<PAGE>
<TABLE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 2000
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SYMBOL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<S> <C> <C>
DELAWARE 3577 11-2308681
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
ONE SYMBOL PLAZA
HOLTSVILLE, NEW YORK 11742
631-738-2400
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
LEONARD H. GOLDNER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SYMBOL TECHNOLOGIES, INC.
ONE SYMBOL PLAZA
HOLTSVILLE, NEW YORK 11742
631-738-2400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
<TABLE>
<S> <C> <C>
With copies to:
JOHN G. FINLEY, ESQ. STEVEN J. ROTHSCHILD, ESQ.
SIMPSON THACHER & BARTLETT SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
425 LEXINGTON AVENUE ONE RODNEY SQUARE, P.O. BOX 636
NEW YORK, NEW YORK 10017 WILMINGTON, DELAWARE 19899
(212) 455-2000 (302) 651-3000
</TABLE>
---------------
Approximate date of commencement or proposed sale to the public: As soon
as practicable after the effective time of the merger of a wholly owned
subsidiary of the registrant with Telxon Corporation, which shall occur as soon
as practicable after the effective date of this registration statement and the
satisfaction of all conditions to the closing of such merger.
---------------
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
================================================================================
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM REGISTRATION
REGISTERED REGISTERED(1) OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE(2) FEE(2)
------------------------- --------------- ------------------------- ----------------------------- -------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share......... 11,974,715 N/A $416,959,576 $110,077
</TABLE>
================================================================================
(1) Represents the maximum number of shares of common stock of Symbol
Technologies, Inc. issuable upon consummation of the merger based on the
exchange ratio of 0.5 shares of Symbol common stock to be exchanged for
each outstanding share of common stock of Telxon Corporation, and based
on (a) the number of outstanding shares of Telxon common stock plus (b)
the number of shares of Telxon common stock that could be issued prior to
the effective time of the merger. This registration statement also
relates to an indeterminate number of shares of Symbol common stock that
may be issued in the merger in the event that prior to the merger Symbol
shall effect any stock splits, stock dividends or similar transactions in
accordance with Rule 416 under the Securities Act.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee was calculated based on the product of (1)
23,949,430 shares of Telxon common stock on a fully diluted basis and (2)
$17.41 per share, the average of the high and low sale prices for shares
of Telxon common stock on the Nasdaq on August 15, 2000.
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROXY STATEMENT PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY
STATEMENT PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION--DATED AUGUST 21, 2000
PRELIMINARY COPY
[Telxon Logo and Letterhead]
[ ], 2000
Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders of
Telxon Corporation which we will hold at 10:00 a.m., local time, on [ ,
], 2000, at [ ], Ohio.
At this important meeting, you will be asked to vote upon the merger of
Telxon and Symbol Technologies, Inc. In the merger, you will receive 0.5 share
of Symbol common stock for each share of Telxon common stock that you own.
Symbol shares are traded on the New York Stock Exchange under the symbol "SBL."
We expect that the merger will be tax-free to you for U.S. federal income tax
purposes, except for cash received in place of fractional shares.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER
AGREEMENT WITH SYMBOL AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT.
We believe that the merger represents an exciting opportunity which will
allow you to continue your investment in Telxon's future as part of a larger
and more diversified company.
Your vote is important. We cannot complete the merger unless the holders
of a majority of our outstanding shares vote to approve and adopt the merger
agreement. Whether or not you are able to attend the meeting personally, please
complete, sign, date and return the enclosed proxy card promptly in the
accompanying envelope, which requires no postage if mailed in the United
States. You are, of course, welcome to attend the meeting and vote in person,
even if you have previously returned your proxy card. If you fail to return
your proxy card or vote in person at the meeting, it will have the same effect
as a vote against the merger.
This document provides you with detailed information about the merger. We
encourage you to read this entire document carefully, particularly the section
describing the RISKS IN CONNECTION WITH THE MERGER, SEE "RISK FACTORS RELATING
TO THE MERGER" BEGINNING ON PAGE 12.
I look forward to your support.
Sincerely,
John W. Paxton, Sr.
Chairman of the Board and
Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SYMBOL SHARES TO BE ISSUED IN THE
MERGER OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT/PROSPECTUS IS DATED [ ], 2000 AND WAS FIRST MAILED
TO STOCKHOLDERS ON OR ABOUT [ ], 2000
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[Telxon Logo]
TELXON CORPORATION
1000 SUMMIT DRIVE
CINCINNATI, OHIO 45150
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ], 2000
A special meeting of stockholders of Telxon Corporation will be held on
[ ], 2000, at 10:00 a.m., local time, at [ ], Ohio.
The special meeting will be conducted:
1. To approve and adopt the merger of TX Acquisition Corporation, a wholly
owned subsidiary of Symbol Technologies, Inc., into Telxon and the
Agreement and Plan of Merger dated as of July 25, 2000 by and among
Symbol, TX Acquisition Corporation and Telxon, pursuant to which, among
other things, each share of Telxon common stock outstanding immediately
prior to the effective time of the merger will be converted into 0.5
share of Symbol common stock.
2. To vote to adjourn the special meeting, if necessary.
A copy of the merger agreement is attached as Appendix A to the
accompanying document. Approval and adoption of the merger and the merger
agreement requires the affirmative vote of a majority of the outstanding Telxon
shares. Holders of Telxon shares will not have dissenter's or appraisal rights,
or have the right to demand payment for their shares under Delaware law in
connection with the merger.
Only those stockholders of record as of the close of business on
[ ], 2000 will be entitled to notice of and to vote at the meeting or any
adjournments or postponements thereof.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT, AS DESCRIBED IN
DETAIL IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors,
John W. Castle
Assistant Secretary
Cincinnati, Ohio
[ ] , 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ACCOMPANYING
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERY TO TELXON OF A
SUBSEQUENTLY EXECUTED PROXY OR A WRITTEN NOTICE OF REVOCATION OR BY VOTING IN
PERSON AT THE SPECIAL MEETING.
<PAGE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
MERGER .............................................. 1
SUMMARY ................................................ 2
The Companies .......................................... 2
The Special Meeting .................................... 2
Record Date; Vote Required ............................. 2
Reasons for the Merger ................................. 2
Recommendation of the Telxon Board ..................... 2
Opinions of Telxon's Financial Advisor ................. 3
The Merger ............................................. 3
Terms of the Merger Agreement .......................... 3
Regulatory Matters ..................................... 4
Accounting Treatment ................................... 4
NYSE Listing ........................................... 5
Ownership of Shares after the Merger ................... 5
Interests of Telxon Officers and Directors in the
Merger .............................................. 5
Effects of the Merger on the Rights of Telxon
Stockholders ........................................ 5
Selected Historical Consolidated Financial Data
of Symbol and Selected Unaudited Pro Forma
Condensed Combined Financial Data of
Symbol and Telxon ................................... 6
Selected Historical Condensed Consolidated
Financial Data of Telxon ............................ 8
Comparative Per Share Information ...................... 10
Comparative Per Share Market Price and
Dividend Information ................................ 11
RISK FACTORS RELATING TO THE
MERGER .............................................. 12
Value of Symbol Shares to Be Received in the
Merger Will Fluctuate ............................... 12
Symbol and Telxon May Not Achieve Strategic
Objectives, Cost Savings and Other Benefits ......... 12
Symbol and Telxon May Encounter Difficulties
in Integrating Their Operations ..................... 12
Component Shortages May Adversely Affect
Symbol's Results .................................... 13
The Merger May Cause Telxon and Symbol
Customers to Delay Purchasing Decisions and
May Adversely Affect the Ability to Attract
and Retain Key Telxon Employees ..................... 13
If We Fail to Obtain Required Consents and
Waivers, Third Parties May Terminate or
Alter Existing Contracts with Telxon ................ 13
The Price of Symbol Shares May Be Affected
by Factors Different From Those Affecting
the Price of Telxon Shares .......................... 13
THE SPECIAL MEETING .................................... 14
Time and Place; Purposes ............................... 14
Record Date ............................................ 14
Quorum ................................................. 14
Vote Required .......................................... 14
Proxies ................................................ 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE MERGER ............................................. 16
Structure of the Merger ................................ 16
Exchange of Telxon Stock Certificates for
Symbol Stock Certificates ........................... 16
Background of the Merger ............................... 16
Reasons for the Merger ................................. 20
Information and Factors Considered by the
Telxon Board; Recommendation of the
Telxon Board ........................................ 21
Opinion of Financial Advisor to Telxon ................. 22
Accounting Treatment ................................... 26
Interests of Telxon Officers and Directors in the
Merger .............................................. 26
Material United States Federal Income Tax
Consequences ........................................ 29
Regulatory Matters ..................................... 30
Appraisal Rights ....................................... 31
Federal Securities Laws Consequences ................... 31
Rights Agreement ....................................... 31
THE MERGER AGREEMENT ................................... 33
The Merger ............................................. 33
Conversion or Cancellation of Telxon Shares
and Options in the Merger ........................... 33
Listing of Symbol Common Stock ......................... 34
Representations and Warranties ......................... 34
Conduct of Business Pending the Merger ................. 35
Non-Solicitation Covenant .............................. 38
Additional Covenants and Agreements .................... 38
Conditions ............................................. 39
Termination ............................................ 41
Amendment; Waiver ...................................... 43
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
INFORMATION ......................................... 44
DESCRIPTION OF SYMBOL CAPITAL
STOCK ............................................... 49
COMPARISON OF CERTAIN RIGHTS OF
STOCKHOLDERS OF SYMBOL AND
TELXON .............................................. 50
EXPERTS ................................................ 53
LEGAL AND TAX MATTERS .................................. 53
SUBMISSION OF STOCKHOLDER
PROPOSALS ........................................... 53
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS .................................. 54
WHERE YOU CAN FIND MORE
INFORMATION ......................................... 55
Appendix A--Agreement and Plan of Merger ............... A-1
Appendix B--Opinion of Prudential Securities
Incorporated ........................................ B-1
</TABLE>
i
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<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE PROPOSED TRANSACTION?
A: A wholly owned subsidiary of Symbol Technologies will merge into Telxon.
As a result, Telxon will become a wholly owned subsidiary of Symbol.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A. Each Telxon share will be converted into 0.5 Symbol share. You will
receive cash payments in place of any fractional Symbol shares you would
have otherwise received. After giving effect to the merger, Telxon
stockholders will hold approximately 7% of the outstanding Symbol shares
on a fully diluted basis.
Q: HOW DO I VOTE?
A: You may vote by mailing a signed proxy card in the enclosed return
envelope as soon as possible so that those shares may be represented at
the special meeting. You may also attend the special meeting and vote in
person.
Q: CAN I CHANGE MY VOTE?
A: Yes. You may change your vote by delivering a written notice of
revocation to Telxon's Assistant Secretary, by delivering a later-dated,
signed proxy card to Telxon's Assistant Secretary before the special
meeting, or by attending the special meeting and voting in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to
your broker on how to vote. You should follow the directions provided by
your broker regarding how to instruct your broker to vote your shares.
Without instructions to your broker, your shares will not be voted on
the merger and will have the same effect as a vote against the merger.
Q: IS THE MERGER TAXABLE?
A: Symbol and Telxon each expect the merger to be tax-free. We have
structured the merger so that, in general, Symbol, Symbol's wholly owned
subsidiary formed for the purpose of the merger, Telxon and the Telxon
stockholders will not recognize any gain or loss for U.S. federal income
tax purposes in the merger, except with respect to any cash that Telxon
stockholders will receive in place of fractional Symbol shares.
We describe the material U.S. federal income tax consequences of the
transactions in more detail on page 29. 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: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. You will not be entitled to appraisal rights in connection with the
merger.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger before the end of 2000. Because the
merger is subject to governmental approvals, however, we cannot predict
the exact timing.
Q: SHOULD I SEND IN MY TELXON STOCK CERTIFICATES NOW?
A: No. After we complete the merger, Symbol will send instructions
explaining how to exchange your Telxon share certificates for Symbol
share certificates and, if applicable, cash in place of any fractional
shares.
Q: WHOM CAN I CALL WITH QUESTIONS?
A: If you have any questions about the merger, please call Kissel Blake,
Inc. at (212) 344-6733 or Symbol at (800) 722-6234.
If you would like copies of any of the documents we refer to in this
proxy statement/prospectus, you should call Kissel Blake, Inc. at (212)
344-6733 if the documents relate to Telxon or Symbol at (800) 722-6234
if the documents relate to Symbol.
1
<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. To better understand the merger, and for a more complete
description of the legal terms of these transactions, you should read this
entire document carefully, as well as those additional documents to which we
refer you. See "Where You Can Find More Information" on page 55.
THE COMPANIES
SYMBOL TECHNOLOGIES, INC.
One Symbol Plaza
Holtsville, New York 11742
Tel: 631-738-2400
website: www.Symbol.com
Symbol is a global leader in wireless and Internet-based mobile data
transaction systems and services. Symbol's systems allow people and
organizations to access, capture and transmit information at the
point-of-activity over local area networks, wide area networks and the
Internet. Symbol is the only corporation in its industry with in-house
technology for the design and manufacture of products in its three core
technologies: bar code reading devices, mobile computing devices and network
systems. These systems are used worldwide in diverse markets such as retail,
transportation and logistics, parcel delivery and postal service, warehousing
and distribution, industrial, health care, hospitality, education and
government.
Symbol is a corporation organized under the laws of the State of
Delaware. In fiscal year ending December 31, 1999, Symbol's sales were
approximately $1.14 billion.
TELXON CORPORATION
1000 Summit Drive
Cincinnati, Ohio 45150
Tel: 800-800-8001
website: www.Telxon.com
Telxon designs, manufacturers, integrates, markets and supports
transaction-based mobile information systems. Telxon's mobile computing devices
and wireless local area network products are integrated with its customers'
host enterprise computer systems and third party wide area networks, enabling
mobile workers to process information on a real-time basis at the point of
transaction. Telxon's products are sold worldwide for use in key vertical
markets, including in-store retail, transportation and logistics, mobile
workforce automation and public safety. Telxon also serves a broad array of
other markets such as manufacturing, healthcare, education and government,
among others, through its indirect sales channels.
Telxon is a corporation organized under the laws of the State of
Delaware. In fiscal year ending March 31, 2000, Telxon's sales were
approximately $366 million.
THE SPECIAL MEETING (SEE PAGE 14)
The special meeting will be held on [ ], 2000, at 10:00 am., local
time, at [ , ], Ohio. At the special meeting, Telxon stockholders will
be asked:
o to approve and adopt the merger and the merger agreement, and
o to vote to adjourn the meeting, if necessary.
RECORD DATE; VOTE REQUIRED (SEE PAGE 14)
You can vote at the special meeting if you owned Telxon shares at the
close of business on [ ], 2000. On that date, there were [ ] Telxon
shares outstanding and entitled to vote. You can cast one vote for each Telxon
share you owned on that date. Approval and adoption of the merger and the
merger agreement requires the favorable vote of the holders of a majority of
the outstanding Telxon shares.
REASONS FOR THE MERGER (SEE PAGE 20)
Symbol and Telxon believe that the merger will enhance opportunities in
the wireless hand-held computing systems market across many industries and
enable customers to benefit from greater resources and economies of scale.
Symbol and Telxon also believe that the merger will create significant cost
saving opportunities.
RECOMMENDATION OF THE TELXON BOARD (SEE PAGE 21)
The Telxon board has unanimously approved the merger and the merger
agreement and recommends that Telxon stockholders vote "FOR" approval and
adoption of the merger and the merger agreement.
2
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OPINIONS OF TELXON'S FINANCIAL ADVISOR (SEE PAGE 22)
Prudential Securities Incorporated, Telxon's financial advisor, has
rendered a written opinion, dated July 25, 2000, to the Telxon board that, as
of the date of the opinion, the exchange ratio in the merger was fair, from a
financial point of view to the holders of Telxon shares, other than Symbol and
its subsidiaries. The full text of the written opinion of Prudential Securities
is attached to this document as Appendix B. We encourage you to read the
opinion carefully in its entirety to understand the procedures followed,
assumptions made, matters considered and limitations on the review undertaken
by Prudential Securities in providing its opinion. THE OPINION OF PRUDENTIAL
SECURITIES IS DIRECTED TO THE TELXON BOARD AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO ANY MATTER RELATING TO THE
MERGER.
THE MERGER (SEE PAGE 16)
We propose that a wholly owned subsidiary of Symbol formed for the
purpose of the merger merge with and into Telxon. As a result, Telxon will
become a wholly owned subsidiary of Symbol.
We have attached the merger agreement, which is the legal document that
governs the merger, as Appendix A. We encourage you to read this document.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 16)
Each of your Telxon shares will be exchanged for 0.5 Symbol share.
Because the number of Symbol shares that you will receive in the merger is
fixed, the value of the Symbol shares you will receive in the merger will
fluctuate as the price of Symbol common stock changes.
