) by check mailed to the registered
address of such Person (provided that the holder of Notes with an aggregate
principal amount in excess of $5,000,000 shall, at the written election of such
holder, be paid by wire transfer of immediately available funds) or (ii) by
transfer to an account maintained by such Person located in the United States;
provided, however, that payments to the Depositary will be made by wire transfer
of immediately available funds to the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such further provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to principles
of conflicts of laws.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal to be affixed or imported hereon.
CONEXANT SYSTEMS, INC.
[Corporate Seal] By:
----------------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
Attest:
-------------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
Dated:
----------------------------------
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
As Authenticating Agent
(if different from Trustee)
A-6
<PAGE>
FORM OF REVERSE OF NOTE
CONEXANT SYSTEMS, INC.
4% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2007
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 4% Convertible Subordinated Notes Due February 1, 2007 (herein
called the "Notes"), limited to the aggregate principal amount of $500,000,000
(or $650,000,000 if the purchase right set forth in Section 2 of the Purchase
Agreement dated January 28, 2000 (as amended from time to time by the parties
thereto) by and between the Company and the Initial Purchaser is exercised in
full) all issued or to be issued under and pursuant to an Indenture dated as of
February 1, 2000 (herein called the "Indenture"), between the Company and Bank
One Trust Company, National Association, as trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Notes.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any
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amount payable upon redemption thereof, or impair the right of any Noteholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Notes, or modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the Noteholders
in any material respect, or change the obligation of the Company to redeem any
Note upon the happening of a Fundamental Change (as defined in the Indenture) in
a manner adverse to the holders of the Notes, or impair the right to convert the
Notes into Common Stock subject to the terms set forth in the Indenture,
including Section 15.6 thereof, without the consent of the holder of each Note
so affected or (ii) reduce the aforesaid percentage of Notes, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding. Subject to the provisions
of the Indenture, the holders of a majority in aggregate principal amount of the
Notes at the time outstanding may on behalf of the holders of all of the Notes
waive any past default or Event of Default under the Indenture and its
consequences except a default in the payment of interest (including Liquidated
Damages, if any) or any premium on, or the principal of, any of the Notes, or a
failure by the Company to convert any Notes into Common Stock of the Company, or
a default in the payment of the redemption price pursuant to Article Three of
the Indenture, or a default in respect of a covenant or provisions of the
Indenture which under Article Eleven of the Indenture cannot be modified without
the consent of the holders of each or all Notes then outstanding or affected
thereby. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture) of the Company, whether outstanding at the date of the Indenture
or thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and
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<PAGE>
shall be bound by such provisions and authorizes the Trustee on its behalf to
take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
February 6, 2003. At any time on or after February 6, 2003, and prior to
maturity, the Notes may be redeemed at the option of the Company, in whole or in
part, upon mailing a notice of such redemption not less than 30 days before the
date fixed for redemption to the holders of Notes at their last registered
addresses, all as provided in the Indenture, at the following optional
redemption prices (expressed as percentages of the principal amount), together
in each case with accrued and unpaid interest (including Liquidated Damages, if
any) to, but excluding, the date fixed for redemption:
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<PAGE>
Period Redemption Price
- ------ ----------------
Beginning on February 6, 2003 and ending on 102.286%
January 31, 2004
Beginning on February 1, 2004 and ending on 101.714%
January 31, 2005
Beginning on February 1, 2005 and ending on 101.143%
January 31, 2006
Beginning on February 1, 2006 and ending on 100.571%
January 31, 2007
and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
The Company may not give notice of any redemption of the Notes if a
default in the payment of interest or premium, if any, on the Notes has occurred
and is continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Fundamental Change occurs at any time prior to maturity of the
Notes, the Notes will be redeemable on the 30th day after notice thereof (the
"Repurchase Date") at the option of the holder of the Notes at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to (but excluding) the date of redemption; provided, however, that, if
such Repurchase Date is a February 1 or August 1, the interest payable on such
date shall be paid to the holder of record of the Notes on the preceding January
15 or July 15, respectively. The Notes will be redeemable in multiples of $1,000
principal amount. The Company shall mail to all holders of record of the Notes a
notice of the occurrence of a Fundamental Change and of the redemption right
arising as a result thereof on or before the 10th day after the occurrence of
such Fundamental Change. For a Note to be so redeemed at the option of the
holder, the Company must receive at the office or agency of the Company
maintained for that purpose in accordance with
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<PAGE>
the terms of the Indenture, such Note with the form entitled "Option to Elect
Repayment Upon a Fundamental Change" on the reverse thereof duly completed,
together with such Note, duly endorsed for transfer, on or before the 30th day
after the date of such notice of a Fundamental Change (or if such 30th day is
not a Business Day, the immediately preceding Business Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company's Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $108.00, as may adjusted from time to time as
provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture (the form entitled "Conversion
Notice" on the reverse hereof), to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, or at the option of such holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. No adjustment in respect of interest on any Note converted
or dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
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interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion. A Note in respect of which a
holder is exercising its right to require redemption upon a Fundamental Change
may be converted only if such holder withdraws its election to exercise such
right in accordance with the terms of the Indenture. Any Notes called for
redemption, unless surrendered for conversion by the holders thereof on or
before the close of business on the Business Day preceding the date fixed for
redemption, may be deemed to be redeemed from the holders of such Notes for an
amount equal to the applicable redemption price, together with accrued but
unpaid interest (including Liquidated Damages, if any) to (but excluding) the
date fixed for redemption, by one or more investment banks or other purchasers
who may agree with the Company (i) to purchase such Notes from the holders
thereof and convert them into shares of the Company's Common Stock and (ii) to
make payment for such Notes as aforesaid to the Trustee in trust for the
holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor
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any Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein
as therein defined.
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<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in common
UNIF GIFT MIN ACT - ____________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors Act
--------------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
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<PAGE>
CONVERSION NOTICE
TO: CONEXANT SYSTEMS, INC.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Conexant Systems, Inc. in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Notes representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
provide the appropriate information below and pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Note.
Dated:
--------------------------
--------------------------------------------
--------------------------------------------
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Note registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined
A-15
<PAGE>
by the Note registrar in addition to, or in
substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
--------------------------------------------
Signature Guarantee
Fill in the registration of shares of Common Stock if to be issued, and Notes if
to be delivered, other than to and in the name of the registered holder:
- ---------------------------------
(Name)
- ---------------------------------
(Street Address)
- ---------------------------------
(City, State and Zip Code)
- ---------------------------------
Please print name and address
Principal amount to be converted
(if less than all):
$
--------------------------------
Social Security or Other Taxpayer
Identification Number:
- ---------------------------------
A-16
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: CONEXANT SYSTEMS, INC.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Conexant Systems, Inc. (the "Company") as
to the occurrence of a Fundamental Change with respect to the Company and
requests and instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 or an integral multiple thereof)
below designated, in accordance with the terms of the Indenture referred to in
this Note at the price of 100% of such entire principal amount or portion
thereof, together with accrued interest to, but excluding, such repayment date,
to the registered holder hereof.
Dated:
--------------------------
--------------------------------------------
--------------------------------------------
Signature(s)
NOTICE: The above signatures of the
holder(s) hereof must correspond with the
name as written upon the face of the Note in
every particular without alteration or
enlargement or any change whatever.
Principal amount to be repaid (if less than
all):
$
-------------------------------------------
--------------------------------------------
Social Security or Other
Taxpayer Identification Number
A-17
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address
including postal zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
- --------------------------------------------------------------------------------
Attorney to transfer said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the Note within the "United States"
or to, or for the account of, "U.S. persons" (in each case as defined in
Regulation S under the Securities Act) and within the period prior to the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Note is being transferred:
A-18
<PAGE>
[_] To Conexant Systems, Inc. or a subsidiary
thereof; or
[_] Pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
[_] To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended, in a minimum denomination
of $200,000; or
[_] Pursuant to and in compliance with Rule 144 under
the Securities Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[_] The transferee is an Affiliate of the Company.
Dated:
--------------------------
--------------------------------------------
--------------------------------------------
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Note registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Note registrar in addition
to, or in substitution for, STAMP, all in
accordance with the
A-19
<PAGE>
Securities Exchange Act of 1934, as amended.
--------------------------------------------
Signature Guarantee
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
A-20
<PAGE>
EXHIBIT B
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660-3095
Bank One Trust Company, National Association, as Trustee
1 Bank One Plaza, Suite IL1-0126
Chicago, IL 60670-0126
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of 4% Convertible
Subordinated Notes Due February 1, 2007 (the "Notes") of Conexant Systems, Inc.,
a Delaware corporation (the "Company"), we confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2) or (3)
under the Securities Act (an "Institutional Accredited Investor");
(ii) (A) any purchase of Notes by us will be for our own
account or for the account of one or more other Institutional
Accredited Investors or as fiduciary for the account of one or more
trusts, each of which is an "accredited investor" within the meaning of
Rule 501(a)(7) under the Securities Act and for each of which we
exercise sole investment discretion or (B) we are a "bank," within the
meaning of Section 3(a)(2) of the Securities Act, or a "savings and
loan association" or other institution described in Section 3(a)(5)(A)
of the Securities Act that is acquiring Notes as fiduciary for the
account of one or more institutions for which we exercise sole
investment discretion;
(iii) in the event that we purchase any Notes, we will acquire
Notes having a minimum purchase price of not less than $200,000 for our
own account or for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of
B-1
<PAGE>
evaluating the merits and risks of purchasing Notes; and
(v) we are not acquiring Notes with a view to distribution
thereof or with any present intention of offering or selling Notes or
the Common Stock of the Company issuable upon conversion thereof,
except as permitted below; provided that the disposition of our
property and property of any accounts for which we are acting as
fiduciary shall remain at all times within our control.
We understand that the Notes are being offered in a
transaction not involving any public offering within the United States
within the meaning of the Securities Act and that the Notes and the
Common Stock of the Company issuable upon conversion thereof have not
been registered under the Securities Act, and we agree, on our own
behalf and on behalf of each account for which we acquire any Notes,
that if in the future we decide to resell or otherwise transfer such
Notes or the Common Stock of the Company issuable upon conversion
thereof, such Notes or Common Stock of the Company may be resold or
otherwise transferred within the United States or to, or for the
account or benefit of, U.S. persons only (i) to the Company or any
subsidiary thereof, (ii) to a person who is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, (iii) to an
Institutional Accredited Investor that, prior to such transfer,
furnishes to the Trustee for the Notes (or in the case of Common Stock
of the Company, the transfer agent therefor) a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of such securities (the form of which letter can be obtained
from the Trustee or the transfer agent, as the case may be), (iv)
pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if applicable), or (v) pursuant to a registration
statement that has been declared effective under the Securities Act
(and which continues to be effective at the time of such transfer), and
in each case, in accordance with any applicable securities law of any
State of the U.S. and in accordance with the legends set forth on the
Notes or the Common Stock of the Company issuable upon conversion
thereof. We further agree to provide any
B-2
<PAGE>
person purchasing any of the Notes or the Common Stock of the Company
issuable upon conversion thereof (other than pursuant to clause (iv) or
(v) above) from us a notice advising such purchaser that resales of
such securities are restricted as stated herein. We understand that the
Trustee and transfer agent for the Notes and the Common Stock of the
Company will not be required to accept for registration of transfer any
Notes or any Common Stock of the Company issued upon conversion of the
Notes, except upon presentation of evidence satisfactory to the Company
that the foregoing restrictions on transfer have been complied with. We
further understand that any Notes and any Common Stock of the Company
issued upon conversion of the Notes will be in the form of definitive
physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph.