You will have to surrender your Telxon common stock certificates to
receive Symbol common stock certificates. HOWEVER, PLEASE DO NOT SEND ANY
TELXON COMMON STOCK CERTIFICATES UNTIL YOU RECEIVE WRITTEN INSTRUCTIONS AFTER
WE COMPLETE THE MERGER.
TERMS OF THE MERGER AGREEMENT
CONDITIONS (SEE PAGE 39)
We will complete the merger only if certain conditions are satisfied or
waived, including the following:
o approval by the Telxon stockholders;
o regulatory approvals under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and any applicable foreign antitrust laws;
o the absence of any statute, rule, regulation, injunction or order
prohibiting the merger;
o the absence of litigation challenging or seeking to enjoin the
merger;
o the approval for listing on the New York Stock Exchange of the
Symbol shares to be issued in the merger;
o receipt of opinions from counsel to Symbol and Telxon to the effect
that the merger will be treated as a tax-free reorganization;
o the accuracy of representations and warranties of Symbol and Telxon
and the compliance with agreements and covenants of Symbol and
Telxon; and
o the absence of a material adverse change with respect to Symbol or
Telxon.
NON-SOLICITATION COVENANT (SEE PAGE 38)
Telxon and its subsidiaries, officers, directors, employees and
representatives are prohibited from soliciting or encouraging the making of any
competing proposal to acquire Telxon and from negotiating or having any
discussions with, or providing any confidential information to, any person in
connection with such an acqusition proposal. However, Telxon may, prior to the
special meeting, furnish information to, and engage in negotiations or
discussions with, a third party in response to an unsolicited written
acquisition proposal by such third party if Telxon's board determines in good
faith (after consultation with its financial and legal advisors) that
responding to such acquisition proposal is reasonably necessary for the board
to act in a manner consistent with its fiduciary duties and such third party
enters into a confidentiality agreement with Telxon. Telxon must notify Symbol
of the terms of any such competing proposal.
TERMINATION (SEE PAGE 41)
Either Symbol or Telxon may terminate the merger agreement if:
o Symbol and Telxon mutually agree to terminate the agreement;
o the merger is not completed by March 31, 2001 (other than as a result
of a failure of the terminating party to perform its obligations);
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<PAGE>
o the merger agreement fails to receive Telxon stockholder approval at
the special meeting;
o a final and nonappealable order is entered enjoining or prohibiting
the completion of the merger;
o the other party breaches its representations or agreements which
would reasonably be expected to result in a closing condition not
being satisfied and which remains uncured 30 days following written
notice.
In addition, Symbol may terminate the merger agreement if (1) the Telxon
board withdraws or modifies in an adverse manner its recommendation of the
merger or approves or recommends another acquisition proposal, (2) Telxon
breaches in any material respect the non-solicitation covenant or (3) any third
party acquires 15% of the outstanding Telxon shares with the approval of the
Telxon board or 25% of the outstanding Telxon shares without the approval of
the Telxon board or 20% of Telxon's consolidated assets.
In addition, Telxon may terminate the merger agreement in order to accept
an acquisition proposal which the Telxon board in good faith determines is
reasonably capable of being consummated and superior from a financial point of
view to the merger.
TERMINATION FEES (SEE PAGE 42)
Telxon will pay Symbol a termination fee of $25 million if any of the
following events occurs:
o Symbol terminates the merger agreement due to (1) the Telxon board
withdrawing or modifying in an adverse manner its recommendation of
the merger or approving or recommending another acquisition
proposal, (2) a breach by Telxon in any material respect of the
non-solicitation covenant or (3) the acquisition by any third party
of 15% of the outstanding Telxon shares which has been approved by
the Telxon board or 25% of the outstanding Telxon shares which has
not been approved by the Telxon board or 20% of Telxon's
consolidated assets;
o Telxon terminates the merger agreement in order to accept an
acquisition proposal which the Telxon board in good faith determines
is reasonably capable of being consummated and superior from a
financial point of view to the merger; or
o The merger agreement is terminated due to a material breach of the
merger agreement by Telxon or due to the failure to obtain Telxon's
stockholder approval in the circumstances described on page 42 of
this document and, within 12 months thereafter, Telxon enters into
an agreement with respect to an alternative acquisition transaction
or an alternative acquisition transaction is consummated.
Symbol will pay Telxon a termination fee of $25 million if the merger
agreement is terminated due to a failure to receive requisite regulatory
approvals, the NYSE listing of the Symbol shares to be issued in the merger,
SEC clearance of this document or material breaches by Symbol of the merger
agreement.
REGULATORY MATTERS (SEE PAGE 30)
Symbol and Telxon must comply with certain filings and take other actions
necessary to obtain approvals from governmental authorities in connection with
the proposed transactions, including U.S. and foreign antitrust authorities.
Symbol and Telxon have agreed to use reasonable best efforts to obtain any
governmental consents and approvals required in connection with the merger, but
Symbol will not be required to provide any undertakings or agree to any
condition that could reasonably be expected to (1) result in a substantial
detriment to Symbol's or Telxon's business, financial condition, results of
operations or prospects or (2) materially diminish the strategic or financial
benefits of the merger.
The waiting period during which the U.S. regulatory authorities review
the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, will expire on September 14, 2000 unless earlier terminated or
extended by a request for additional information or documentary materials. We
cannot be certain, however, that Symbol and Telxon will obtain all required
governmental approvals, or that we will obtain these approvals without
conditions that would be substantially detrimental to Symbol or Telxon.
ACCOUNTING TREATMENT (SEE PAGE 26)
The merger will be accounted for under the purchase method of accounting
in accordance with generally accepted accounting principles. Accordingly, the
cost to acquire Telxon will be allocated to the assets acquired and liabilities
assumed based on their
4
<PAGE>
fair values, with any excess being treated as goodwill and other intangibles
and amortized over their estimated useful lives. To the extent that a portion
of the purchase price is allocated to in-process research and development, as
is anticipated, a charge will be recognized for the period in which the merger
occurs. That charge may be material to Symbol's results of operations.
NYSE LISTING
Symbol will list the Symbol shares to be issued in the merger on the New
York Stock Exchange.
OWNERSHIP OF SHARES AFTER THE MERGER
After giving effect to the merger, the former holders of Telxon common
stock will hold about 7% of the outstanding Symbol common stock on a fully
diluted basis, based upon the figures for outstanding stock as of [ ],
2000.
INTERESTS OF TELXON OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 26)
When considering the merger agreement, Telxon's board was aware that
certain of the officers and directors of Telxon may have interests and
arrangements that may be different from your interests as stockholders,
including rights under stock-based employee benefits awards and severance
arrangements.
EFFECTS OF THE MERGER ON THE RIGHTS OF TELXON STOCKHOLDERS (SEE PAGE 50)
The rights of Telxon stockholders who receive Symbol shares in the merger
will continue to be governed by Delaware law, but will also be governed by
Symbol's certificate of incorporation and Symbol's by-laws. The rights of
Telxon stockholders under Symbol's certificate of incorporation and by-laws
will differ in certain respects from the rights under Telxon's certificate of
incorporation and by-laws.
5
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SYMBOL AND
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF SYMBOL AND
TELXON
The following is a summary of selected historical consolidated financial
data of Symbol for each of the years in the five-year period ended December 31,
1999 and the six-month periods ended June 30, 2000 and 1999 and selected
unaudited pro forma combined financial data of Symbol and Telxon for the year
ended December 31, 1999 and the six-month period ended June 30, 2000. The
operating results for the six months ended June 30, 2000 are not necessarily
indicative of results for the full fiscal year ending December 31, 2000.
The selected historical consolidated financial data of Symbol are derived
from the audited historical financial statements of Symbol contained in
Symbol's Annual Report on Form 10-K for each of the years in the five-year
period ended December 31, 1999 and from the unaudited financial statements of
Symbol contained in Symbol's Quarterly Report on Form 10-Q for the period ended
June 30, 2000 and from Symbol's Quarterly Report on Form 10-Q for the period
ended June 30, 1999. The historical data is only a summary, and should be read
in conjunction with the historical financial statements and related notes
contained in the annual and quarterly reports of Symbol which have been
incorporated by reference into this proxy statement/prospectus. The selected
unaudited pro forma combined financial data of Symbol and Telxon have been
derived from Symbol's audited consolidated financial statements for the year
ended December 31, 1999, Symbol's unaudited consolidated financial statements
for the six months ended June 30, 2000, Telxon's unaudited consolidated
financial statements for the quarter ended June 30, 2000, Telxon's audited
consolidated financial statements for the year ended March 31, 2000, Telxon's
audited consolidated financial statements for the year ended March 31, 1999 and
Telxon's unaudited consolidated financial statements for the quarter ended June
30, 1999. In addition, the audited financial statements contained in Telxon's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998 and the
unaudited financial statements of Telxon contained in Telxon's Quarterly
Reports on Form 10-Q for the periods then ended have been used to conform the
financial reporting periods of Telxon to those of Symbol.
The selected unaudited pro forma combined financial data give effect to
the merger as if it had occurred on the dates referenced under "Unaudited Pro
Forma Condensed Combined Financial Information." The selected unaudited pro
forma combined financial data do not include the realization of any cost
savings from operating efficiencies, synergies or other restructurings
resulting from the merger. The selected unaudited pro forma combined financial
data do not purport to represent what Symbol's results of operations or
financial position actually would have been if the merger had been consummated
on the date or for the periods indicated or what such results will be for any
future date or any future period. You should read this summary together with
"Unaudited Pro Forma Condensed Combined Financial Information" beginning on
page 44 and the accompanying notes.
6
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------------------------- -------------------------------
2000 1999
--------------------------- -------------------------------
ACTUAL PRO FORMA(2) 1999 ACTUAL PRO FORMA
------------- ------------- ------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue ........................... $661,409 $824,945 $533,793 $1,139,290 $1,484,610
Net earnings ...................... 67,913 274,223 52,125 116,364 40,784
Basic earnings per common
share (1) ........................ $ 0.50 $ 1.88 $ 0.39 $ 0.88 $ 0.29
Diluted earnings per common
share (1) ........................ 0.46 1.75 0.37 0.82 0.27
Basic shares outstanding (1) ...... 135,857 145,857 132,350 132,488 142,488
Diluted shares outstanding (1) 146,591 156,891 141,180 141,572 151,872
Dividends declared (1) ............ $ 0.010 $ 0.010 $ 0.009 $ 0.019 $ 0.019
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1998(3) 1997 1996(4) 1995(5)
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue ........................... $977,901 $774,345 $656,675 $555,163
Net earnings ...................... 92,964 70,232 50,256 46,486
Basic earnings per common
share (1) ........................ $ 0.70 $ 0.53 $ 0.38 $ 0.36
Diluted earnings per common
share (1) ........................ 0.66 0.51 0.37 0.34
Basic shares outstanding (1) ...... 132,291 132,836 130,944 130,581
Diluted shares outstanding (1) 140,481 137,781 137,088 136,952
Dividends declared (1) ............ $ 0.015 $ 0.012 -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000 JUNE 30,
----------------------------- ----------
ACTUAL PRO FORMA 1999
-------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET AND OTHER DATA
Cash from operations ......... $ (100,158) $ (178,604) $ 74,809
Working capital .............. 556,594 653,158 312,432
Total assets ................. 1,261,001 1,962,516 888,040
Long-term debt (less current
maturities) ................. 150,855 150,855 82,277
Stockholders' equity ......... 830,249 1,225,926 569,548
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1999 1998(3) 1997 1996(4) 1995(5)
------------- ---------- ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET AND OTHER DATA
Cash from operations ......... $ 155,010 $ 87,954 $124,249 $ 68,665 $ 92,823
Working capital .............. 351,613 295,317 241,846 221,678 209,852
Total assets ................. 1,047,944 838,399 679,190 614,238 544,268
Long-term debt (less current
maturities) ................. 99,623 64,596 40,301 50,541 60,829
Stockholders' equity ......... 640,460 530,928 453,742 399,676 352,854
</TABLE>
---------
(1) Adjusted to reflect the three-for-two stock splits effective April 5,
2000, June 14, 1999, April 3, 1998, and April 1, 1997.
(2) Excludes the effect of an extraordinary item.
(3) Includes a pre-tax charge for costs associated with a terminated
acquisition of $3,597 or $0.02 diluted earnings per share.
(4) Includes a pre-tax charge for costs associated with acquisition related
matters of $12,341 or $0.06 diluted earnings per share.
(5) Includes a pre-tax charge for costs associated with a management change
of $2,500 or $0.01 diluted earnings per share.
7
<PAGE>
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL DATA OF TELXON
The following is a summary of selected consolidated financial data of
Telxon for each of the years in the five-year period ended March 31, 2000 and
the three-month periods ended June 30, 2000 and 1999. The operating results for
the three months ended June 30, 2000 are not necessarily indicative of results
for the full fiscal year ending March 31, 2001. This information is derived
from the selected audited financial data of Telxon contained in Telxon's Annual
Report on Form 10-K for the fiscal year ended March 31, 2000 and from the
unaudited financial statements of Telxon contained in Telxon's Quarterly Report
on Form 10-Q for the period ended June 30, 2000, which are incorporated by
reference in this proxy statement/prospectus, and from Telxon's Quarterly
Report on Form 10-Q for the period ended June 30, 1999, and is qualified in its
entirety by such documents.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------
2000 1999
------------ ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER
SHARE DATA INFORMATION)
<S> <C> <C>
OPERATING DATA:
Revenue .......................................... $ 85,598 $ 87,825
(Loss) income from continuing operations ......... (14,318) (12,252)
(Loss) income before income taxes,
extraordinary item and cumulative effect of
accounting change ............................... (15,441) (15,423)
(Loss) income before extraordinary item and
cumulative effect of an accounting change,
net of tax ...................................... (10,191) (16,701)
Extraordinary item, net of tax ................... -- --
(Loss) income before cumulative effect of
accounting change ............................... (10,191) (16,701)
Cumulative effect of accounting change, net of
tax ............................................. -- --
Net (loss) income ................................ (10,191) (16,701)
PER COMMON SHARE DATA:
(Loss) income per common share before
extraordinary item and cumulative effect of
an accounting change:
Basic .......................................... $ (0.58) $ (1.03)
Diluted ........................................ (0.58) (1.03)
Extraordinary item:
Basic .......................................... -- --
Diluted ........................................ -- --
(Loss) income per common share before
cumulative effect of an accounting change:
Basic .......................................... (0.58) (1.03)
Diluted ........................................ (0.58) (1.03)
Cumulative effect of an accounting change:
Basic .......................................... -- --
Diluted ........................................ -- --
Net (loss) income per share:
Basic .......................................... (0.58) (1.03)
Diluted ........................................ (0.58) (1.03)
Average number of common shares outstanding:
Basic .......................................... 17,514 16,156
Diluted ........................................ 17,514 16,156
Dividends declared per share ..................... -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital .................................. $ 116,564 $ 15,449
Total assets ..................................... 563,072 339,741
Convertible subordinated notes and debentures 106,913 106,913
Stockholders' equity ............................. 272,833 28
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------------------------------
2000(1) 1999(2) 1998(3) 1997(4) 1996
----------- ------------- ------------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA INFORMATION)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue .......................................... $365,751 $ 396,394 $455,056 $461,397 $484,127
(Loss) income from continuing operations ......... (90,363) (106,897) 18,145 (35,684) 28,496
(Loss) income before income taxes,
extraordinary item and cumulative effect of
accounting change ............................... 324,944 (116,382) 13,162 (7,525) 24,003
(Loss) income before extraordinary item and
cumulative effect of an accounting change,
net of tax ...................................... 252,111 (135,006) 7,199 (8,251) 14,975
Extraordinary item, net of tax ................... 1,113 -- -- -- --
(Loss) income before cumulative effect of
accounting change ............................... 250,998 (135,006) 7,199 (8,251) 14,975
Cumulative effect of accounting change, net of
tax ............................................. -- -- 1,016 -- --
Net (loss) income ................................ 250,998 (135,006) 6,183 (8,251) 14,975
PER COMMON SHARE DATA:
(Loss) income per common share before
extraordinary item and cumulative effect of
an accounting change:
Basic .......................................... $ 15.41 $ (8.38) $ 0.45 $ (0.51) $ 0.94
Diluted ........................................ 15.16 (8.38) 0.44 (0.51) 0.91
Extraordinary item:
Basic .......................................... (0.07) -- -- -- --
Diluted ........................................ (0.07) -- -- -- --
(Loss) income per common share before
cumulative effect of an accounting change:
Basic .......................................... 15.34 (8.38) 0.45 (0.51) 0.94
Diluted ........................................ 15.09 (8.38) 0.44 (0.51) 0.91
Cumulative effect of an accounting change:
Basic .......................................... -- -- (0.06) -- --
Diluted ........................................ -- -- (0.06) -- --
Net (loss) income per share:
Basic .......................................... 15.34 (8.38) 0.39 (0.51) 0.94
Diluted ........................................ 15.09 (8.38) 0.38 (0.51) 0.91
Average number of common shares outstanding:
Basic .......................................... 16,362 16,108 15,809 16,062 15,910
Diluted ........................................ 16,628 16,108 16,317 16,062 16,472
Dividends declared per share ..................... -- 0.01 0.01 0.01 0.01
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital .................................. $125,949 $ 34,275 $181,172 $167,845 $184,154
Total assets ..................................... 636,290 348,844 375,225 357,698 387,368
Convertible subordinated notes and debentures 106,913 106,913 107,224 107,224 107,224
Stockholders' equity ............................. 321,827 16,966 151,179 142,373 159,188
</TABLE>
---------
(1) The fiscal 2000 operating results included significant inventory and bad
debt charges aggregating $30.7 million and $5.1 million, respectively.
Furthermore, Telxon's operating results included significant charges
related to the transition of its headquarters from Akron to Cincinnati,
to the repurchase of the minority interests of Metanetics Corporation, a
subsidiary of Telxon and a licensor and developer of image processing
technology, and to a loss on a sales contract with a major domestic
retailer of $4.0 million, $3.1 million and $2.0 million, respectively.
(footnotes continue on following page)
8
<PAGE>
During fiscal 2000, Telxon recorded two significant transactions related to
its former Aironet Wireless Communication, Inc. subsidiary. During July
1999, Aironet became publicly traded through a public offering producing
proceeds, net of cash given of $6.1 million, to Telxon of $17.2 million and
a non-operating gain on sale of subsidiary stock of $32.0 million. As a
result of this transaction, Telxon ceased consolidation of Aironet effective
April 1, 1999. During March 2000, the merger of Aironet with a subsidiary of
Cisco Systems, Inc. was consummated. Telxon recorded the increase in the
carrying value of Aironet common stock held to the fair value of the Cisco
stock held upon consummation, which resulted in a net pre-tax gain of $396.2
million. Shortly after the consummation of the merger noted above, Telxon
sold $150.0 million of its Cisco holdings, extinguished its existing bank
debt of $76.6 million and paid off a significant portion of its current
obligations. At March 31, 2000, Telxon held $321.9 million of Cisco shares
which it held at fair market value.
On March 23, 2000, Telxon, with funds received from the sale of
approximately $150.0 million of Telxon's Cisco shares, extinguished the
principal balance outstanding of $76.6 million on the secured credit
facility including accrued and unpaid interest, expenses and an early
termination premium of $1.5 million. The payment of this termination fee
plus the unamortized debt issuance costs of $0.3 million were charged
against income, net of taxes of $0.7 million as an extraordinary item in
accordance with Statement of Financial Accounting Standards No. 4,
"Reporting Gains and Losses from Extinguishment of Debt".
(2) The fiscal 1999 operating results included $8.1 million of costs incurred
in response to takeover and proxy contest proposals as well as terminated
discussions of proposed business combination transactions.
(3) The fiscal 1998 operating results included a $6.1 million pre-tax charge
for impairment of various notes receivable. Additionally, on November 20,
1997, the FASB's Emerging Issues Task Force issued a new consensus
ruling, "Accounting for Costs Incurred in Connection with a Consulting
Contract or an Internal Project That Combines Business Process
Reengineering and Information Technology Transformation". This ruling
requires business process reengineering costs associated with information
systems development to be expensed as incurred. Telxon has been involved
in a corporate-wide information systems implementation project that is
affected by this pronouncement. In accordance with this ruling, during
fiscal 1998, Telxon recorded a one-time, after-tax, non-cash charge of
$1.0 million to expense previously capitalized costs associated with this
project. Such costs had primarily been incurred during the second quarter
of fiscal 1998.
(4) Effective December 31, 1996, Telxon sold substantially all of the assets
of its Itronix Corporation subsidiary, with a net book value of $30.8
million, as well as all of the subsidiary's associated business, for
$65.5 million in cash, plus the assumption by the buyer of specified
liabilities of the transferred business totaling $8.2 million. The
transaction resulted in a $32.7 million gain, net of transaction costs of
$10.3 million, which has been recorded as other non-operating income.
9
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table summarizes per share information for Symbol and Telxon
on a historical, pro forma combined and equivalent pro forma combined basis.
The following information should be read in conjunction with the audited
consolidated financial statements of Symbol and Telxon, the unaudited interim
consolidated financial statements of Symbol and Telxon, the selected historical
condensed consolidated financial data and the unaudited pro forma condensed
combined financial information included elsewhere or incorporated by reference
herein. The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial
position that would have occurred if the acquisition had been consummated as of
the beginning of the periods presented, nor is it necessarily indicative of the
future operating results or financial position of the combined companies. The
historical book value per share is computed by dividing total stockholders'
equity by the number of common shares outstanding restated to reflect stock
splits at the end of the period. The pro forma earnings per share is computed
by dividing the pro forma net earnings by the pro forma weighted average number
of shares outstanding. The pro forma combined book value per share is computed
by dividing total pro forma stockholders' equity by the pro forma number of
common shares outstanding at the end of the period plus 10.0 million shares to
be issued as a result of the merger (using an exchange ratio of 0.5), based on
an estimated 17.5 million Telxon common shares outstanding and assuming the
exercise of 2.5 million Telxon stock options which are vested or will become
vested prior to or as a result of the merger. In addition, Telxon's convertible
subordinated notes and debentures were excluded because the market price of
Telxon shares is currently below the conversion price. The Telxon equivalent
unaudited pro forma combined per share amounts are calculated by multiplying
the Symbol pro forma combined per share amounts by the exchange ratio of 0.5
provided under the terms of the definitive merger agreement.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1999 2000
-------------- ----------------
<S> <C> <C>
SYMBOL
Historical Per Common Share Data:
Basic earnings per share .......................... $ 0.88 $ 0.50
Diluted earnings per share ........................ 0.82 0.46
Book value ........................................ 4.82 6.05
Dividends declared ................................ 0.02 0.01
Pro Forma Combined Per Common Share Data:
Basic earnings per share .......................... $ 0.29 $ 1.88(1)
Diluted earnings per share ........................ 0.27 1.75(1)
Book value ........................................ 8.33
Dividends declared ................................ 0.02 (2) 0.01(2)
TELXON
Historical Per Common Share Data:
Basic (loss) earnings per share ................... $(6.29) $15.03
Diluted (loss) earnings per share ................. (6.29) 14.54
Book value ........................................ 0.19 15.58
Dividends declared ................................ 0.01 --
Equivalent Pro Forma Combined Per Common Share Data:
Basic earnings per share .......................... $ 0.15 $ 0.94(1)
Diluted earnings per share ........................ 0.14 0.88(1)
Book value ........................................ 4.17
Dividends declared ................................ 0.01 0.01
</TABLE>
---------
(1) Excludes the effect of an extraordinary item.
(2) Pro forma dividends declared per common share assumes consistent rate
maintained for additional shares to be issued in connection with the
merger and actual shares.
10
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The following table sets forth the high and low sale prices for a Symbol
share and for a Telxon share, and the dividends declared for the periods
indicated. The prices are as reported on the New York Stock Exchange ("NYSE")
and The NASDAQ Stock Market's National Market ("NNM"), based on published
financial sources.
<TABLE>
<CAPTION>
SYMBOL COMMON STOCK TELXON COMMON STOCK
------------------------------------------- -------------------------------------
CASH CASH
DIVIDEND DIVIDEND
HIGH (1) LOW (1) PER SHARE (1) HIGH LOW PER SHARE
----------- ----------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
First Quarter .............. $10 11/12 $ 8 5/9 -- $17 3/4 $13 1/2 $0.01
Second Quarter ............. 10 5/36 8 4/9 $0.006 19 1/4 13 5/8 --
Third Quarter .............. 13 1/4 83 5/36 -- 24 7/8 18 --
Fourth Quarter ............. 12 5/36 10 2/3 $0.006 29 22 --
YEAR ENDED DECEMBER 31, 1998:
First Quarter .............. $15 7/18 $11 1/18 -- $26 5/8 $21 5/8 $0.01
Second Quarter ............. 17 19/36 14 11/16 $0.006 35 15/16 24 1/2 --
Third Quarter .............. 22 31/36 16 1/18 -- 32 1/4 17 1/8 --
Fourth Quarter ............. 28 5/12 17 5/12 $0.009 30 1/8 11 1/16 --
YEAR ENDED DECEMBER 31, 1999:
First Quarter .............. $28 5/6 $18 17/24 -- $15 $ 5 3/4 $0.01
Second Quarter ............. 25 5/12 17 1/3 $0.009 12 1/4 7 5/8 --
Third Quarter .............. 27 7/12 21 3/4 -- 10 9/16 6 7/16 --
Fourth Quarter ............. 43 1/3 19 3/4 $0.01 20 1/2 8 1/4 --
YEAR ENDED DECEMBER 31, 2000:
First Quarter .............. $69 4/93 $34 29/99 -- $28 1/4 $13 --
Second Quarter ............. 63 1/2 35 1/4 $0.01 20 7/8 12 9/16 --
</TABLE>
---------
(1) Adjusted to reflect stock splits.
Symbol common stock is currently traded on the NYSE under the symbol
"SBL." Telxon common stock is currently traded on NNM under the symbol "TLXN."
On July 25, 2000, the last trading day prior to the public announcement of
the merger agreement, the closing sale price of a Symbol share was $49.875, and
the closing sale price of a Telxon share was $19.50. On , 2000, the most
recent practicable date prior to the printing of this proxy
statement/prospectus, the closing price of a Symbol share was [$ ], and the
closing price of a Telxon share was [$ ].
Because the exchange ratio in the merger is fixed and because the market
price of Symbol common stock is subject to fluctuation, the market value of the
Symbol shares that the Telxon stockholders will receive in the merger may
increase or decrease before and after the special meeting. WE URGE TELXON
STOCKHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS FOR SYMBOL COMMON STOCK AND
TELXON COMMON STOCK PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE MERGER. WE
CANNOT GIVE ANY ASSURANCE AS TO THE FUTURE PRICES OR MARKETS FOR SYMBOL COMMON
STOCK.
11
<PAGE>
RISK FACTORS RELATING TO THE MERGER
By voting in favor of the merger, you will be choosing to invest in Symbol
Common Stock. You should carefully consider the following important factors, in
addition to those discussed in the documents that we have filed with the SEC
which we have incorporated by reference in this proxy statement/prospectus, to
determine whether to vote for the proposals relating to the merger.
VALUE OF SYMBOL SHARES TO BE RECEIVED IN THE MERGER WILL FLUCTUATE
In the merger, each Telxon share will be converted into 0.5 Symbol share.
This exchange ratio is fixed and will not be adjusted in the event of any
increase or decrease in the market price of Symbol shares or Telxon shares.
Therefore, because the market price of Symbol shares is subject to fluctuation,
the value at the time of the merger of the Symbol shares to be received by
Telxon stockholders will depend on the market price of Symbol shares at that
time. There can be no assurance as to the value of Symbol shares at that time.
We urge Telxon stockholders to obtain current market quotations for Telxon
shares and Symbol shares.
The merger may occur at a date later than the date of the special meeting,
and there can be no assurance that the market price of Symbol shares on the
date of the special meeting will reflect the market price of Symbol shares at
the time of the merger. The market price of Symbol shares has been, and may
continue to be, volatile. In addition to conditions that affect the market for
stocks of technology companies generally, factors such as new product
announcements by Symbol or its competitors, quarterly fluctuations in Symbol's
operating results and challenges associated with integration of Telxon's
business may have a significant impact on the market price of Symbol shares.
These conditions could cause the price of Symbol shares to fluctuate
substantially over short periods. We discuss and refer to other factors
affecting the market price of Symbol shares under "Special Note Regarding
Forward-Looking Statements." For historical and current market prices of Symbol
shares, see "Summary--Comparative Per Share Market Price and Dividend
Information."
SYMBOL AND TELXON MAY NOT ACHIEVE STRATEGIC OBJECTIVES, COST SAVINGS AND OTHER
BENEFITS
We expect to realize strategic and other financial and operating benefits
as a result of the merger, including, among other things, significant cost
savings. We discuss these benefits and others in this document under "The
Merger--Reasons for the Merger." However, we cannot predict with certainty
whether these benefits will occur, the extent to which they actually will be
achieved or the timing of any such benefits. The following are factors that may
prevent us from realizing these benefits:
o a substantial demand for mobile computing systems and wireless data
networks may not continue to develop as much or as rapidly as we expect;
o changes in technology may increase the number of competitors that Symbol
faces after the merger or may require significant capital expenditures to
provide competitive services;
o other manufacturers that compete with Symbol that currently market
products compatible with Telxon products may not continue to do so; and
o an increase in the number of competitors serving these markets may make
it more difficult to attract and retain necessary personnel or to obtain
and retain customers.
Any of these factors could cause actual results to differ materially from
our expectations.
SYMBOL AND TELXON MAY ENCOUNTER DIFFICULTIES IN INTEGRATING THEIR OPERATIONS
Symbol and Telxon plan a full integration of their respective
organizations. Symbol and Telxon will, however, face significant challenges in
integrating their organizations, operations and product lines in a timely and
efficient manner. There are a large number of systems that may be integrated,
including management information, purchasing, accounting and finance, sales,
billing, payroll and benefits and regulatory compliance. The integration of
Symbol and Telxon will be complex and time consuming and will require
significant attention from management. The diversion of management's attention
and any difficulties associated with integrating Telxon into Symbol could have
a material adverse effect on the revenues, the levels of expenses and the
operating results of Symbol after the merger and the value of Symbol shares and
could result in Symbol and Telxon not achieving the anticipated potential
benefits of the merger.
12
<PAGE>
COMPONENT SHORTAGES MAY ADVERSELY AFFECT SYMBOL'S RESULTS
For sometime there has been a worldwide shortage of key electronic
components. This shortage has had an adverse impact on Symbol's ongoing program
to reduce the costs of its products and increase or maintain its gross margins.
In addition, this shortage has made it materially more difficult for Symbol to
fulfill orders from its customers. Notwithstanding the adverse impact of the
shortage, in the past, Symbol has had satisfactory financial results. This
shortage, however, has intensified and, accordingly, there can be no assurance
that this shortage will not have a material adverse impact on Symbol's results
of operations in the current or subsequent quarters.
THE MERGER MAY CAUSE TELXON AND SYMBOL CUSTOMERS TO DELAY PURCHASING DECISIONS
AND MAY ADVERSELY AFFECT THE ABILITY TO ATTRACT AND RETAIN KEY TELXON EMPLOYEES
Uncertainty regarding the merger may cause customers of Telxon and Symbol
to delay purchasing decisions. There can be no assurance that customers of each
of Telxon and Symbol will continue their current buying patterns without regard
to the proposed merger. Customers of Telxon and Symbol may, in response to the
announcement of the merger, delay or defer purchasing decisions. Any delay or
deferral in purchasing decisions by Telxon's customers or Symbol's customers
could have a material adverse effect on Telxon's business or Symbol's business,
regardless of whether or not the merger is ultimately completed. Similarly,
current and prospective employees of Telxon may experience uncertainty about
their future role with Telxon or Symbol until Symbol's strategies with regard
to Telxon are announced or executed. This may adversely affect the ability of
Telxon to attract and retain key management, marketing and technical personnel.
IF WE FAIL TO OBTAIN REQUIRED CONSENTS AND WAIVERS, THIRD PARTIES MAY TERMINATE
OR ALTER EXISTING CONTRACTS WITH TELXON
Telxon has contracts with many of its suppliers, customers, licensors,
licensees and other business partners relating to, among other things, the
operation of its business. Some of these contracts require Telxon to obtain the
consent, waiver or approval of these other parties in connection with the
merger. If such consent, waiver or approval cannot be obtained, Telxon may lose
the benefits it receives under such contracts. There can be no assurance that
Telxon will be able to obtain all of the necessary consents, waivers and
approvals.
THE PRICE OF SYMBOL SHARES MAY BE AFFECTED BY FACTORS DIFFERENT FROM THOSE
AFFECTING THE PRICE OF TELXON SHARES
Upon completion of the merger, holders of Telxon common stock will become
holders of Symbol common stock. Symbol's business differs from that of Telxon,
and Symbol's results of operations, as well as the price of Symbol common
stock, may be affected by factors different from those affecting Telxon's
results of operations and the price of Telxon common stock. For a discussion of
Symbol's and Telxon's businesses and certain factors to consider in connection
with such businesses, see Telxon's Annual Report on Form 10-K for the fiscal
year ended March 31, 2000 and Symbol's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, which are incorporated by reference in
this proxy statement/prospectus.
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THE SPECIAL MEETING
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from Telxon stockholders for use at the Telxon special
meeting in connection with our proposed merger. This proxy statement/prospectus
is also furnished to Telxon stockholders as a prospectus in connection with the
issuance of Symbol shares in the merger. This proxy statement/prospectus and
accompanying form of proxy are first being mailed to Telxon stockholders on or
about [ ], 2000.