The Company and the Trustee and their respective counsel are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(Name of Purchaser)
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
--------------------------------------------
--------------------------------------------
B-3
<PAGE>
EXHIBIT 5.01
LATHAM & WATKINS
LETTERHEAD
FEBRUARY 2, 2000
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Re: Registration Statement on Form S-4; Maximum of 13,125,176 Shares of
Common Stock, par value $1.00 per share
Ladies and Gentlemen:
In connection with the registration by Conexant Systems, Inc., a Delaware
corporation (the "Registrant"), of a maximum of 13,125,176 shares of common
stock of the Registrant, par value $1.00 per share (the "Shares"), under the
Securities Act of 1933, as amended (the "Act"), on that certain registration
statement on Form S-4 filed with the Securities and Exchange Commission (the
"Commission") on February 2, 2000 (the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below.
In our capacity as your counsel in connection with such registration, we are
familiar with the proceedings taken and proposed to be taken by the Registrant
in connection with the authorization, issuance and sale of the Shares, and for
purposes of this opinion, have assumed such proceedings will be timely completed
in the manner presently proposed. In addition, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction only of
the general corporation laws of the State of Delaware, and we express no opinion
with respect to the applicability thereto, or the effect thereon, of the laws of
any other jurisdiction, or, in the case of Delaware, any other laws, or as to
any matters of municipal law or the laws of any other local agencies within the
State of Delaware.
Subject to the foregoing, it is our opinion that the Shares have been duly
authorized, and, upon issuance, delivery and payment therefor in the manner
contemplated by the Registration Statement, will be validly issued, fully paid
and nonassessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Legal
Matters."
Very truly yours,
LATHAM & WATKINS
<PAGE>
Exhibit 8.01
LATHAM & WATKINS
Letterhead
February 2, 2000
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Re: Tax Consequences of Merger of Maker Communications, Inc. and
Merlot Acquisition Corp.
------------------------------------------------------------
Gentlemen:
You have requested our opinion with respect to certain
federal income tax consequences of the proposed merger and reorganization
(the "Merger") pursuant to the Agreement and Plan of Merger, dated as of
December 18, 1999 (the "Agreement"), among Maker Communications, Inc., a
Delaware corporation ("Maker"), Conexant Systems, Inc., a Delaware
corporation ("Conexant"), and Merlot Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Conexant ("Sub"). This opinion is
being delivered to you in connection with the Form S-4 Registration
Statement/Proxy Statement (the "Proxy Statement") filed with respect to the
Merger. For purposes of this opinion, all capitalized terms, unless otherwise
specified, have the meanings assigned to them in the Agreement.
In rendering our opinion, we have examined and relied upon
the accuracy and completeness of the facts, information, statements and
representations contained in the Agreement and in the Proxy Statement. In
connection with this opinion, we have also relied upon statements and
representations made to us via certificates by Conexant, Sub and Maker with
respect to certain factual matters (the "Certificates"), dated February 2,
2000, which statements and representations we have neither investigated nor
verified. The opinions expressed herein are conditioned on the initial and
continuing accuracy as of the Effective Time of the facts, information,
statements and representations set forth in the documents, the Certificates
and filings referred to above. We have assumed that all such facts,
information, statements and representations qualified by the
<PAGE>
Conexant Systems, Inc.
February 2, 2000
Page 2
knowledge and belief of Conexant, Maker or Sub will be complete and accurate as
of the Effective Time as though not so qualified. In our examination, we have
assumed the genuineness of all signatures, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
We hereby consent to the use of our name under the caption
"Material Federal Income Tax Consequences" in the Proxy Statement and to the
filing of this opinion with the Securities and Exchange Commission as an exhibit
to the Proxy Statement. In giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
In rendering our opinion, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations promulgated thereunder, pertinent judicial authorities and
published rulings and other pronouncements of the Internal Revenue Service, all
as of the date hereof. We express no opinion as to the tax consequences of the
Merger under any laws other than the federal income tax laws of the United
States.
This opinion does not address the tax consequences of any
transaction effected prior to or after the Merger (whether or not such
transactions were effected in connection with the Merger), including, without
limitation, the exercise of any options, warrants, or other rights to acquire
shares of capital stock of Maker in anticipation of the Merger. This opinion
also does not address the United States federal income tax considerations
applicable to shareholders or other persons subject to special treatment under
United States federal income tax law, including, for example, Maker shareholders
who acquired their Company Common Stock as compensation, shareholders who are
dealers in securities or insurance companies, shareholders who are foreign
persons and shareholders who hold their stock as part of a hedge, straddle or
conversion transaction.
We have assumed that (i) all parties to the Agreement, and to
any other documents reviewed by us, have acted, and will act, in accordance with
the terms of the Agreement and such other documents, (ii) the Merger will be
consummated at the Effective Time pursuant to the terms and conditions set forth
in the Agreement without the waiver or modification of any such terms and
conditions, and (iii) the Merger is authorized by and will be effected pursuant
to applicable state law. We have also assumed that (i) the opinion dated
February 2, 2000 rendered by Hutchins, Wheeler & Dittmar to Maker pursuant to
the Agreement has been delivered and has not been withdrawn, and (ii) the Merger
will be reported by Maker and Conexant on their respective federal income tax
returns in a manner consistent with the opinion set forth below.
Based solely on and subject to (a) the qualifications and
limitations set forth herein, and (b) the qualifications, limitations,
representations and assumptions contained in the portion of the Proxy Statement
captioned "Material Federal Income Tax Consequences" and in
<PAGE>
Conexant Systems, Inc.
February 2, 2000
Page 3
the Certificates, we are of the opinion that (i) for federal income tax
purposes, the Merger will constitute a reorganization within the meaning of
section 368(a) of the Code, and (ii) no gain or loss will be recognized by
stockholders of Maker upon the exchange of their Maker common stock solely
for shares of Conexant common stock (except with respect to cash received in
lieu of fractional shares of Conexant common stock).