TIME AND PLACE; PURPOSES
The special meeting will be held on [ , ], 2000, at 10:00 a.m., at
[ , ], Ohio. At that meeting, Telxon stockholders will be asked to vote on
the proposal to approve and adopt the merger and the merger agreement.
RECORD DATE
Telxon has established the close of business on [ ], 2000, as the
record date to determine Telxon stockholders entitled to receive notice of and
to vote at the special meeting. At the close of business on the record date,
[ ] Telxon shares were outstanding and entitled to vote at the special
meeting, and were held by approximately [ ] record holders. The Telxon shares
constitute the only outstanding class of Telxon voting securities. Each Telxon
share is entitled to one vote on the merger and merger agreement.
QUORUM
The presence at the special meeting, either in person or by proxy, of a
majority of the Telxon shares outstanding on the record date is necessary to
constitute a quorum to transact business at that meeting. If a quorum is not
present, it is expected that the special meeting will be adjourned or postponed
in order to solicit additional proxies.
Abstentions and "broker non-votes" will be counted for the purpose of
determining whether a quorum is present. Broker non-votes are shares held by
brokers or nominees on behalf of customers that are represented at the meeting
but with respect to which the broker or nominee has not been instructed how to
vote. Brokers holding Telxon shares in street name for customers are prohibited
from voting those customers' shares regarding the merger and merger agreement
in the absence of specific instructions from those customers.
VOTE REQUIRED
Approval and adoption of the merger and the merger agreement requires the
affirmative vote of the holders of a majority of the Telxon shares outstanding
on the record date. Failure to vote, abstentions and broker non-votes will not
be deemed to be cast either "FOR" or "AGAINST" the merger and the merger
agreement. However, because approval and adoption of the merger and the merger
agreement requires the affirmative vote of the holders of a majority of the
outstanding Telxon shares, the failure to vote, abstentions and broker
non-votes will have the same effect as a vote "AGAINST" the merger and the
merger agreement. Votes may be cast at the meeting in person or by proxy.
Telxon's directors and executive officers owned, as of the record date,
[ ] Telxon shares, which represented less than [ %] of the outstanding
Telxon shares.
PROXIES
Telxon shares represented by properly executed proxies, if such proxies
are received in time and are not revoked, will be voted in accordance with
instructions indicated on the proxies. Except for the broker non-votes, if no
instructions are indicated, those proxies will be voted "FOR" approval and
adoption of the merger and the merger agreement, and as determined by the
Telxon board as to any other matter that may properly come before the special
meeting. In the event that a quorum is not present at the time the special
meeting is convened, or if for any other reason Telxon believes that additional
time should be allowed for the solicitation of proxies, Telxon may postpone the
meeting or may adjourn the meeting with or without a vote of stockholders. If
Telxon proposes to postpone or adjourn the special meeting by a vote of
stockholders, the persons named in the
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enclosed form of proxy will vote in favor of such postponement or adjournment
all Telxon shares which were voted in favor of the proposal to adjourn the
meeting. However, such persons will not vote any Telxon shares for which they
have been instructed to vote against the proposal to adjourn the meeting.
Any Telxon stockholder who executes and returns a proxy may revoke it at
any time prior to the voting of the proxies by giving written notice to the
Assistant Secretary of Telxon, by executing a later-dated proxy or by attending
the special meeting and voting in person.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to Telxon Corporation, 1000 Summit
Drive, Cincinnati, Ohio 45150, Attention: Assistant Secretary. A proxy
appointment will not be revoked by death or incapacity of the Telxon
stockholder executing the proxy unless, before the shares are voted, notice of
such death or incapacity is filed with Telxon's Assistant Secretary or other
person responsible for tabulating votes on Telxon's behalf.
Your attendance at the special meeting will not by itself constitute
revocation of your proxy. You must also vote in person at the special meeting.
If you instructed your broker to vote your Telxon shares, you must follow the
broker's directions in order to change your vote.
Telxon will pay the cost of soliciting proxies. In addition to
solicitation by mail, Telxon's officers and employees may solicit proxies by
telephone, fax, telegram or in person. Arrangements will also be made with
brokerage houses and other nominees and fiduciaries for forwarding solicitation
material to the beneficial owners of stock held of record by those persons, and
Telxon will reimburse those custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses. Telxon has retained Kissell Blake, Inc. to
assist in the solicitation of proxies for a fee not to exceed [ ], plus
expenses.
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THE MERGER
STRUCTURE OF THE MERGER
In accordance with the merger agreement and Delaware law, a wholly owned
subsidiary of Symbol formed for the purpose of the merger ("Merger Sub") will
merge with and into Telxon, with Telxon being the surviving corporation in the
merger and becoming a wholly owned subsidiary of Symbol. In the merger, each
share of common stock, par value $0.01 per share, of Telxon outstanding will be
converted into the right to receive 0.5 (the "Exchange Ratio") of a Symbol
share. No fractional Symbol shares will be issued in the merger, and cash equal
to the value of any fraction of a share will be paid in place thereof. All
Telxon shares held in the treasury of Telxon or by Symbol or Merger Sub will be
canceled.
The merger will become effective when a Certificate of Merger is filed
with the Secretary of State of Delaware or at such other time as will be
specified in the Certificate of Merger. The effective time of the merger will
occur as soon as practicable after the last of the conditions in the merger
agreement has been satisfied or waived. We expect the merger to occur in the
fourth quarter of 2000. Because the merger is subject to governmental
approvals, however, we cannot predict the exact timing.
EXCHANGE OF TELXON STOCK CERTIFICATES FOR SYMBOL STOCK CERTIFICATES
When the merger is completed, we will mail to Telxon stockholders a letter
of transmittal and instructions for use in surrendering Telxon stock
certificates in exchange for Symbol stock certificates. When you deliver your
Telxon stock certificates to the exchange agent along with a properly executed
letter of transmittal and any other required documents, your Telxon stock
certificates will be canceled and you will receive Symbol stock certificates
representing the number of full shares of Symbol common stock to which you are
entitled under the merger agreement.
You will receive payment in cash, without interest, in place of any
fractional shares of Symbol common stock which would have been otherwise
issuable to you as a result of the merger.
Please do not submit your Telxon stock certificates for exchange unless
and until you receive the transmittal instructions and a form of letter of
transmittal from the exchange agent.
You are not entitled to receive any dividends or other distributions on
Telxon common stock after the merger is completed.
If there is any dividend or other distribution on Symbol common stock with
a record date after the merger and a payment date prior to the date you
surrender your Telxon stock certificates in exchange for Symbol stock
certificates, you will receive it with respect to the whole shares of Symbol
common stock issued to you promptly after they are issued.
Symbol will only issue a Symbol stock certificate or a check in place of a
fractional share in a name other than that in which a surrendered Telxon stock
certificate is registered if you present the exchange agent with all documents
required to show and effect the unrecorded transfer of ownership and show that
you paid any applicable stock transfer taxes or that such transfer taxes were
not applicable.
BACKGROUND OF THE MERGER
Symbol and Telxon have for a number of years been global providers of
mobile and wireless data transaction systems. In addition, Symbol is a supplier
of equipment and licensor of intellectual property to Telxon. As such, the
companies were familiar with each other's businesses and technologies. As part
of their growth strategies, each of Symbol and Telxon has considered
opportunities for potential acquisitions, technological partnerships and other
strategic alternatives. In the summer of 1997, the senior management of Symbol
began to explore in a serious manner the strategic benefits that a business
combination might offer to the combined companies' businesses and their ability
to develop advanced products and serve customers.
In July, 1997, representatives of Symbol initiated conversations with
representatives of Telxon to explore a potential business combination. Symbol
indicated that it was interested in pursuing a business combination in
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which the stockholders of Telxon would receive approximately $27 in cash for
all of their shares. On July 28, 1997, Telxon engaged Goldman, Sachs & Co. to
assist Telxon in evaluating Symbol's proposal and other possible strategic
alternatives. Following immediately upon its engagement, Goldman, Sachs
conducted financial due diligence of Telxon and the proposed transaction.
On August 4, 1997, after meeting with its financial and legal advisors to
consider the Symbol proposal, the Telxon board determined that pursuing the
transaction at that time was not in the best interest of Telxon or its
stockholders, and Telxon then notified Symbol. On August 18, 1997, Symbol
responded by indicating that it was still interested in pursuing the
acquisition of Telxon and was willing to pay $30.50 per Telxon share in cash.
On August 25, 1997, Telxon informed Symbol that Telxon was not for sale,
but the Telxon board had authorized its management to meet with Symbol to
discuss potential strategic transactions. Representatives of Symbol and Telxon
met on October 7 and 8, 1997 to discuss the rationale behind a potential
business combination involving the companies. After the October meeting, Telxon
informed Symbol that the Telxon board was not interested in pursuing an
acquisition by Symbol at that time.
On April 8, 1998, Dr. Jerome Swartz, Chairman of the Board and then Chief
Executive Officer of Symbol, sent a letter to Mr. Frank Brick, then Chief
Executive Officer of Telxon, indicating interest in acquiring all of Telxon's
outstanding shares for $38 per share. During April of 1998, Telxon provided
Symbol with due diligence materials while the Telxon board and its financial
and legal advisors considered Symbol's proposal and met with Symbol and its
advisors to discuss a potential acquisition of Telxon by Symbol. On May 8,
1998, Telxon announced that the Telxon board had determined that the terms of
the Symbol proposal were not in the best interests of Telxon or its
stockholders and that the $38 per share price was inadequate.
On June 1, 1998, Symbol delivered a revised written proposal to Telxon,
increasing the proposed consideration to $40 per share in cash or up to $42 per
share in cash and Symbol stock, subject to due diligence. During the week of
June 3, 1998, Symbol's advisors met with Telxon's advisors to conduct due
diligence and to discuss Symbol's proposal. During this period, the Telxon
board also met with its advisors to discuss Symbol's most recent proposal. On
June 5, Telxon announced that its board had determined that Symbol's $40 cash
proposal was inadequate and that the board had insufficient information to make
a determination with respect to the $42 cash/stock proposal. On June 8, 1998,
Symbol withdrew its proposal.
In early November 1998, Symbol's management team met with its financial
and legal advisors concerning the advisability of making another proposal to
Telxon. On November 4, 1998, representatives of Bear, Stearns & Co. Inc.,
financial advisor to Symbol, contacted representatives of Goldman, Sachs to
discuss a possible business combination between Telxon and Symbol. On November
18, 1998, after consulting individually with outside directors of Symbol, Dr.
Swartz wrote to Mr. Brick that Symbol was prepared to provide Telxon
stockholders a fixed exchange ratio of .76 Symbol shares. In response to Mr.
Brick's written request for greater price certainty, on November 20, 1998, Dr.
Swartz sent a letter to Telxon revising the proposed consideration for each
Telxon share to Symbol shares valued at $40.25, subject to a collar.
During the period between November 20, 1998 and December 7, 1998, the
management teams of Telxon and Symbol and their respective financial, legal and
accounting advisors met to discuss the terms of the proposed transaction and
exchanged due diligence information. During this time period, the Telxon board
met on several occasions to discuss the status of the ongoing negotiations with
Symbol and its advisors. As a result of this due diligence process, the parties
discovered potential accounting inconsistencies with respect to Telxon's
financial statements. On December 11, 1998, Telxon publicly announced its plans
to restate its financial statements and, following this announcement, Symbol
terminated its merger discussions with Telxon.
In May of 1999, Dr. Swartz and Mr. John Paxton, Telxon's then newly
appointed Chairman of the Board and Chief Executive Officer, met to discuss
recent business developments with respect to Telxon. Although they discussed
the feasibility of an acquisition of Telxon by Symbol, each company decided
that a transaction was not in its best interests at such time.
On December 7, 1999, Telxon engaged Prudential Securities to act as
Telxon's financial advisor in connection with any business combination
transactions involving Telxon that may be proposed. Following its engagement,
Prudential Securities undertook a study and analysis of the business,
operations, financial condition and prospects of Telxon.
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In February and March, 2000, Mr. Tomo Razmilovic, President of Symbol, and
Mr. Paxton revisited the possibility of a potential transaction between Telxon
and Symbol. During this time period, at the request of Telxon's management,
Prudential Securities was also contacting third parties, on a confidential
basis, to determine whether any alternative transactions to maximize
stockholder value were available. As a result of this process, no formal
proposals were made to Telxon by third parties, and Prudential Securities
concluded that the likelihood of such a proposal being made was low.
On February 18, 2000, Symbol's legal advisors delivered to Telxon a draft
term sheet contemplating a transaction in which Telxon stockholders would
receive $38 per share in a combination of cash and Symbol stock. The term sheet
was based primarily on the terms and conditions that had been negotiated prior
to the termination of negotiations in December 1998. These discussions were
terminated due to valuation issues but were restarted on March 17, 2000 when
Symbol orally communicated a new proposal at $35 per share with the form of
consideration consisting solely of shares of Symbol stock, subject to a collar.
Symbol's legal advisors concurrently delivered to Telxon's legal advisors a
revised term sheet based on the term sheet delivered in February. This proposal
was conditioned upon Telxon meeting analysts' earnings estimates. Although
Telxon had indicated that $35 per share would not be acceptable, on March 20,
2000, Symbol and Telxon's senior management teams, together with their financial
and legal advisors, nonetheless met to discuss a potential transaction. At the
beginning of the meeting, Symbol raised the price at which it would be willing
to consider a transaction to $36.50. Based on the information then provided to
Symbol with respect to Telxon's projected and actual earnings results, Symbol
indicated that it was not willing to proceed at the price levels being
discussed. Accordingly, the parties terminated discussions due to these
valuation issues.
In late May 2000, Mr. Razmilovic telephoned Mr. Paxton, and explained that
Symbol remained very interested in acquiring Telxon. Mr. Razmilovic requested a
meeting with Mr. Paxton to discuss the terms of the proposed acquisition. On
June 15, 2000, Mr. Razmilovic and Mr. Ken Jaeggi, Symbol's Chief Financial
Officer, met in Cincinnati, Ohio with Mr. Paxton and Mr. Woody McGee, Chief
Financial Officer of Telxon. At this meeting, they agreed that a combination
between the two companies was strategically compelling and, accordingly, they
should try again to explore whether a transaction was possible. They met for
several hours to negotiate pricing terms, including the value of the
transaction in terms of the shares of Symbol stock to be issued in the merger.
At the end of the meeting, Messrs. Paxton and Razmilovic tentatively agreed on
a 0.5 exchange ratio, subject to completion of due diligence and negotiation of
the terms and conditions of the definitive documents and approvals of their
respective boards of directors.
On June 16, 2000, Telxon and Symbol entered into a confidentiality
agreement. On that same day, the Telxon board held a telephonic meeting at
which Mr. Paxton reported to the Telxon board on the meeting with Messrs.
Razmilovic and Jaeggi. Representatives of Skadden, Arps, Slate, Meagher & Flom
LLP, Telxon's legal advisor, reviewed with the board the material terms of the
proposed transaction. Mr. McGee reviewed financial aspects of the proposed
merger and historical and prospective financial information concerning Symbol.
The Telxon board authorized management and Telxon's financial and legal
advisors to conduct due diligence of Symbol and to negotiate the terms of the
proposed transaction.
After the meeting, Symbol's and Telxon's legal and financial advisors and
independent auditors began conducting their due diligence review.
Representatives of Prudential Securities met with Mr. Jaeggi on June 19, 2000
to review Symbol's financial performance, projections and strategy.
On June 19, 2000, Symbol's legal advisors delivered to Telxon and its
legal advisors a draft merger agreement. From June 19 through June 25, 2000,
counsel for both parties negotiated the terms of the merger agreement. On June
21, 2000, Mr. Jaeggi and Symbol's financial advisors and independent
accountants met with Mr. McGee and other Telxon representatives and Telxon's
independent accountants to conduct financial and accounting due diligence.
During the course of the next several days, Symbol and Telxon and their
advisors continued to exchange and evaluate due diligence information. The
independent accountants of Symbol and Telxon also explored the possibility of a
pooling of interests transaction but determined at this time that such an
accounting treatment was not likely to be attained.
In late June, 2000, Telxon informed Symbol that it would have to delay the
filing of its Form 10-K for the fiscal year ended March 31, 2000 in order to
restate its historical results of operations for the first quarter of 1999 and
the fourth quarter of 1998 and to incorporate related adjustments into the Form
10-K. Both parties agreed to defer merger discussions until Telxon filed its
Form 10-K.
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On June 26, 2000 the Telxon board held a telephonic meeting attended by
representatives of Prudential Securities and Skadden Arps. Representatives of
Skadden Arps presented the Telxon board with an overview of the status of
negotiations and discussions between Telxon and Symbol, the status of legal due
diligence and the open issues on the merger agreement. Representatives of
Prudential Securities then updated the board on their financial due diligence
of Symbol and its business, assets and management, Prudential Securities'
financial analysis of the proposed merger and their progress in connection with
preparing Prudential Securities' fairness opinion. Telxon's management informed
the board of the pending restatements of Telxon's results of operations for the
first quarter of 1999 and the fourth quarter of 1998 and the status of the Form
10-K. After some discussion, the Telxon board authorized management and
Telxon's advisors to prepare and file the Form 10-K, continue negotiating the
terms of the proposed merger agreement and finalize legal and financial due
diligence.