Except as set forth above, we express no other opinion as to
the tax consequences of the Merger and related transactions to any party under
federal, state, local or foreign laws. Our opinion is not binding on the
Internal Revenue Service or the courts, and there is no assurance that the
Internal Revenue Service will not assert a contrary position. Furthermore, no
assurance can be given that future legislative, judicial or administrative
changes, on either a prospective or retroactive basis, would not adversely
affect the accuracy of the conclusions herein. If all of the transactions
described in the Agreement are not consummated in accordance with the terms of
such Agreement or if all of the representations, warranties, statements and
assumptions upon which we relied are not true and accurate at all relevant
times, our opinion might be adversely affected and may not be relied upon.
We are furnishing this opinion solely to Maker and its
shareholders in connection with the Merger, and this opinion is not to be relied
upon by any other person for any other purpose.
Very truly yours,
Latham & Watkins
<PAGE>
Exhibit 8.02
February 2, 2000
Maker Communications, Inc.
73 Mount Wayte Avenue
Framingham, MA 01702
Ladies and Gentlemen:
This opinion is being delivered to you in accordance with Section
6.3(c) of the Agreement and Plan of Merger dated as of December 18, 1999 (the
"Merger Agreement") among Conexant Systems, Inc., a Delaware corporation
("Parent"), Merlot Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent ("Sub"), and Maker Communications, Inc., a Delaware
corporation (the "Company"). Pursuant to the terms of the Merger Agreement, Sub
will merge with and into the Company (the "Merger") and the Company will become
a wholly owned subsidiary of Parent.
Except as otherwise provided, capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
We have acted as counsel to the Company in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have
examined and are relying upon (without any independent investigation or
review thereof) the truth, accuracy and completeness, at all relevant times,
of the facts, information, statements, covenants, representations, and
warranties contained in the following documents (including all exhibits and
schedules attached thereto):
(a) the Merger Agreement;
(b) those certain Officer's Certificates dated February 2, 2000,
delivered to us by Parent, Sub, and the Company, containing
certain statements and representations of Parent, Sub, and the
Company (the "Tax Representation Certificates");
(c) Form S-4 registration statement filed in connection with the
Merger (the "Registration Statement"); and
(d) such other instruments and documents related to the formation,
organization, and operation of Parent, Sub, and the Company
and related to the consummation of the Merger and the other
transactions contemplated by the Merger Agreement as we have
deemed necessary or appropriate.
<PAGE>
Maker Communications, Inc.
February 2, 2000
Page 2
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that:
1. Original documents submitted to us (including signatures thereto)
are authentic, documents submitted to us as copies conform to the original
documents, and all such documents have been (or will be by the Effective Time)
duly and validly executed and delivered where due execution and delivery are a
prerequisite to the effectiveness thereof;
2. All facts, information, statements, covenants, representations, and
warranties made or agreed to by Parent, Sub, and the Company, their managements,
employees, officers, directors, and shareholders in connection with the Merger,
including, but not limited to, those set forth in the Merger Agreement
(including the exhibits thereto) and the Tax Representation Certificates, are
true, accurate and complete at all relevant times;
3. All covenants contained in the Merger Agreement (including exhibits
thereto) and the Tax Representation Certificates are performed without waiver or
breach of any material provision thereof;
4. Any representation or statement made "to the best knowledge of" or
similarly qualified is correct without such qualification;
5. The opinion, dated February 2, 2000, from Latham & Watkins to Parent
in satisfaction of Section 6.2(c) of the Merger Agreement has been delivered and
has not been withdrawn; and
6. The Merger is authorized by and will be effected pursuant to
applicable state law and will be reported by Parent and the Company on their
respective United States federal income tax returns in a manner consistent with
this opinion.
Based on the foregoing and subject to the limitations,
qualifications, assumptions, and caveats set forth herein, and the
limitations, qualifications, assumptions, and caveats set forth in the
portion of the Registration Statement captioned "The Merger -- Material
Federal Income Tax Consequences", we are of the opinion that, for United
States federal income tax purposes, (i) the Merger will be a reorganization
within the meaning of Section 368(a) of the Code, and (ii) no gain or loss
will be recognized by the shareholders of the Company upon the exchange of
their Company Common Stock solely for shares of Parent Common Stock, except
with respect to cash, if any, received in lieu of fractional shares of Parent
Common Stock.
We further consent to the reference to our firm under the captions "The
Merger -- Material Federal Income Tax Consequences" and "Legal Matters" in the
Registration Statement and to the filing of this opinion as an exhibit to the
Registration Statement. In giving such
<PAGE>
Maker Communications, Inc.
February 2, 2000
Page 3
consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
This opinion does not address the various state, local, or foreign tax
consequences that may result from the Merger or the other transactions
contemplated by the Merger Agreement. In addition, no opinion is expressed as to
(i) any United States federal tax consequences of the Merger or the other
transactions contemplated by the Merger Agreement, except as specifically set
forth herein, or (ii) the tax consequences of any transaction effected prior to
or after the Merger (whether or not such transaction was effected in connection
with the Merger), including, without limitation, the exercise of any options,
warrants, or other rights to acquire shares of Company Common Stock in
anticipation of the Merger; and this opinion may not be relied upon except with
respect to the consequences specifically discussed herein.
This opinion also does not address the United States federal income tax
considerations applicable to persons subject to special treatment under United
States federal income tax law, including, for example, shareholders of the
Company (i) who acquired their Company Common Stock as compensation, (ii) who
are dealers in securities or insurance companies, (iii) who are foreign persons,
or (iv) who hold their Company Common Stock as part of a hedge, straddle, or
conversion transaction.
No opinion is expressed as to any transaction other than the Merger
as described in the Merger Agreement, or as to the Merger if all of the
transactions described in the Merger Agreement are not consummated in
accordance with the terms of the Merger Agreement and without waiver or
breach of any material provision thereof. To the extent that any of the
facts, information, statements, covenants, representations, warranties, and
assumptions material to our opinion and upon which we have relied are not
true, accurate and complete in all material respects at all relevant times,
our opinion would be adversely affected and should not be relied upon.