On June 26, 2000, Symbol sent to its board of directors due diligence
materials prepared by Symbol's accountants, financial analyses prepared by its
financial advisors and a summary of the draft merger agreement prepared by its
legal advisors. During that week, Dr. Swartz also individually briefed the
outside Symbol directors as to the status of the discussions with Telxon.
On July 10, 2000, Telxon filed its Form 10-K. The parties resumed the
exchange of due diligence materials and, over the next two weeks, Symbol and
Telxon and their respective advisors completed their due diligence evaluations.
During this period, the legal advisors of Symbol and Telxon continued to
negotiate the merger agreement.
On July 19, 2000, Messrs. Paxton and McGee met in New York with
representatives of Prudential Securities and Skadden Arps to receive an update
on the status of due diligence, Prudential Securities' financial analysis of
the merger and the progress made in the negotiations in connection with the
merger agreement. Late that afternoon, Mr. Paxton telephoned Mr. Razmilovic to
discuss some of the open issues on the merger agreement. Mr. Paxton also
telephoned Telxon's outside directors to brief them individually of the status
of negotiations.
On July 20, 2000, a special meeting of the Symbol board was held. Symbol's
legal advisors advised the Symbol board of its legal duties with respect to a
potential strategic merger transaction with Telxon. Symbol's senior management
reviewed for the Symbol board the background and status of discussions with
Telxon and summarized the strategic reasons for the proposed transaction.
Symbol's senior management also reported to the Symbol board the due diligence
that had been conducted with respect to Telxon, its financial analysis of the
proposed transaction and the potential benefits and risks of the proposed
transaction, and responded to questions from the directors. At this meeting,
Symbol's financial advisors reviewed the financial aspects of the proposed
transaction, and responded to questions from directors regarding the manner and
conclusion of its analyses. Symbol's accountants reviewed the results of their
accounting due diligence of Telxon. Symbol's legal advisors also reviewed the
material terms of the merger agreement and other regulatory and legal issues.
Symbol's senior management and its advisors responded to additional questions
from directors. After discussion, the Symbol board approved the proposed
transaction, subject to Symbol's senior management finalizing the terms and
conditions of the merger agreement and satisfactory completion of due
diligence.
From July 20 through July 25, 2000, counsel for the parties negotiated the
final terms of the merger agreement. Messrs. Razmilovic and Paxton spoke again
by telephone on July 24, together with their respective legal advisors, to
resolve some of the remaining issues.
On July 25, 2000, the Telxon board met in Cincinnati, Ohio to consider the
proposed merger. Mr. Paxton, together with representatives of Skadden Arps,
updated the board on the discussions and negotiations that had taken place.
Messrs. Paxton and McGee reviewed with the Telxon board the potential benefits
to Telxon and the potential negative factors of the proposed merger and
management's reasons for recommending the merger agreement. Representatives of
Skadden Arps then described to the members of the Telxon board their fiduciary
duties in connection with the proposed transaction and reviewed with the board
the final terms of the merger and the merger agreement, including the closing
conditions and the approvals that would be required to complete the merger.
Representatives of Prudential Securities reviewed with the board their
financial analysis of the transaction and financial information with respect to
Symbol and Telxon. Prudential Securities then delivered to the Telxon board
Prudential Securities' oral opinion, confirmed by a subsequent written opinion,
that, as of that date, the exchange ratio in the merger was fair to Telxon's
stockholders (other than Symbol and its subsidiaries) from a financial point of
view. Telxon's management and advisors responded to questions concerning the
merger and Symbol by members of the board.
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After considerable discussion among the Telxon board members, the board
unanimously determined the terms of the merger were fair to and in the best
interests of Telxon and its stockholders, approved the merger agreement and the
transactions contemplated thereby and voted to submit the merger agreement to a
vote of Telxon's stockholders and to recommend that the Telxon stockholders
approve and adopt the merger agreement. Late that evening, following the
meeting of the Telxon board, the merger agreement was executed.
Early in the morning of July 26, 2000, Symbol and Telxon issued a press
release announcing the execution of the merger agreement.
REASONS FOR THE MERGER
Symbol and Telxon believe that the merger will enable the combined
company, with its larger and more diversified portfolio of products and
resources, to more effectively compete and to achieve a number of key strategic
objectives:
o THE MERGER WILL ENHANCE THE COMBINED COMPANY'S RESOURCES AND ABILITY TO
MEET CUSTOMER NEEDS AS A GLOBAL PROVIDER OF MOBILE AND WIRELESS DATA
TRANSACTION SYSTEMS AND SERVICES. The market for wireless computing
systems continues to grow across a wide range of industries and vertical
markets and customers are seeking more sophisticated equipment systems
and support. The merger and the complementary strengths of Symbol and
Telxon will enable the combined company to meet the growing needs of its
customers better and faster than either company could have done
separately. The merger with Telxon, which is a designer and manufacturer
of wireless networks for mobile computing solutions and information
systems, strengthens Symbol's ability to provide innovative customer
solutions based on wireless local area networking for data and voice,
application-specific mobile computing and bar-code data capture. The
combination of Telxon's complementary technologies, product lines,
customer relationships and network of partnerships, with Symbol's
research and development expertise, product portfolio, technologies,
financial resources, manufacturing capabilities and distribution
strengths, should better enable the combined company to apply Internet
and wireless technologies and handheld computing systems across a wider
range of industries and vertical markets. In addition, the merger will
provide the combined company with greater scale to compete with the
larger and more sophisticated vendors, including Cisco, Compaq, Ericsson,
Fujitsu, Hewlett Packard, Lucent, Motorola, NEC, Nokia and Sony, which
have recently emerged as a result of the broadening of our markets.
o THE MERGER WILL ENABLE THE COMBINED COMPANY TO COMPETE IN THE NEXT
GENERATION OF WIRELESS INTERNET CONNECTIVITY. As e-commerce proliferates
and application-specific handheld computers evolve into wireless
information appliances, the demand for wireless Internet connectivity
will increase. The addition of Telxon's complementary products and
technologies across many vertical markets, strengthens the combined
company's ability to capitalize on and drive the accelerating demand for
wireless Internet connectivity.
o THE MERGER WILL STRENGTHEN RELATIONSHIPS WITH KEY CUSTOMERS. As the
market for wireless computing systems becomes more competitive, our
customers are increasingly looking for suppliers that can expand product
offerings, reduce costs and improve quality and have the resources to
enable them to supply world-class products and services. Many of these
customers are already customers of Symbol or Telxon. However, as the
demands of customers and development of technology have broadened our
markets, both companies have increasingly faced competition from larger
and more sophisticated vendors. Through the merger, we expect to create a
fully integrated organization with greater research and development and
new product development output that will be better positioned to provide
fully integrated solutions, new products and technology innovations that
help customers increase productivity and reduce costs.
o THE MERGER CREATES SIGNIFICANT COST-SAVINGS OPPORTUNITIES. Symbol
expects that the merger will result in substantial operating efficiencies
from eliminating duplicate functions, rationalizing manufacturing
facilities and sales offices and realizing purchasing, sales,
manufacturing and other efficiencies. Symbol expects the merger to be
approximately neutral to its earnings per share in 2001 before one time
transaction costs and significantly accretive thereafter as the benefits
of the merger are realized.
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INFORMATION AND FACTORS CONSIDERED BY THE TELXON BOARD; RECOMMENDATION OF THE
TELXON BOARD
The Telxon board of directors unanimously recommends that Telxon's
stockholders approve and adopt the merger and the merger agreement.
In reaching its decision to approve the merger and the merger agreement
and to recommend that Telxon's stockholders approve and adopt the merger and
the merger agreement, the Telxon board considered a number of factors,
including the following:
o The information and presentations by Telxon's management and financial
advisors regarding the financial condition, cash flows and results of
operations of Telxon and Symbol, on both a historical and prospective
basis.
o Information relating to the business, assets, management, competitive
position, operating performance and prospects of each of Telxon and
Symbol, including the prospects of Telxon if it were to continue as an
independent company.
o Current industry, market and economic conditions.
o The possibility of strategic alternatives to the merger for enhancing
long-term stockholder value, including the possibility of other potential
strategic transactions.
o Historical market prices, trading information and volatility with
respect to Telxon shares and Symbol shares.
o The opinion of Prudential Securities, that, as of July 25, 2000, the
0.5 exchange ratio was fair to Telxon stockholders (other than Symbol or
its subsidiaries) from a financial point of view, and Prudential
Securities' financial presentation to the Telxon board.
o The exchange ratio represented:
o A 99.2% premium over the closing price of Telxon shares on June 15,
2000, the day Symbol and Telxon reached a tentative agreement upon the
exchange ratio;
o A 55.8% premium over the average closing price of Telxon shares for
the thirty trading days prior to the public announcement of the
merger; and
o A 27.9% premium over the closing price of Telxon shares on July 25,
2000, the last trading day prior to the public announcement of the
merger.
o The amount and form of consideration to be received by Telxon's
stockholders in the merger in light of comparable transactions.
o The opportunity for Telxon's stockholders to participate, as
stockholders of Symbol after the effective time of the merger, in a
larger, more diversified company, including participation in the value
that may be created through combining Telxon's and Symbol's
businesses, as discussed in this document under "Reasons for the
Merger."
o The value of the Symbol shares to be received by Telxon stockholders
may increase or decrease as a result of fluctuations in the price of the
Symbol shares and that any such increase or decrease in value will not be
limited by any "collar" arrangements.
o Telxon's financial advisors contacted a number of third parties,
including companies in the wireless networking and information systems
industry, regarding a potential business combination with Telxon, and, to
date, no third party has made a formal proposal to enter into a business
combination with Telxon, and the advice of Prudential Securities that the
likelihood of a third party making such a proposal that is financially
superior to the merger is low.
o The arm's-length negotiations between Telxon and Symbol and their
respective advisors, including that the negotiations resulted in Telxon
having the right to terminate the merger agreement to accept an
unsolicited, superior acquisition proposal.
o The ability, subject to specified conditions, (i) of Telxon to provide
information to, and negotiate with, a third party which has made an
unsolicited acquisition proposal and (ii) of the Telxon board to withdraw
its recommendation of the merger if a superior acquisition proposal is
made.
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o The Telxon board's belief, after review of the termination fee payable
by Telxon with its advisors, that the amount of the termination fee would
not meaningfully impair the possibility of a competing transaction.
o The termination fee which is payable by Symbol if the merger is not
completed by March 31, 2001 due to the failure to satisfy the closing
conditions relating to the HSR Act, this document being declared
effective by the SEC, the NYSE listing of the Symbol shares to be issued
in the merger or breaches of Symbol's representations, warranties,
agreements or covenants.
o The other terms and conditions of the merger agreement, including the
limited number of closing conditions which provides increased certainty
that the merger will be completed.
o The merger is intended to be a tax-free exchange to Telxon's
stockholders.
o The approval and adoption of the merger and the merger agreement
requires the affirmative vote of a majority of the outstanding Telxon
shares entitled to vote thereon.
The Telxon board also considered many of the risks described under the
caption "Risk Factors" begining on page 12 as potentially negative factors in
its evaluation of the merger, as well as the following potentially negative
factors:
o The merger is subject to the closing conditions described under the
caption "The Merger Agreement--Conditions" beginning on page 39 and, if
the merger is not completed for any reason, Telxon may be subject to a
number of material risks, including, among other things, the following:
o Telxon may be required to pay Symbol a termination fee of $25 million;
o the price of Telxon common stock may decline to the extent that the
current market price of Telxon common stock reflects a market
assumption that the merger will be completed; and
o costs related to the merger, such as legal, accounting and financial
advisor fees, must be paid even if the merger is not completed.
o If the merger agreement is terminated and Telxon's board determines
to seek a merger or business combination with a party other than
Symbol, there can be no assurance that it will be able to find a
partner willing to provide Telxon's stockholders with a value
equivalent to or more attractive than the value they will receive in
the merger.
However, the Telxon board believed that such negative factors were
outweighed by the potential advantages of the merger, particularly since
Telxon's stockholders would receive Symbol shares in exchange for all of their
shares, thereby enabling them to participate, as stockholders of Symbol after
the effective time of the merger, in a larger, more diversified company.
The foregoing discussion of the information and factors considered by the
Telxon board includes all of the material factors considered by the Telxon
board in reaching its conclusions and recommendations but is not meant to be
exhaustive. In view of the variety of factors considered in reaching its
determination, the Telxon board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusions and recommendations. In addition,
individual members of the Telxon board may have given different weights to
different factors.
At the July 25, 2000 meeting of the Telxon board, after presentations from
its legal and financial advisors and after careful consideration, the Telxon
board unanimously determined that the merger and the terms of the merger
agreement were fair to and in the best interests of Telxon and its
stockholders, approved the merger and the merger agreement and recommended that
Telxon's stockholders approve and adopt the merger and the merger agreement.
OPINION OF FINANCIAL ADVISOR TO TELXON
On July 25, 2000, Prudential Securities delivered its oral opinion to the
Telxon board, which opinion was confirmed in writing as of such date, to the
effect that, as of such date, the exchange ratio of Symbol common shares to be
received by the holders (other than Symbol and its subsidiaries) of Telxon's
common stock was fair,
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from a financial point of view, to such holders. Prudential Securities
presented the financial analysis underlying its oral opinion at a meeting of
the Telxon board on July 25, 2000.
In requesting the Prudential Securities opinion, the Telxon board did not
give any special instructions to Prudential Securities or impose any limitation
upon the scope of the investigation that Prudential Securities used to deliver
the Prudential Securities opinion. A copy of the Prudential Securities opinion,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached to this proxy statement/prospectus as Appendix B
and is incorporated herein by reference. The summary of the Prudential
Securities opinion set forth below is qualified in its entirety by reference to
the full text of the Prudential Securities opinion. Telxon common stockholders
are urged to read the Prudential Securities opinion in its entirety.
THE PRUDENTIAL SECURITIES OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE
EXCHANGE RATIO OF SYMBOL COMMON SHARES TO BE RECEIVED BY THE HOLDERS (OTHER
THAN SYMBOL AND ITS SUBSIDIARIES) OF TELXON COMMON STOCK, FROM A FINANCIAL
POINT OF VIEW. IT DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE MEETING OR AS TO ANY OTHER ACTION SUCH
STOCKHOLDER SHOULD TAKE REGARDING THE MERGER.
In conducting its analysis and arriving at the Prudential Securities
opinion, Prudential Securities reviewed such information and considered such
financial data and other factors as Prudential Securities deemed relevant under
the circumstances, including the following:
o a draft, dated July 20, 2000, of the merger agreement;
o historical financial, operating and reserve data concerning Telxon,
including, but not limited to:
o Telxon's Annual Report on Form 10-K for the fiscal years ended March
31, 2000, 1999 and 1998;
o the Proxy Statement for the Annual Meeting of Stockholders held on
September 22, 1999;
o Telxon's internal financial statements for the quarter ended June 30,
2000.
o internal financial statements and other financial and operating data
concerning Telxon prepared by the management of Telxon;
o historical stock prices and trading volumes for Telxon common stock;
o historical financial, operating and reserve data concerning Symbol,
including, but not limited to:
o Symbol's Annual Report on Form 10-K for the fiscal years ended December
31, 1999 and 1998;
o Symbol's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
o the Proxy Statement for the Annual Meeting of Stockholders held on
May 8, 2000;
o Symbol's internal financial statements for the quarter ended June 30,
2000.
o Information relating to Symbol, including certain internal financial
statements and other financial and operating data concerning Symbol
prepared by the management of Symbol;
o historical stock prices and trading volumes for Symbol common stock;
o publicly-available financial, operating and stock market data concerning
certain companies engaged in businesses Prudential Securities deemed
reasonably similar to that of Telxon and Symbol;
o the financial terms of certain recent transactions Prudential Securities
deemed relevant to its inquiry; and
o such other financial studies, analyses and investigations as Prudential
Securities deemed appropriate.
Prudential Securities assumed, with Telxon's consent, that the draft of
the merger agreement that Prudential Securities reviewed (as referred to above)
would substantially conform in all material respects to the merger agreement
when in final form and that the merger would be consummated on the terms
described in the merger agreement without any waiver of any material terms or
conditions.
Prudential Securities discussed with the senior management of Telxon:
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o the prospects for Telxon;
o their estimates of Telxon's future financial performance;
o the financial impact of the merger on the respective companies; and
o such other matters as Prudential Securities deemed relevant.