This opinion represents only our best judgment as to the United States
federal income tax consequences of the Merger and is not binding on the Internal
Revenue Service or any court of law, tribunal, administrative agency, or other
governmental body. The conclusions are based on the Code, judicial decisions,
administrative regulations, and published rulings and procedures, all as
existing on the date hereof. No assurance can be given that future legislative,
judicial, or administrative changes or interpretations, on either a prospective
or retroactive basis, would not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, by rendering this opinion, we undertake no
responsibility to advise you of any new developments in the application or
interpretation of the United States federal income tax laws.
This opinion is being delivered by us in our capacity as tax counsel to
the Company, for the purpose of satisfying the conditions set forth in Section
6.3(c) of the Merger Agreement and for the purpose of being included as an
exhibit to the Registration Statement. It is intended for the benefit of the
Company and its shareholders and may not be relied upon or utilized for any
<PAGE>
Maker Communications, Inc.
February 2, 2000
Page 4
other purpose or by any other person and may not be made available to any other
person without our prior written consent.
Very truly yours,
HUTCHINS, WHEELER & DITTMAR,
A Professional Corporation
<PAGE>
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Conexant Systems, Inc. on Form S-4 of our report dated October 29, 1999,
appearing in the Annual Report on Form 10-K of Conexant Systems, Inc. for the
year ended September 30, 1999, and to the reference to us under the heading
"Experts" in the proxy statement/prospectus, which is part of this Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
February 2, 2000
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated February 10, 1999 on the consolidated financial statements of Maker
Communications, Inc. (and to all references to our Firm) included in or made a
part of this registration statement on Form S-4.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 2, 2000
<PAGE>
EXHIBIT 23.03
CONSENT OF DEUTSCHE BANK SECURITIES, INC.
We hereby consent to (i) the inclusion of our opinion letter, dated
December 18, 1999, to the Board of Directors of Maker Communications, Inc. as
Appendix B to the proxy statement/prospectus forming part of this Registration
Statement on Form S-4, and (ii) references made to our firm and such opinion in
such proxy statement/prospectus under the captions entitled "SUMMARY--Fairness
Opinion of Financial Advisor to Maker", "THE MERGER--Background of the Merger",
"THE MERGER--Maker's Reasons for the Merger; Recommendation of the Maker Board"
and "THE MERGER--Opinion of Deutsche Bank, Financial Advisor to Maker". In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
Amended, and the Rules and Regulations Promulgated thereunder, and we do not
admit that we are experts with respect to any part of the Registration Statement
within the meaning of the term "expert" as used in the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
DEUTSCHE BANK SECURITIES, INC.
By: /s/ Robert V. A. Benner, Jr.
----------------------------------
Name: Robert V. A. Benner, Jr.
Title: Managing Director
Deutsche Bank Securities, Inc.
Boston, Massachusetts
February 2, 2000
<PAGE>
Exhibit 99.01
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Michael Rubino
3 Cobblestone Way
Shrewsbury, MA 01545
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares to have
typed or printed thereon a restrictive legend which shall read substantially as
follows (if and to the extent true and necessary in light of legal and factual
circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the Court of
Chancery of the State of Delaware (unless such court asserts no jurisdiction, in
which case the parties hereto consent to the exclusive jurisdiction of the
courts of the State of Delaware) for any actions, suits or proceedings arising
out of or relating to this Agreement and the transactions contemplated hereby
(and each party hereto agrees not to commence any action, suit or proceeding
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to the addresses
set forth herein shall be effective service of process for any such action, suit
or proceeding brought against each party in such court. Each party hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby, in the Court of Chancery of the State of Delaware (unless
such court asserts no jurisdiction, in which case each party consents to the
exclusive jurisdiction of the courts of the State of Delaware). Each party
hereby further irrevocably and unconditionally waives and agrees not to plead or
to claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum. Each of the parties
hereto also agrees that any final and unappealable judgment against a party
hereto in connection with any action, suit or other proceeding that be
conclusive and binding on such party and that such award
6
<PAGE>
or judgment may be enforced in any court of competent jurisdiction, either
within or outside of the United States. A certified or exemplified copy of such
award or judgment shall be conclusive evidence of the fact and amount of such
award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
----------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
By: /s/ Michael Rubino
----------------------------------------
Name: Michael Rubino
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Michael Rubino 20,000 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
--------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: Robert Sherman
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any
6
<PAGE>
action, suit or other proceeding that be conclusive and binding on such party
and that such award or judgment may be enforced in any court of competent
jurisdiction, either within or outside of the United States. A certified or
exemplified copy of such award or judgment shall be conclusive evidence of the
fact and amount of such award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
---------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
BERGANTINO 1999 IRREVOCABLE
TRUST DTD 4/5/99
By: /s/ Robert P. Sherman
---------------------------------------
Name: Robert P. Sherman
Title: Trustee
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Bergantino 1999 Irrevocable 75,000 Beneficial
Trust DTD 4/5/99
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: Robert Sherman
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any
6
<PAGE>
action, suit or other proceeding that be conclusive and binding on such party
and that such award or judgment may be enforced in any court of competent
jurisdiction, either within or outside of the United States. A certified or
exemplified copy of such award or judgment shall be conclusive evidence of the
fact and amount of such award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
-----------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
BERGANTINO 1999 GRANTOR RETAINED
ANNUITY TRUST DTD 4/5/99
By: /s/ Robert P. Sherman
-----------------------------------
Name: Robert P. Sherman
Title: Trustee
By: /s/ Paul V. Bergantino
-----------------------------------
Name: Paul V. Bergantino
Title: Trustee
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Bergantino 1999 Grantor 75,000 Beneficial
Retained Annuity Trust DTD
4/5/99
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Tecumseh Limited Partnership I
42 Waterston Road
Newton, MA 02458
Attention: William Giudice
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any
6
<PAGE>
action, suit or other proceeding that be conclusive and binding on such party
and that such award or judgment may be enforced in any court of competent
jurisdiction, either within or outside of the United States. A certified or
exemplified copy of such award or judgment shall be conclusive evidence of the
fact and amount of such award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
-----------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
TECUMSEH LIMITED PARTNERSHIP I
By: /s/ William N. Giudice
-----------------------------------------
Name: William N. Giudice
Title: General Partner
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Tecumseh Limited Partnership I 131,490 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Greylock Equity Limited Partnership
One Federal Street, 26th Floor
Boston, MA 02110
Attention: Barbara Murray
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any
6
<PAGE>
action, suit or other proceeding that be conclusive and binding on such party
and that such award or judgment may be enforced in any court of competent
jurisdiction, either within or outside of the United States. A certified or
exemplified copy of such award or judgment shall be conclusive evidence of the
fact and amount of such award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