In connection with its review and analysis and in the preparation of the
Prudential Securities opinion, Prudential Securities relied upon the accuracy
and completeness of the financial and other information publicly-available or
otherwise provided to Prudential Securities by Telxon and did not undertake any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of Telxon or Symbol. With respect
to certain financial forecasts provided to Prudential Securities by senior
management of Telxon and Symbol, Prudential Securities assumed that such
information, and the assumptions and bases therefor, represented Telxon's and
Symbol's best then available estimate as to the future financial performance of
Telxon and Symbol, respectively. Prudential Securities assumes no
responsibility for and expresses no view as to such forecasts and the
assumptions under which they were prepared. For the purposes of the Prudential
Securities opinion, Prudential Securities assumed the merger qualifies as a
reorganization within the meaning of 368(a) of the Internal Revenue Code of
1986, as amended, and that the transaction contemplated by the merger agreement
will be consummated as described in the merger agreement and in this document.
The Prudential Securities opinion is based on economic, financial and
market conditions as they existed on July 25, 2000 and can only be evaluated as
of the date of the Prudential Securities opinion. Prudential Securities assumes
no responsibility to update or revise the Prudential Securities opinion based
upon events or circumstances occurring after such date.
The Prudential Securities opinion, including Prudential Securities'
presentation of such opinion to the Telxon board, was one of the many factors
that the Telxon board took into consideration in making its determination to
recommend approval of the merger agreement. Consequently, Prudential
Securities' analyses described below should not be viewed as determinative of
the opinion of the Telxon board with respect to the exchange ratio of Symbol
common shares to be received by the holders (other than Symbol and its
subsidiaries) of Telxon common stock. The exchange ratio was determined through
arm's length negotiations between Telxon and Symbol and was approved by the
Telxon board.
The Prudential Securities opinion does not address nor should it be
construed to address the relative merits of the merger or alternative business
strategies that may be available to Telxon. In addition, the Prudential
Securities opinion does not address the fairness of the merger to Symbol with
regard to the shares of Telxon common stock currently owned by Symbol and its
subsidiaries.
In arriving at the Prudential Securities opinion, Prudential Securities
performed a variety of financial analyses, including those summarized herein.
The summary set forth below of the analyses presented to the Telxon board at
the July 25, 2000 meeting does not purport to be a complete description of the
analyses performed. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analyses and the application of these methods to the
particular circumstance. Therefore, such an opinion is not necessarily
susceptible to partial analysis or summary description. Prudential Securities
believes that its analyses must be considered as a whole and selecting portions
thereof or portions of the factors considered by it, without considering all
analyses and factors, could create an incomplete view of the evaluation process
underlying the Prudential Securities opinion. Prudential Securities made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Telxon. Any estimates contained in Prudential Securities'
analyses are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the values of businesses and securities do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities may be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty. Subject to the foregoing,
the following is a summary of the material financial analyses presented by
Prudential Securities to the Telxon board on July 25, 2000 in connection with
the delivery of the Prudential Securities opinion.
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COMPARABLE COMPANY MULTIPLES. Prudential Securities employed a comparable
companies analysis to establish a range of implied exchange ratios. Prudential
Securities analyzed publicly available historical and projected financial
results, including the ratio of (i) "enterprise value" (calculated as the
product of diluted shares outstanding times the closing stock price on July 21,
2000, plus debt and preferred stock minus cash) to the last twelve months
revenue ("LTM Revenue"), projected calendar year 2000 revenue ("2000 Revenue"),
projected calendar year 2001 revenue ("2001 Revenue") and projected calendar
year 2001 earnings before interest and taxes ("2001 EBIT"), and (ii) "equity
value" (calculated as the product of diluted shares outstanding times the
closing stock price on July 21, 2000) to projected calendar year 2001 earnings
per share ("2001 EPS") of certain companies considered by Prudential Securities
to be reasonably similar to Telxon. The companies included were as follows:
o EMS Technologies, Inc.;
o Metrologic Instruments, Inc.;
o Symbol Technologies, Inc.;
o Solectron Corporation; and
o UNOVA, Inc.
These comparable companies were found to have a range of ratios of
enterprise value to LTM Revenue of 0.4x to 5.7x, 2000 Revenue of 0.4x to 5.0x,
2001 Revenue of 0.3x to 4.0x and as a multiple of 2001 EBIT of 4.7x to 26.0x,
and the range of ratios of equity value to 2001 EPS of 9.6x to 37.8x. Applying
such ratios to Telxon's LTM and Telxon management's projected 2000 Revenue;
2001 Revenue; 2001 EBIT; and 2001 EPS resulted in an implied exchange ratio
range of 0.248x to 2.432x with a median of .503x; 0.246x to 2.236x with a
median of .632x; 0.280x to 2.357x with a median of .827x; 0.257x to 1.016x with
a median of .987x; and 0.185x to 0.723x with a median of .450x, respectively.
COMPARABLE TRANSACTION MULTIPLES. Prudential Securities also analyzed the
consideration paid in seven recent merger and acquisition transactions that
Prudential Securities deemed to be reasonably similar to the merger, and
considered the ratio of the acquired entity's enterprise value to the acquired
entity's LTM Revenue. The transactions considered were the combinations of:
o Teklogix International Inc. and Psion PLC (pending);
o PSC Inc. and Mohawk Corp. (pending);
o Percon Incorporated and PSC Inc.;
o Meto AG and Checkpoint Systems Inc.;
o Eltron International, Inc. and Zebra Technologies Corp.;
o Norand Corp. and Western Atlas Inc.; and
o LXE Inc. and Electromagnetic Sciences, Inc.
The precedent transactions used in this analysis were found to imply a
ratio of enterprise value to LTM Revenue within a range of 0.8x to 2.6x and a
median of 1.4x. Applying such results to Telxon resulted in an implied exchange
ratio of 0.425x to 1.141x with a median of 0.656x.
COMPARABLE TRANSACTION PREMIUMS ANALYSIS. Prudential Securities also
analyzed the exchange ratio premiums over the respective time periods, listed
below, in four recent merger and acquisition transactions that Prudential
Securities deemed to be reasonably similar to the merger, and considered the
implied exchange ratio of this transaction using the mean of the exchange ratio
premiums of the comparable transactions over those time periods. The
transactions considered were the combinations of:
o Teklogix International Inc. and Psion PLC (pending);
o Aironet Wireless Communications, Inc. and Cisco Systems, Inc.;
o Eltron International, Inc. and Zebra Technologies Corp.; and
o LXE Inc. and Electromagnetic Sciences, Inc.
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The means of the exchange premiums of the precedent transactions
determined over the periods of one, five, ten, twenty, thirty and sixty trading
days prior to the exchange, are 25.6%, 24.4%, 28.0%, 30.7%, 35.2% and 48.4%,
respectively. Applying such results to Telxon resulted in an implied exchange
ratio that ranged from 0.434x to 0.486x with a median of 0.472x.
Prudential Securities also analyzed the exchange ratio premium of this
transaction on each date one, five, ten, twenty, thirty and sixty trading days
prior to July 21, 2000 and the average during the time period from each date to
July 21, 2000. The mean and median of the implied premiums calculated using
each of the dates were 57.5% and 61.0%, respectively, and during each of the
periods were 41.9% and 40.6%, respectively.
None of the publicly-traded companies or the acquired entities in the
above comparable company multiples, comparable transaction multiples or
comparable transaction premiums analysis is, of course, identical to Telxon or
the merger. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the publicly-traded companies and
the acquired entities, and other factors that could affect the public trading
value and consideration paid for each of the publicly-traded companies and the
acquired entities, respectively, as well as that of Symbol.
The Telxon board selected Prudential Securities to provide a fairness
opinion because it is a nationally recognized investment banking firm engaged
in the valuation of businesses and their securities in connection with merger
and acquisition transactions and because it has substantial experience in
transactions similar to the merger. Pursuant to an engagement letter with
Prudential Securities, Telxon paid Prudential Securities a retainer of $100,000
and an opinion fee of $500,000 for Prudential's fairness opinion with respect
to the merger, and has agreed to pay a transaction fee upon consummation of the
merger equal to $5,700,000 (less retainer and opinion fee amounts previously
paid). In addition, the engagement letter with Prudential Securities provides
that Telxon will reimburse Prudential Securities for its reasonable
out-of-pocket expenses (including fees and expenses of its legal counsel) and
indemnify Prudential Securities and certain related persons against certain
liabilities, including liabilities under securities laws, arising out of the
merger or its engagement, as set forth in the separate indemnification
agreement. In the ordinary course of business, Prudential Securities may
actively trade shares of Telxon and Symbol common stock for its own account and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with generally accepted accounting principles. For
purposes of preparing Symbol's consolidated financial statements, Symbol will
establish a new accounting basis for Telxon's assets and liabilities based upon
their fair values, the merger consideration and the costs of the merger. Symbol
believes that any excess of cost over the fair value of the net assets of
Telxon will be recorded as goodwill and other intangible assets. A final
determination of the intangible asset lives and required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values, has not
yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the unaudited pro forma combined financial
information appearing elsewhere in or incorporated by reference into this proxy
statement/prospectus are preliminary and have been made solely for purposes of
developing that pro forma information. Symbol will determine the fair value of
Telxon's assets and liabilities and will make appropriate purchase accounting
adjustments, including adjustments to the amortization period of the intangible
assets, upon completion of that determination. To the extent that a portion of
the purchase price is allocated to in-process research and development as is
anticipated, a charge will be recognized for the period in which the merger
occurs. That charge may be material to Symbol's results of operations.
INTERESTS OF TELXON OFFICERS AND DIRECTORS IN THE MERGER
When considering the recommendation of Telxon's board, you should be aware
that some of Telxon's officers and directors have interests in the merger that
are different from, or are in addition to, yours. The Telxon board was aware of
these interests and considered them, among other things, in approving the
merger and the merger agreement. These interests are described below.
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Treatment of Telxon Options and Restricted Shares
Some of our directors, officers and employees hold options to purchase our
common stock and/or restricted shares of our common stock issued under our
equity incentive plans. As of [ ], 2000, executive officers and directors of
Telxon beneficially owned an aggregate of [ ] Telxon shares, including
options to purchase Telxon shares. Under the merger agreement, each unexercised
and unexpired option to purchase Telxon shares will be converted into an option
to acquire such number of Symbol shares equal to the number of Telxon shares
subject to such option, multiplied by the 0.5 exchange ratio, rounded up or
down to the nearest whole share, at an exercise price equal to the per share
exercise price of such option immediately prior to the effective time of the
merger divided by the 0.5 exchange ratio, rounded down to the nearest whole
cent.
Each such option to purchase Symbol shares will vest and become
exercisable upon the same terms and conditions as were applicable to the Telxon
options prior to the merger, except that (i) such options will become fully
vested and exercisable if, after the effective time of the merger, the
employment with Telxon of the holder of such option is terminated by Telxon
without "cause" or is terminated by such option holder with "good reason" and
(ii) options granted under Mr. Paxton's employment agreement will vest and
become exercisable immediately upon the completion of the merger, in accordance
with its terms.
In the merger, each of the restricted shares of Telxon common stock issued
under our equity incentive plans will be converted into 0.5 restricted shares
of Symbol common stock. After the effective time of the merger, such restricted
Symbol shares will vest upon the same terms and conditions as were applicable
to the restricted Telxon shares immediately prior to the merger, except that
such shares will become fully vested if, after the effective time of the
merger, the employment of the holder of such restricted Symbol shares is
terminated by Telxon without "cause" or is terminated by such holder with "good
reason."
As defined in the merger agreement, a Telxon employee is terminated for
"cause" if such termination results from:
o an employee's continued failure to substantially perform his or her
duties (other than as a result of total or partial incapacity due to
physical or mental illness) for a 30-day period following written notice;
o any material act or omission involving dishonesty in the performance of
such employee's duties;
o the indictment of such employee of a felony under the laws of the United
States of America or any state thereof;
o willful malfeasance or willful misconduct in connection with such
employee's duties or any act or omission which is materially injurious to
the financial condition or business reputation of Telxon or any of its
subsidiaries; or
o such employee's material breach of the provisions of any employment
agreement with Telxon which is not cured within 30 days following written
notice under the merger agreement.
Additionally, "good reason" is defined to mean, with respect to any
employee of Telxon:
o a reduction in such employee's base salary or target bonus;
o a transfer of such employee's primary workplace by more than fifty
miles; or
o with respect to Telxon's key employees only, an adverse diminution in
any material respect in the employee's current duties or responsibilities
(other than solely by virtue of Telxon ceasing to be a public company)
for a period of 30 days after such employee has given Telxon written
notice of such diminution.
CEO Employment Agreement
Telxon is a party to a three-year employment agreement with Mr. Paxton
that expires on March 31, 2002. The consummation of the merger will constitute
a change of control under this employment agreement.
Under this employment agreement, in the event that Mr. Paxton's employment
is terminated by Telxon, other than for cause, or is deemed to have been
terminated upon or after a change of control of Telxon, then (1) Telxon must
pay Mr. Paxton an amount equal to 2.99 times his base salary of $800,000 and
(2) Mr. Paxton will be
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entitled to continued benefits for himself and his dependents for a period of
up to 2 years after the effective date of such termination. The employment
agreement is deemed to have been terminated by Telxon without cause in the
event that Mr. Paxton terminates his employment with Telxon (1) within 30 days
following a change of control of Telxon or (2) within 2 years after a change in
control of Telxon if any event constituting "good reason" occurs.
The employment agreement defines "good reason" as:
o the failure by any successor to Telxon to assume and agree to perform
Mr. Paxton's employment agreement within one business day after such
person becomes a successor to Telxon;
o a reduction by Telxon of Mr. Paxton's base salary or the level of his
benefits under any of Telxon's plans, programs or policies, without Mr.
Paxton's prior written consent, as in effect immediately prior to a
change of control of Telxon; or
o Telxon requiring Mr. Paxton to be based anywhere other than, or to
relocate from, the metropolitan area where Mr. Paxton's office is located
immediately prior to the change in control, without Mr. Paxton's prior
written consent
Pursuant to Mr. Paxton's employment agreement, Telxon sold 300,000
unregistered shares of Telxon stock to Mr. Paxton. Telxon also granted Mr.
Paxton options to purchase 300,000 Telxon shares under our 1990 stock option
plan and price performance options to purchase 400,000 Telxon shares under the
employment agreement. Currently, 100,000 of Mr. Paxton's stock options granted
under the stock option plan and 300,000 of Mr. Paxton's price performance stock
options are vested and exercisable. Upon a change of control of Telxon, all of
Mr. Paxton's options will immediately vest and such options will remain
exercisable for the remainder of their original terms. In the merger, each such
option will be converted into an option to acquire such number of Symbol shares
equal to the number of Telxon shares subject to such option, multiplied by the
0.5 exchange ratio, rounded up or down to the nearest whole share, at an
exercise price equal to the per share exercise price of such option immediately
prior to the effective time of the merger, divided by the 0.5 exchange ratio,
rounded down to the nearest whole cent. In the merger, each such unregistered
share of Telxon common stock held by Mr. Paxton will be converted into 0.5
shares of Symbol common stock.
Consulting Agreement
Telxon is party to a ten-year consulting agreement, dated December 29,
1997, with Mr. Robert A. Goodman, a director of Telxon. The consummation of the
merger will constitute a change of control under this consulting agreement.
This consulting agreement terminates upon a change in control of Telxon, and,
upon such termination, Mr. Goodman will be entitled to receive a lump sum cash
payment of the unpaid balance of the $150,000 annual consulting payments for
the remaining term of the agreement.
Severance Arrangements with Officers and Employees
Telxon has entered into employment agreements with some of its officers
and employees which provide for severance payments for termination following a
change in control of Telxon. The consummation of the merger will constitute a
change of control of Telxon under these severance agreements. Under these
agreements, if the employment of these officers or employees is terminated by
Telxon other than for "cause" or by the officer or employee for "good reason"
following a change of control of Telxon, then Telxon must continue to pay to
such officer or employee a base salary for a period ranging from 3 months to 2
years.
These employment agreements generally define "cause" as:
o any action or inaction of the employee which, in the sole judgment of
the Telxon board, is adverse to Telxon's interests, including, without
limitation, dishonesty, grossly negligent misconduct, willful misconduct,
disloyalty, acts of bad faith, neglect of duty; or
o any material breach of the employment agreement or any other agreement
between such employee and Telxon or of any policy applicable to Telxon
employees generally.
These employment agreements generally define "good reason" as any
termination of such employee's employment as a result of:
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o any reduction, without such employee's prior written consent, in such
employee's status, position or job responsibilities or the assignment to
such employee of duties or responsibilities inconsistent with such
employee's status, positions or responsibilities as in effect immediately
prior to a change in control of Telxon;
o a reduction by Telxon, without such employee's prior written consent, in
such employee's base salary, or in the level of benefits provided to such
employee and such employee's dependents under any Telxon employee benefit
plan, as in effect immediately prior to a change in control of Telxon; or
o Telxon's requiring such employee, without such employee's written
consent, to be based anywhere other than, or to relocate from, the
metropolitan area where such employee's office was located prior to a
change in control of Telxon.