----------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
GREYLOCK EQUITY LIMITED
PARTNERSHIP
By: /s/ Roger Evans
----------------------------------------
Name: Roger Evans
Title: General Partner
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Greylock Equity Limited 2,643,378 Beneficial
Partnership
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Paul Bergantino
19 Butterfield
Lexington, MA 02420
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any action, suit or other proceeding that be
conclusive and binding on such party and that such award
6
<PAGE>
or judgment may be enforced in any court of competent jurisdiction, either
within or outside of the United States. A certified or exemplified copy of such
award or judgment shall be conclusive evidence of the fact and amount of such
award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
---------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
By: /s/ Paul V. Bergantino
---------------------------------------
Name: Paul V. Bergantino
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Paul Bergantino 989,619 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Thomas Medrek
8 Lancaster Road
Windham, NH 03087
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any action, suit or other proceeding that be
conclusive and binding on such party and that such award
6
<PAGE>
or judgment may be enforced in any court of competent jurisdiction, either
within or outside of the United States. A certified or exemplified copy of such
award or judgment shall be conclusive evidence of the fact and amount of such
award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
---------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
By: /s/ Thomas J. Medrek
---------------------------------------
Name: Thomas J. Medrek
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Thomas Medrek 317,000 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
<PAGE>
or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
2
<PAGE>
after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
3
<PAGE>
8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Bessemer Venture Partners IV L.P.
Bessemer Trust Company
1400 Old Country Road, Suite 407
Westbury, NY 11590
Attention: Robert Buescher
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also
6
<PAGE>
agrees that any final and unappealable judgment against a party hereto in
connection with any action, suit or other proceeding that be conclusive and
binding on such party and that such award or judgment may be enforced in any
court of competent jurisdiction, either within or outside of the United States.
A certified or exemplified copy of such award or judgment shall be conclusive
evidence of the fact and amount of such award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
---------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
BESSEMER VENTURE PARTNERS IV L.P.
By: /s/ Dear IV & Co. LLC
By: /s/ Robert H. Burscher
---------------------------------------
Name: Robert H. Burscher
Title: Manager
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Bessemer Venture Partners IV L.P. 851,990 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
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or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
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after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
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8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
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(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
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(ii) if to the Stockholder, to such Stockholder c/o
William N. Giudice
42 Waterston Road
Newton, MA 02458
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also agrees that any final and unappealable judgment against a
party hereto in connection with any action, suit or other proceeding that be
conclusive and binding on such party and that such award
6
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or judgment may be enforced in any court of competent jurisdiction, either
within or outside of the United States. A certified or exemplified copy of such
award or judgment shall be conclusive evidence of the fact and amount of such
award or judgment.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
---------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
By: /s/ William N. Giudice
---------------------------------------
Name: William N. Giudice
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
William N. Giudice 895,007 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT (the "AGREEMENT") dated as of December 18, 1999,
between the undersigned stockholder ("STOCKHOLDER") of Maker Communications,
Inc., a Delaware corporation (the "COMPANY"), and Conexant Systems, Inc., a
Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Parent have entered into an Agreement and Plan of
Merger dated as of December 18, 1999 (the "MERGER AGREEMENT"), providing for the
merger of a wholly-owned subsidiary of Parent ("MERGER SUB") with and into the
Company (the "MERGER") pursuant to the terms and conditions thereof; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which Stockholder will receive the consideration
provided for in the Merger Agreement in exchange for each share of Company
Common Stock, par value $0.01 per share, of Company (the "COMPANY COMMON STOCK")
owned by him, Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. REPRESENTATIONS OF STOCKHOLDER. Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of
Company Common Stock set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "SHARES");
(b) except as may be denoted in Exhibit A, does not
beneficially own (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "1934 ACT")) or own of record any shares
of Company Common Stock other than such Stockholder's Shares, but
excluding any shares of Company Common Stock which such Stockholder has
the right to obtain upon the exercise of stock options outstanding on
the date hereof; and
(c) has the right, power and authority to execute and deliver
this Agreement and the Proxy (as hereinafter defined) and to perform
such Stockholder's obligations under this Agreement and the Proxy, and
this Agreement and the Proxy has been duly executed and delivered by
such Stockholder and constitutes a valid and legally binding agreement
of such Stockholder, enforceable in accordance with its terms; and such
execution, delivery and performance by such Stockholder of this
Agreement and the Proxy will not (i) conflict with, require a consent,
waiver or approval under, or result in a breach of or default under,
any of the terms of any contract, commitment or other obligation
(written or oral) to which such Stockholder is a party or by which such
Stockholder is bound; (ii) violate any order, writ, injunction, decree
or statute, or any rule
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or regulation, applicable to Stockholder or any of the properties or
assets of Stockholder; or (iii) result in the creation of, or impose
any obligation on such Stockholder to create, any Lien (as defined in
the Merger Agreement), charge or other encumbrance of any nature
whatsoever upon the Shares, other than in favor of Parent.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. AGREEMENT TO VOTE SHARES. Stockholder shall be present (in person or
by proxy) and vote his Shares and any New Shares (as defined in Section 4
hereof), and shall cause any holder of record of his Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the Merger Agreement
and the Merger (and each other action and transaction contemplated by the Merger
Agreement or by this Agreement), (b) against any Acquisition Proposal (as
defined in the Merger Agreement) other than the Merger (or any other Acquisition
Proposal of Parent) and (c) against any proposed action or transaction that
would prevent or intentionally delay consummation of the Merger (or other
Acquisition Proposal of Parent) or is otherwise inconsistent therewith, and in
each case, at every meeting of the stockholders of the Company at which any such
matters are considered and at every adjournment thereof (and, if applicable, in
connection with any request or solicitation of written consents of
stockholders). Any such vote shall be cast, or consent shall be given, in
accordance with such procedures relating thereto as shall ensure that it is duly
counted for purposes of determining that a quorum is present and for purposes of
recording the results of such vote or consent. Stockholder shall deliver to
Parent upon request a proxy substantially in the form attached hereto as Exhibit
B (the "PROXY"), which proxy shall be coupled with an interest and irrevocable
to the extent permitted under Delaware law, with the total number of such
Stockholder's Shares and any New Shares correctly indicated thereon. Stockholder
hereby revokes any and all previous proxies granted with respect to his Shares.
Such irrevocable proxy is intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law. The
Stockholder understands and acknowledges that Parent and Merger Sub are entering
into the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. Stockholder
shall also use his best efforts to take, or cause to be taken, all action, and
do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement or
the Merger Agreement.
3. NO VOTING TRUSTS. After the date hereof, Stockholder agrees that he
will not, nor will he permit any entity under his control to, deposit any Shares
in a voting trust or subject any Shares to any Lien or agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. ADDITIONAL SHARES. Stockholder agrees that in the event (a) of any
stock dividend, stock split, recapitalization, reclassification, combination or
exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Company Common Stock
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after the execution of this Agreement (including by exercise of options), or (c)
such Stockholder acquires the right to vote or share in the voting of any shares
of Company Common Stock other than the Shares (collectively, "NEW SHARES"), such
Stockholder shall deliver promptly to Parent upon request an irrevocable proxy
substantially in the form attached hereto as Exhibit B with respect to such New
Shares. Stockholder also agrees that any New Shares acquired or purchased by him
shall be subject to the terms of this Agreement and shall constitute Shares to
the same extent as if they were owned by such Stockholder on the date hereof.
5. NO ENCUMBRANCES.
(a) Except as expressly contemplated by this Agreement, Stockholder's
Shares and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever (other than to the extent
set forth on Schedule 1 to this Agreement), except for any such encumbrances or
proxies arising hereunder.
(b) Except as may otherwise be agreed by Parent in writing and as
contemplated by those agreements or understandings set forth on Schedule II
hereto, the Stockholder shall not (i) transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Stockholder's Shares, or any interest therein
or (ii) enter into any contract, option or other agreement or understanding with
respect to any such transfer or any or all of the Stockholder's Shares, or any
interest therein.
6. ACQUISITION PROPOSALS. Stockholder agrees that such Stockholder,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement, (i) shall not, directly or indirectly,
solicit, encourage, initiate, participate in or otherwise facilitate or consent
to any negotiations, or consent to any negotiations, inquiries or discussions
with respect to any Acquisition Proposal and (ii) has terminated any discussions
or negotiations with, and the provision of information or data to, any Person
(other than Parent) respecting an Acquisition Proposal. Such Stockholder further
agrees that he shall not, directly or indirectly, provide any confidential
information or data to any Person (as defined in the Merger Agreement) relating
to or in contemplation of an Acquisition Proposal or engage in any negotiations
or discussions relating to or in contemplation of an Acquisition Proposal,
except in his capacity as an officer or director of the Company in a manner
permitted by the Merger Agreement. Such Stockholder will notify Parent
immediately if any inquiries, proposals or offers respecting an Acquisition
Proposal are received by, any such information or data is requested from, or any
such discussions or negotiations are sought to be initiated or continued with,
such Stockholder indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers, and
shall keep Parent apprised with respect to the status and terms thereof.
7. AFFILIATES LETTER. Stockholder shall execute and deliver on a timely
basis an Affiliate Letter (as defined in the Merger Agreement).
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8. RELIANCE BY PARENT. Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
9. SPECIFIC PERFORMANCE. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other parties if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other parties will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that any other party has adequate remedy at law. Each party
hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
10. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto other than any assignment in whole or in part by
Parent.
11. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written oral, among the parties hereto with respect to the subject matter hereof
and contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by all the parties hereto. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the negotiation
of this Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws of the State of Delaware without regard to principles of conflicts of law.
(d) SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
4
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one 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.
(f) TERMINATION. This Agreement shall terminate upon the earliest to
occur of (A) the Effective Time (as defined in the Merger Agreement), (B) six
months after the occurrence of a termination of the Merger Agreement in
accordance with Section 7.1 (d), (e) or (f) thereof, (C) a termination of the
Merger Agreement in accordance with Section 7.1 (a), (c) or (g) thereof and (D)
six months after the Outside Date as defined in Section 7.1 (b) of the Merger
Agreement and the Merger Agreement is not otherwise terminated.
(g) HEADINGS. All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
(h) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) if to Parent, to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660
Attention: President
Telecopy No.: (949) 483-4318
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher Kaufman, Esq.
Telecopy No.: (650) 463-2600
Latham & Watkins
885 Third Avenue
Suite 100
New York, NY 10022
Attention: Raymond Lin, Esq.
Telecopy No.: (212) 751-4864
5
<PAGE>
(ii) if to the Stockholder, to such Stockholder c/o
Bessec Ventures IV LP
Bessemer Trust Company
1400 Old Country Road, Suite 407
Westbury, NY 11590
Attention: Robert Buescher
Telecopy No.:
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02210
Attention: Richard Stein, Esq.
Telecopy No.: (617) 951-7050
(i) Stockholder shall cause certificates for the Shares and New Shares
to have typed or printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and necessary in light of
legal and factual circumstances existing at such time):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS AS SET FORTH IN THE VOTING AGREEMENT, DATED AS
OF DECEMBER 18, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF CONEXANT SYSTEMS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES, WHICH CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER
THEREOF."