Director and Officer Indemnification and Insurance
Pursuant to the merger agreement, for six years after the effective time
of the merger, Symbol will cause Telxon to indemnify, defend and hold harmless
Telxon's present and former directors, officers, employees and agents, to the
fullest extent permitted under the Delaware law, for acts or omissions
occurring before the effective time of the merger and any claims relating to
the merger agreement or the merger. Symbol will cause Telxon to maintain the
current provisions of its charter and by-laws relating to indemnification for
six years after the merger. For three years after the completion of the merger,
Symbol will cause Telxon to maintain in effect the current directors' and
officers' liability insurance policy for acts or omissions occurring before the
effective time of the merger covering each such person currently covered by
Telxon's directors' and officers' liability insurance policy, provided, that
the cost of such insurance does not exceed 125% of the most recent annual
premium paid by Telxon, in which case Symbol will cause Telxon to maintain
directors' and officers' liability insurance which will provide the maximum
coverage available at an annual premium equal to 125% of the most recent annual
premium paid by Telxon.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material United States federal income
tax consequences of the merger. The summary is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), applicable Treasury regulations under
the Code and administrative rulings and judicial authority as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
This discussion assumes that holders of Telxon shares hold such shares as
capital assets. This discussion does not address all aspects of United States
federal income taxation that may be relevant to a stockholder in light of that
stockholder's particular circumstances, or to stockholders subject to special
rules, such as rules relating to:
o stockholders who are not citizens or residents of the United States,
o financial institutions,
o tax-exempt organizations,
o insurance companies,
o dealers in securities,
o stockholders who acquired Telxon shares under Telxon's equity-based
compensation plans or otherwise as compensation, or through a
tax-qualified retirement plan, and
o stockholders who hold Telxon shares as part of a hedge, straddle,
constructive sale or conversion transaction.
This discussion does not address any consequences arising under the laws
of any state, locality or foreign jurisdiction or under federal laws other than
the United States federal income tax laws.
The respective obligations of the parties to complete the merger are
conditioned on the receipt by Symbol of an opinion of Simpson Thacher &
Bartlett, and the receipt by Telxon of an opinion of Skadden Arps Slate Meagher
& Flom LLP, on the closing date of the merger, that:
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o the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and
o Symbol, Merger Sub and Telxon will each be a party to the reorganization
within the meaning of Section 368(b) of the Code.
See "The Merger Agreement--Conditions." Such opinions of counsel will be
based upon, among other things, assumptions, representations and covenants,
including those contained in certificates of officers of Symbol, Telxon and
others, which counsel will assume to be true, correct and complete. The
opinions of counsel are not binding on the Internal Revenue Service or the
courts, and there can be no assurance that the Internal Revenue Service will
not challenge the conclusions set forth in the opinions of counsel or that a
court will not sustain such a challenge. Assuming the merger is treated as a
reorganization:
o No gain or loss will be recognized for federal income tax purposes by
holders of Telxon shares who exchange their Telxon shares solely for
Symbol shares pursuant to the merger, except to the extent of cash, if
any, received by Telxon stockholders in lieu of fractional share
interests in such Symbol shares.
o The aggregate adjusted tax basis of the Symbol shares received in the
merger by a Telxon stockholder (treating fractional share interests in
Symbol shares as having been issued to such holder in the merger and then
redeemed for cash) will be the same as the aggregate adjusted tax basis
of the Telxon shares surrendered in the merger.
o The holding period of the Symbol shares that a Telxon stockholder
receives in the merger will include the period during which such holder
held the Telxon shares surrendered in the merger.
o Cash received by a Telxon stockholder in place of a fractional share
interest in the Symbol shares will result in the recognition of gain or
loss for federal income tax purposes, measured by the difference between
the amount of cash received and the portion of the tax basis of the
Telxon share allocable to this fractional share interest. This gain or
loss will be capital gain or loss and will be long-term capital gain or
loss if the Telxon stockholder's holding period in the fractional Symbol
share interest is more than one year at the effective time of the merger
and such share was held as a capital asset.
Certain non-corporate Telxon stockholders may be subject to backup
withholding at a 31% rate on cash payments received in place of a fractional
share interest in the Symbol shares. Backup withholding will not apply,
however, to a Telxon stockholder who:
o furnishes a correct taxpayer identification number and certifies that
such holder is not subject to backup withholding on the substitute Form
W-9 or successor form included in the letter of transmittal to be
delivered to Telxon stockholders,
o provides a certification of foreign status on Internal Revenue Service
Form W-8 or successor form, or
o is otherwise exempt from backup withholding.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. TELXON
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
REGULATORY MATTERS
Symbol and Telxon must comply with the notification and waiting period
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act").
The HSR Act provides for an initial 30-calendar-day waiting period following
the filing with the U.S. Federal Trade Commission and the Antitrust Division of
the U.S. Department of Justice of certain Notification and Report Forms by the
parties to the merger. The HSR Act further provides that, if, within the
initial 30 calendar-day waiting period, the FTC or the Antitrust Division
issues a formal request for additional information or documents, the waiting
period will be extended until 11:59 p.m. on the 20th day after the date of
substantial compliance by the filing parties with such request. Only one such
extension of the initial waiting period is permitted under the HSR Act;
however, the filing parties may voluntarily extend the waiting period.
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The statutory waiting period for Symbol and Telxon is expected to expire
on September 14, 2000, unless earlier terminated or extended by a request for
additional information or documentation materials.
Completion of the transactions may also require other regulatory
approvals, including approvals of foreign regulatory authorities. Under the
laws of certain foreign nations, the merger may not be completed unless certain
filings are made with these nations' antitrust regulatory authorities and these
authorities approve or clear the merger. The parties may be required to make
filings with the antitrust authorities under the applicable laws of Germany,
among other countries. Symbol and Telxon conduct operations in a number of
foreign countries, some of which have pre-merger and/or post-merger
notification systems. Should any other approval or action be required or deemed
advisable, Symbol and Telxon currently contemplate that such approval or action
would be sought. The failure to make any such filings or to obtain any such
approvals is not anticipated to have a material effect on the merger or the
combined company.
Symbol and Telxon believe that they will obtain all material required
regulatory approvals prior to the special meeting. However, it is not certain
that all such approvals will be received by such time and governmental
authorities may impose unfavorable conditions for granting the required
approvals.
At any time before or after the merger and notwithstanding expiration of
the waiting period, the FTC, the Antitrust Division and state and foreign
antitrust authorities could take action under the antitrust laws to challenge
the merger, including seeking to enjoin the completion of the merger, seeking
the divestiture by Symbol of all or part of the stock or assets of Telxon or of
other business conducted by Symbol, or seeking to subject Symbol or Telxon to
certain operating conditions. There can be no assurance that a challenge to the
merger will not be made or that, if such a challenge is made, Symbol or Telxon
will prevail. The obligations of Symbol and Telxon to complete the merger are
subject to the condition that there be no decree, order or injunction of a
court of competent jurisdiction that prohibits the completion of the merger.
APPRAISAL RIGHTS
Under Delaware Law, stockholders of Telxon will not be entitled to
exercise dissenter's or appraisal rights or to demand payment for their shares
in connection with the merger.
FEDERAL SECURITIES LAWS CONSEQUENCES
The Symbol shares to be issued to Telxon stockholders in the merger will
have been registered under the Securities Act of 1933, as amended. Upon
issuance, these shares may be traded freely and without restriction by those
stockholders not deemed to be affiliates of Telxon as that term is defined
under the Securities Act. An "affiliate" of Telxon, as defined by the rules
promulgated under the Securities Act, is a person who directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with Telxon. Any transfer of Symbol shares after the merger by
an affiliate of Telxon must be one permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 promulgated under the
Securities Act, in the case of such persons who become affiliates of Symbol) or
as otherwise permitted under the Securities Act. These restrictions are
expected to apply to the directors, executive officers and holders of 10% or
more of the Telxon shares (as well as to certain other related individuals or
entities).
Telxon has agreed to use its best efforts to cause each of its affiliates
to deliver to Symbol a written agreement that such person will not dispose of
any Symbol shares in violation of the Securities Act or the rules and
regulations promulgated under the Securities Act.
This proxy statement/prospectus does not cover resales of Symbol shares to
be received by the stockholders of Telxon in the merger, and no person is
authorized to make any use of this proxy statement/prospectus in connection
with any such resale.
RIGHTS AGREEMENT
In connection with the execution of the merger agreement, Telxon amended
its rights agreement with Computershare Investor Services, LLC, as rights
agent, to provide that:
o each of Symbol and Merger Sub is deemed to be an exempt person, as such
term is defined in the rights agreement, solely for purposes of
consummating the specific transactions contemplated by the merger
agreement;
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o neither Symbol nor Merger Sub will become an acquiring person, as such
term is defined in the rights agreement, solely as a result of the
execution, delivery or performance of the merger agreement; and
o neither the execution, delivery or performance of the merger agreement,
nor the consummation of the transactions contemplated by the merger
agreement will give rise to a distribution date or a triggering event, as
such terms are defined in the rights agreement.
The amendment to the rights agreement was unanimously approved by the Telxon
board.
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THE MERGER AGREEMENT
The following is a description of the material terms of the merger
agreement but does not purport to describe all the terms of the merger
agreement. The full text of the merger agreement is attached as Appendix A to
this proxy statement/prospectus and is incorporated herein by reference. TELXON
SHAREHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
THE MERGER
Subject to the terms and conditions of the merger agreement, Merger Sub
will merge with and into Telxon at the effective time of the merger. The
separate corporate existence of Merger Sub will cease. Telxon will be the
surviving corporation in the merger and will continue its corporate existence
as a wholly owned subsidiary of Symbol and will continue to be governed by the
laws of the State of Delaware.
EFFECTIVE TIME. Telxon, Merger Sub, and Symbol will complete the merger by
filing a certificate of merger with the Secretary of State of the State of
Delaware as soon as practicable following the satisfaction or waiver of the
conditions to the merger. The date and time the certificate of merger is filed
or another later time specified in the certificate of merger is the effective
time of the merger.
CERTIFICATE OF INCORPORATION AND BY-LAWS. The merger agreement provides
that at the effective time of the merger the restated certificate of
incorporation of Telxon will be the restated certificate of incorporation of
the surviving corporation, and the by-laws of Merger Sub will be the by-laws of
the surviving corporation.
DIRECTORS AND OFFICERS. The merger agreement provides that the directors
of Merger Sub immediately prior to the effective time of the merger will be the
initial directors of the surviving corporation, and that the officers of Telxon
immediately prior to the effective time will be the initial officers of the
surviving corporation.
CONVERSION OR CANCELLATION OF TELXON SHARES AND OPTIONS IN THE MERGER
CONVERSION OF SHARES AND OPTIONS. The merger agreement provides that, at
the effective time of the merger and without any action on the part of Merger
Sub, Telxon, or the holders of any of the securities listed below, each Telxon
share and each option to purchase Telxon shares shall be treated as follows:
o Each Telxon share issued and outstanding immediately prior to the
effective time of the merger will be converted into 0.5 Symbol share.
o Each unexercised and unexpired stock option to purchase Telxon shares
will be converted into an option to acquire the number of Symbol shares
equal to 0.5 of the number of Telxon shares subject to such option, at an
exercise price per Symbol share equal to the exercise price per share of
such option immediately prior to the effective time divided by 0.5,
rounded down to the nearest whole cent. If the foregoing calculation
results in an option being exercisable for a fraction of a Symbol share,
then the number of Symbol shares subject to such option will be rounded
to the nearest whole number of shares, with no cash being payable for
such fractional Symbol share.
o Each Telxon restricted share will be converted into 0.5 Symbol
restricted share.
o Each Telxon share held in the treasury of Telxon or owned by Symbol or
Merger Sub will be canceled and retired without any conversion or payment
made with respect to such shares.
VESTING OF OPTIONS AND RESTRICTED SHARES. After the effective time of the
merger, each new Symbol option and new Symbol restricted share referred to
above will vest upon the same terms and conditions as were applicable to the
related Telxon option and Telxon restricted share except that (1) the new
Symbol options and restricted shares will become fully vested if, after the
effective time of the merger, the employment of the holder of such new Symbol
options or restricted shares is terminated by Telxon without "cause" or is
terminated by such holder with "good reason" and (2) all options granted under
Mr. Paxton's employment agreement will vest, to the extent not already vested,
upon completion of the merger as set forth in such employment agreement. For a
definition of "cause" or "good reason," see "Interests of Telxon Officers and
Directors in the Merger" on page 26 of this document.
FRACTIONAL SHARES. No fractional Symbol shares will be issued in the
merger. In place of any fractional Symbol shares, each holder of Telxon shares
who would otherwise have been entitled to a fraction of a Symbol share will be
paid an amount in cash, without interest, equal to such holder's fractional
interest in a Symbol share multiplied by the price of a Symbol share on the
date of the closing of the merger.
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EXCHANGE OF CERTIFICATES IN THE MERGER. Symbol will designate a bank or
trust company to act as exchange agent for Telxon stockholders to receive the
Symbol shares and any cash payable in place of any fractional interests in
Symbol shares to which Telxon stockholders become entitled as provided in the
merger agreement and will deposit Symbol shares and cash sufficient to make all
required payments under the merger agreement with the exchange agent. Promptly
after the effective time, the exchange agent will mail to each holder of record
of certificates that immediately prior to the effective time represented
outstanding Telxon shares a letter of transmittal and instructions for use in
effecting the surrender of certificates. The letter of transmittal and
instructions are for use by each holder of record in surrendering the
certificates in exchange for certificates representing Symbol shares and cash
for any fractional shares thereof to which such holder would otherwise be
entitled. WE REQUEST THAT YOU NOT SURRENDER YOUR CERTIFICATES FOR EXCHANGE
UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS. No dividends or
other distributions declared or made after the effective time with respect to
Symbol shares will be paid to the holder of record of any unsurrendered
certificate. However, the holder of record will be paid, without interest, upon
surrender of such certificate, any dividends or distributions with a record
date after the effective time but a payment between the effective time and the
time of surrender. No transfers of Telxon shares will be made after the
effective time.
LISTING OF SYMBOL COMMON STOCK
Symbol has agreed to use its reasonable best efforts to cause the Symbol
shares to be issued in the merger to be approved for listing on the NYSE,
subject to official notice of issuance. This approval is a condition to the
obligations of the parties to complete the merger.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES BY TELXON. The merger agreement includes
customary representations and warranties by Telxon to Symbol, including
representations and warranties as to:
o corporate organization, standing and power of Telxon and its
subsidiaries;
o the certificate of incorporation, by-laws and minutes of Telxon and its
material subsidiaries;
o capitalization of Telxon and its subsidiaries;
o power and authority of Telxon to execute and deliver the merger
agreement and to perform its obligations under, and to complete the
transactions contemplated by, the merger agreement, including approval of
the Telxon board, subject to stockholder approval;
o no conflict with organization documents, laws and orders and required
consents and authorizations of governmental entities and third parties;
o compliance with applicable organizational documents, laws and agreements
and possession and validity of necessary government permits;
o Telxon's financial statements and reports filed with the SEC and
compliance with SEC rules and regulations;
o conduct by Telxon and its subsidiaries of business in the ordinary
course and consistent with past practice since March 31, 2000 and the
absence of any event or development since that date which would
reasonably be expected to have a material adverse effect on Telxon or
prevent or materially impair Telxon's performance under the merger
agreement;
o litigation;
o Telxon's employee benefit plans;
o tax matters;
o environmental matters;
o material contracts;
o intellectual property matters;
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o affiliate transactions;
o opinion delivered by Telxon's financial advisor;
o accuracy of information provided by Telxon in this document;
o brokers and finders employed by Telxon;
o required vote of Telxon's stockholders;
o qualification of the merger as a tax-free reorganization;
o amendment of Telxon's rights plan so that the merger will not trigger
the rights under the rights plan and that the rights plan will terminate
immediately prior to the effective time; and
o Telxon's ownership of shares of Cisco.
REPRESENTATIONS AND WARRANTIES BY SYMBOL AND MERGER SUB. The merger
agreement also includes customary representations and warranties by Symbol and
Merger Sub as to:
o corporate organization, standing and power of Symbol and Merger Sub;
o certificate of incorporation and by-laws of Symbol and Merger Sub;
o capitalization of Symbol and Merger Sub;
o power and authority of Symbol and Merger Sub to execute and deliver the
merger agreement and to perform their obligations under, and to complete
the transactions contemplated by, the merger agreement;
o no conflict with organization documents, laws and orders and required
consents and authorizations of governmental entities and third parties;
o Symbol's financial statements and reports filed with the SEC and
compliance with SEC rules and regulations;
o conduct by Symbol and its subsidiaries of business in the ordinary
course and consistent with past practice since December 31, 1999 and the
absence since that date of any event or development which would
reasonably be expected to have a material adverse effect on Symbol or
materially impair Symbol's performance under the merger agreement;
o litigation;
o qualification of the merger as a tax-free reorganization;
o brokers and finders employed by Symbol;
o accuracy of information provided by Symbol in this document; and
o absence of knowledge as to material breaches of Telxon's
representations.