(j) CONSENT TO JURISDICTION, ETC. Each party hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
Court of Chancery of the State of Delaware (unless such court asserts no
jurisdiction, in which case the parties hereto consent to the exclusive
jurisdiction of the courts of the State of Delaware) for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against each party in such court. Each
party hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby, in the Court of Chancery of the State
of Delaware (unless such court asserts no jurisdiction, in which case each party
consents to the exclusive jurisdiction of the courts of the State of Delaware).
Each party hereby further irrevocably and unconditionally waives and agrees not
to plead or to claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
parties hereto also
6
<PAGE>
agrees that any final and unappealable judgment against a party hereto in
connection with any action, suit or other proceeding that be conclusive and
binding on such party and that such award or judgment may be enforced in any
court of competent jurisdiction, either within or outside of the United States.
A certified or exemplified copy of such award or judgment shall be conclusive
evidence of the fact and amount of such award or judgment.
[Signature Pages Follow]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
CONEXANT SYSTEMS, INC.
By: /s/ Dwight Decker
---------------------------------------
Name: Dwight Decker
Title: Chairman & CEO
<PAGE>
Confirmed and accepted as of the date first written above:
BESSEC VENTURES IV L.P.
By: /s/ Dear IV & Co. LLC
By: /s/ Robert H. Burscher
---------------------------------------
Name: Robert H. Burscher
Title: Manager
<PAGE>
EXHIBIT A
STOCKHOLDER
Number of Shares of
Name Company Common Stock Type of Ownership
---- -------------------- -----------------
Bessec Ventures IV L.P. 851,992 Beneficial
<PAGE>
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby
appoints [PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Company Common Stock, par
value $0.01 per share, of Maker Communications, Inc., a Delaware corporation
(the "COMPANY"), owned by the undersigned at the Special Meeting of Stockholders
of the Company to be held for the consideration of the Merger under the
Agreement and Plan of Merger, dated as of December 18, 1999 (the "MERGER
AGREEMENT"), among Conexant Systems, Inc., a Delaware corporation ("Parent"),
the Company and Merlot Acquisition, Corp., a Delaware corporation ("MERGER
SUB"), and at any adjournment thereof or any other meeting for consideration of
any Acquisition Proposal (as defined in the Merger Agreement) or affecting the
Merger or any Acquisition Proposal, or to execute any written consent of
stockholders with respect to any of the foregoing (i) "FOR" approval and
adoption of the Merger Agreement, providing for the merger (the "MERGER") of
Merger Sub with and into the Company, and the Merger, (ii) "AGAINST" against any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase of any substantial portion of
the assets of, or any equity securities of, or any transaction that would
involve the transfer or potential transfer of control of, the Company other than
the Merger and any proposed action or transaction that would prevent or
intentionally delay consummation of the Merger or is otherwise inconsistent
therewith and (iii) on other matters as directed by Section 2 of that certain
Voting Agreement, dated as of December 18, 1999, between a certain stockholder
of the Company, the undersigned, and Parent (the "VOTING AGREEMENT"). This proxy
is coupled with an interest and is irrevocable until such time as the Voting
Agreement terminates in accordance with its terms.
Dated __________________________, 1999
-------------------------------------
(Signature of Stockholder)
<PAGE>
MAKER COMMUNICATIONS, INC.
PROXY CARD
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS ON MARCH 10, 2000.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned, having received the Notice of Special Meeting of Stockholders
and Proxy Statement of Maker Communications, Inc. (the Company) hereby
appoint(s) ________________ and ________________, or either of them, proxies for
the undersigned, with full power of substitution in each of them, to represent
the undersigned at the Special Meeting of Stockholders of the Company to be held
at the offices of Hutchins, Wheeler & Dittmar, A Professional Corporation, 101
Federal Street, Boston, Massachusetts 02110 at 10:00 a.m. on March 10, 2000,
and at any adjournment or postponement thereof, and thereat to vote all
shares of common stock of the Company which the undersigned would be entitled
to vote if personally present, and especially (but without limiting the
general authorization and power hereby given) to vote and act as indicated on
the reverse.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
The undersigned hereby confer(s) upon said proxies, and each of them,
discretionary authority to vote upon any other matters or proposals not known at
the time of solicitation of this proxy which may properly come before the
meeting.
Attendance of the undersigned at said meeting or at any adjournment or
postponement thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate thereat his or her intention to vote
said shares in person. If a fiduciary capacity is attributed to the undersigned
hereon, this proxy will be deemed signed by the undersigned in that capacity.
Please Vote, DATE, SIGN on REVERSE AND return promptly in the enclosed
POSTAGE-PAID envelope.
Has your address changed? Do you have any comments?
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
<PAGE>
FOR AGAINST ABSTAIN
1. To approve and adopt the Agreement and Plan
of Merger, dated as of December 18, 1999, by / / / / / /
and among Conexant Systems, Inc., Merlot
Acquisition Corp. and Maker Communications,
Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE BOARD
RECOMMENDS AN AFFIRMATIVE VOTE ON ALL PROPOSALS SPECIFIED. SHARES WILL BE VOTED
AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED WILL BE VOTED
FOR PROPOSALS 1 AND 2.
FOR AGAINST ABSTAIN
2. To merge Maker with and into Merlot
Acquisition Corp., a wholly-owned subsidiary / / / / / /
of Conexant, whereby holders of Maker common
stock would receive 0.66 of a share of
Conexant common stock for each share of
Maker common stock .
3. In their discretion, the proxies are
authorized to vote upon such other business
as may properly come before the Meeting.
RECORD DATE SHARES:
PLEASE DATE AND SIGN THIS PROXY IN THE SPACE PROVIDED AND RETURN IT IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
Please sign exactly as your name(s) appear(s) on the Proxy. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give the full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
MARK HERE IF YOU MARK HERE FOR
PLAN TO ATTEND / / ADDRESS CHANGE / /
THE MEETING AND NOTE BELOW
------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------- ------------------------------
- ------------Shareholder sign here-------------------Co-owner sign here----------
- --------------------------------------------------------------------------------
DETACH CARD DETACH CARD
PLEASE VOTE, SIGN, DATE, DETACH AND RETURN THE ABOVE PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