CONDUCT OF BUSINESS PENDING THE MERGER
CONDUCT OF BUSINESS OF TELXON PENDING THE MERGER. Telxon has agreed to
conduct its business in the ordinary course consistent with past practice and
to use reasonable best efforts to preserve substantially intact its business
organization, and to keep available the services of its current officers,
consultants and key employees and to preserve its current relationships with
customers, suppliers, licensors, licensees, advertisers, distributors and
others having significant business relations with Telxon or its subsidiaries.
Telxon has agreed that, with certain exceptions, it will not, and will not
permit any of its subsidiaries to do any of the following without the prior
written consent of Symbol:
Amendments to organizational documents
o amend its certificate of incorporation or by-laws or equivalent
organizational documents;
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Sale of Securities or Assets
o issue, sell, pledge, dispose of or encumber any shares of capital stock,
or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock;
o except for sales of goods and products in the ordinary course of
business consistent with past practice, sell, pledge, dispose of or
otherwise encumber any property or assets with a fair market value or
book value in excess of $1 million in the aggregate;
Dividends, stock splits and redemptions
o declare, set aside, make or pay any dividend or other distribution;
o reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire any capital stock;
Acquisitions; indebtedness; capital expenditures; material transactions and
contracts
o acquire any corporation, partnership or other business organization or
division or any assets with a fair market value or book value of $1
million in the aggregate, except for the purchase of raw materials,
inventory and supplies in the ordinary course of business and capital
expenditures permitted under the merger agreement;
o incur any indebtedness for borrowed money (other than borrowings of up
to $25 million in the aggregate in the ordinary course of business and up
to $10 million to pay expenses relating to the merger) or assume,
guarantee or endorse the obligations of any person, or make any loans,
advances or capital contributions to, or investments in, any other
person;
o enter into any transaction, contract, commitment, arrangement or
understanding with any Telxon affiliate;
o enter into any commitments or transactions involving consideration,
transfer of assets or payments in excess of $5 million or otherwise
material to Telxon and its subsidiaries taken as a whole;
o enter into any new material line of business;
o authorize any single capital expenditure in excess of $2 million or
capital expenditures which are, in the aggregate, in excess of $10
million;
o enter into, amend in any material respect, renew or terminate any
contract or agreement involving consideration or payments in excess of $1
million, any joint venture arrangements or any other contract, agreement,
commitment or arrangement with respect to any of the matters set forth in
this section;
Compensation
o increase or otherwise amend the compensation or fringe benefits of any
of its directors, officers or employees, except increases in salary or
wages of employees who are not officers in the ordinary course of
business consistent with past practice not to exceed $1.5 million in the
aggregate;
o grant any retention, severance or termination pay not currently required
to be paid under existing severance plans or enter into, or amend, renew
or terminate, any employment, consulting or severance agreement or
arrangement with any present or former director, officer or other
employee;
o establish, adopt, enter into or amend, renew or terminate any collective
bargaining agreement or employee benefit arrangement;
o amend the terms of any outstanding options to purchase any equity of
Telxon or any of its subsidiaries;
Accounting and tax
o except as may be required as a result of a change in law or in generally
accepted accounting principles, change any accounting practices or
principles;
o revalue any of its assets in any material respect, including, without
limitation, writing down the value of inventory or notes or accounts
receivable;
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o take any action that would prevent the merger from qualifying as a
tax-free reorganization;
o except as may be required by law, make or change any tax election, file
any amended tax return, settle or compromise any tax liability, change
any annual tax accounting period, change any method of tax accounting,
enter into any closing agreement relating to any tax, surrender any right
to claim a tax refund, or consent to any extension or waiver of the
limitations period applicable to any tax claim or assessment;
Claims
o settle or compromise any pending or threatened suit, action or claim
which is in an aggregate amount in excess of $500,000 (provided that such
settlement or compromise does not involve any material non-monetary
obligations) or which relates to the transactions contemplated by the
merger agreement;
o pay, discharge or satisfy any claims, liabilities or obligations in
excess of $500,000, other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the financial statements of
Telxon or incurred in the ordinary course of business and consistent with
past practice;
Insurance
o fail to use reasonable best efforts to maintain in full force and effect
existing insurance policies;
Noncompete and change of control provisions
o enter into or amend any agreement or contract so as to include or amend
any noncompete or change of control provision;
Conditions
o take, authorize or offer to take, or agree to take in writing or
otherwise, any action which would reasonably be expected to result in any
of the conditions to the merger not being satisfied.
CONDUCT OF BUSINESS OF SYMBOL PENDING THE MERGER. Symbol has agreed to use
reasonable best efforts to preserve intact its current business organization,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with it to the end that its
goodwill and ongoing businesses will be unimpaired, in each case to the extent
commercially appropriate. Symbol has also agreed that, subject to certain
exceptions, it will not do any of the following without the prior consent of
Telxon:
Amendments to organizational documents
o amend its certificate of incorporation or by-laws in a manner that would
be materially adverse to the holders of Symbol common stock;
Issuance of Securities
o other than in connection with acquisitions having a value of not more
than $750,000,000 in the aggregate, issue, sell, pledge, dispose of or
encumber any shares of capital stock or any options, warrants,
convertible securities or other rights of any kind to acquire any shares
of capital stock, if any such action would reasonably be expected to
prevent or materially delay the merger;
Acquisitions
o acquire any corporation, partnership or other business organization or
division, if any such action would reasonably be expected to delay
materially the consummation of the merger;
Conditions
o take, or offer or propose to take, or agree to take in writing or
otherwise, any action which would reasonably be likely to result in any
of the conditions to the merger not being satisfied.
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NON-SOLICITATION COVENANT
The merger agreement provides that neither Telxon nor any of its
subsidiaries, including their employees, officers, directors, agents,
investment bankers, attorneys, accountants and other representatives, will,
directly or indirectly:
o initiate, solicit, encourage or otherwise facilitate, including by way
of furnishing information, any Acquisition Proposal;
o have any discussions with, or provide any confidential information or
data to, any person in connection with any Acquisition Proposal; or
o engage in any negotiations concerning an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make, or accept an
Acquisition Proposal.
However, Telxon may comply with Rule 14e-2(a) promulgated under the
Securities Exchange Act of 1934. In addition, Telxon may engage in discussions
or negotiations with, or provide information to, any person in response to an
unsolicited bona fide written Acquisition Proposal by that person, to the
extent that:
o the Telxon stockholders' meeting relating to the merger has not yet
taken place;
o the Telxon board by majority vote concludes, in good faith, after
consultation with its financial and legal advisors, that, as a result of
such Acquisition Proposal, such action is reasonably necessary for the
board to act in a manner consistent with its fiduciary duties under
applicable law; and
o prior to providing any information or data to that person, the Telxon
board receives an executed confidentiality agreement from that person on
terms no less favorable to Telxon than those in place with Symbol.
The Telxon board will promptly notify Symbol of any such proposal, including
the name of such person and the material terms and conditions of any proposals
or offers. Telxon will keep Symbol informed, on a current basis, of the status
and terms of any such proposals or offers and the status of any such
discussions or negotiations.
"Acquisition Proposal" means any offer or proposal concerning:
o any merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Telxon or any of its subsidiaries; or
o any purchase or sale of all or any significant portion of the assets or
15% or more of the voting securities of Telxon or any of its
subsidiaries.
ADDITIONAL COVENANTS AND AGREEMENTS
STOCKHOLDERS' MEETING. In the merger agreement, Telxon agreed to promptly
call the special meeting relating to the required stockholder approval of the
merger and to hold such meeting as soon as practicable after this document is
declared effective by the SEC. Telxon's board has agreed to recommend that its
stockholders approve the merger and to take all reasonable and lawful action to
solicit and obtain such approval. The Telxon board may withdraw, amend or
modify in a manner adverse to Symbol its recommendation of the merger only if:
o Telxon has complied in all material respects with the non-solicitation
covenant;
o an unsolicited Superior Proposal has been made by any person and is
pending; and
o Telxon has notified Symbol of such Superior Proposal at least five
business days in advance of its intention to effect such withdrawal,
amendment or modification.
"Superior Proposal" means a bona fide written Acquisition Proposal which
the Telxon board concludes in good faith, after consultation with its financial
and legal advisors, taking into account all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal, including any
break-up fees, expense reimbursement provisions and conditions to consummation:
o would, if consummated, be more favorable to Telxon's stockholders, from
a financial point of view, than the transactions contemplated by the
merger agreement; and
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o is reasonably capable of being completed.
For purposes of this definition of "Superior Proposal," the reference to "15%
or more" in the definition of "Acquisition Proposal" is deemed to refer to "a
majority" and "Acquisition Proposal" shall only be deemed to refer to a
transaction involving voting securities of Telxon, and the reference to
"assets," including the shares of any Telxon subsidiary, is deemed to refer to
the assets of Telxon and its subsidiaries, taken as a whole, and not the assets
of any of the subsidiaries alone.
ACCESS. Symbol and Telxon have agreed to afford the other party reasonable
access at all reasonable times to its officers, employees, auditors, legal
counsel, properties, offices, plants and other facilities and to all books and
records, and to furnish the other party with all financial, operating and other
data and information as the other party may from time to time reasonably
request. In addition, Symbol may initiate communications with any officer or
key employee of Telxon for the purpose of addressing the prospective retention
of such officer or employee following the merger, provided that (1) Symbol
believes, in good faith, that there is a compelling, legitimate business need
to initiate such communication prior to the merger, (2) such communications is
conducted in coordination with Telxon's chief executive officer and (3) Symbol
will not solicit to hire such officer or key employee through such
communications.
EMPLOYEE BENEFITS MATTERS. As of the effective time of the merger, Telxon
and Symbol will be responsible for all Telxon plans and benefits accrued
thereunder; provided, that such plans may be amended or terminated in
accordance with their terms at any time after the merger. Nothing in the merger
agreement will prevent the termination of any employee of Telxon. After the
merger, Telxon's employees will be entitled to participate in the employee
benefit plans of Symbol on substantially the same terms and conditions as
Symbol's employees.
REASONABLE BEST EFFORTS. Telxon and Symbol will use reasonable best
efforts to obtain government approvals for the merger. Symbol will not be
required to provide any undertakings or agree to any condition that could
reasonably be expected to (1) result in a substantial detriment to Symbol's or
Telxon's business, financial condition, results of operations or prospects or
(2) materially diminish the strategic or financial benefits of the merger.
D&O INDEMNIFICATION AND INSURANCE. For a period of six years, Symbol
agrees to cause Telxon to continue to indemnify Telxon's directors and officers
for actions and omissions prior to the merger and to cause Telxon to keep the
current indemnification provisions in Telxon's charter and by-laws in effect.
For a period of three years, Symbol agrees to cause Telxon to maintain in
effect Telxon's directors' and officers' insurance policies with respect to
actions and omissions prior to the merger, provided, that the cost of such
insurance does not exceed 125% of the most recent annual premium paid by
Telxon. In the event such premium exceeds such amount, Symbol will cause Telxon
to maintain the maximum amount of such insurance coverage available at an
annual premium equal to 125% of the most recent annual premium paid by Telxon.
CISCO SHARES. Without the prior written consent of Symbol, Telxon will not
sell or otherwise transfer, or enter into any new hedging transaction in
respect of, any Cisco shares acquired in the Aironet merger.
OPERATING EXPENSES. Telxon has agreed to limit its operating expenses
prior to the merger to budgeted amounts.
CONDITIONS
The merger agreement generally provides that the obligations of the
parties to complete the transactions contemplated in the merger agreement are
subject to customary conditions, including the following:
STOCKHOLDER APPROVAL. Adoption of the merger agreement by the affirmative
vote of a majority of the holders of Telxon common stock.
NO ORDER. No statute, rule, regulation, executive order, decree, ruling,
injunction or other order, whether temporary, preliminary or permanent, shall
have been enacted, entered, promulgated or enforced by any court or
governmental authority which prohibits, restrains, enjoins or restricts the
consummation of the merger, provided, however, that the parties will use their
reasonable best efforts to cause any such decree, ruling, injunction or other
order to be vacated or lifted.
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HSR ACT. Expiration or termination of any waiting period applicable to the
merger under the HSR Act and any applicable foreign antitrust or competition
laws.
FORM S-4. This document having been declared effective by the SEC under
the Securities Act and not being the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the registration of Symbol common stock to be exchanged for
Telxon common stock to be issued in the merger having been complied with.
NYSE. Approval of Symbol common stock to be issued in the merger for
listing on the NYSE, subject only to official notice of issuance.
TAX OPINIONS. The opinion from the legal advisors to Symbol and Telxon,
respectively, to the effect that:
o the merger will be treated for federal income tax purposes as a tax-free
reorganization under the Internal Revenue Code; and
o Symbol, Merger Sub, and Telxon will each be a party to a tax-free
reorganization under the Internal Revenue Code.
AGREEMENTS AND COVENANTS. Each party having performed in all material
respects their agreements and covenants contained in the merger agreement
required to be performed on or before the closing of the merger.
REPRESENTATIONS AND WARRANTIES OF SYMBOL. The representations and
warranties of Symbol and Merger Sub contained in the merger agreement which are
qualified as to materiality being true in all respects and those
representations and warranties which are not qualified as to materiality being
true in all material respects.
REPRESENTATIONS AND WARRANTIES OF TELXON.
o the representations and warranties of Telxon contained in the merger
agreement which are qualified as to materiality being true in all
respects and those representations and warranties which are not qualified
as to materiality being true in all material respects, except to the
extent that the aggregate effect of all inaccuracies in certain
representations and warranties would not reasonably be expected to result
in costs, liabilities, payments, damages or expenses to Telxon or Symbol
in excess of $25 million; and
o the aggregate effect of all inaccuracies in the representations and
warranties of Telxon contained in the merger agreement, without giving
effect to any qualifications as to materiality, would not reasonably be
expected to have a "material adverse effect."
Material Adverse Change. At any time on or after the date of the merger
agreement, there having occurred no material adverse change in the business,
assets, including intangible assets, liabilities including contingent
liabilities, financial condition or results of operations of either party and
its subsidiaries taken as a whole, except for changes resulting from:
o the United States economy in general and not relating specifically to
the business of that party and its subsidiaries taken as a whole;
o revenue declines attributable to long-standing customers of that party
becoming customers of the other party after the date of the merger
agreement; or
o with respect to Telxon, the exercise by third parties of their rights
under contracts with Telxon.
LITIGATION AND OTHER PROCEEDINGS. No suit, action or proceeding is pending
by any governmental authority or any other third party, other than Telxon
shareholders in their capacity as shareholders:
o challenging or seeking to enjoin or prohibit the merger or seeking to
obtain from Symbol or any of its subsidiaries any material damages in
connection with the transactions contemplated in the merger agreement;
o seeking to enjoin or prohibit the ownership or operation by Telxon,
Symbol or any of their respective subsidiaries of any material portion of
the business or assets of Telxon, Symbol or any of their respective
subsidiaries, to dispose of or hold separate any significant portion of
the business or assets of Telxon, Symbol or any of their respective
subsidiaries, as a result of the transactions contemplated by the merger
agreement; or
40
<PAGE>
o seeking to enjoin or prohibit Symbol or any of its subsidiaries from
controlling in any material respect the business or operations of Telxon
or its subsidiaries.
Notwithstanding the foregoing, it shall not be a condition to closing if there
shall be pending any suit, action or proceeding by any third party, other than
a governmental authority, seeking any of the relief specified above, if the
suit, action or proceeding shall allege violations of federal, state or foreign
antitrust or competition laws, unless Symbol's board concludes, taking into
account the advice of outside counsel, that such third party has a reasonable
probability of obtaining such relief.
TERMINATION
The merger agreement may be terminated and the merger abandoned at any
time, whether before or after approval of the merger by the stockholders of
Telxon:
o by mutual written consent of Symbol and Telxon.
o by either Symbol or Telxon, if the merger has not been completed on or
before March 31, 2001 unless the failure to complete the merger by such
date shall be due to the failure of the party seeking to terminate the
merger agreement to perform its obligations under the merger agreement.
o by Symbol or Telxon, if the merger agreement fails to receive the
requisite vote for approval by the Telxon stockholders at the special
meeting or any adjournment of that meeting.
o by Symbol or Telxon if any court or other governmental body of competent
jurisdiction shall have issued a final order, decree or ruling or taken
any other final action restraining, enjoining or otherwise prohibiting
the merger and such order, decree, ruling or other action is or shall
have become final and nonappealable, provided that the terminating party
shall have used reasonable best efforts to resist or resolve any such
action.
o by Symbol or Telxon if there has been a breach of any representation,
warranty, covenant or agreement on the part of the other party which
would reasonably be expected to result in a closing condition not being
satisfied and which has not been cured within 30 days following written
notice of the breach.
o by Symbol, if:
-- the Telxon board has failed to recommend or withdrawn, modified or
amended in any respect adverse to Symbol or Merger Sub its approval or
recommendation of the merger agreement, the merger or any of the other
transactions contemplated by the merger agreement or resolved to do
so;
-- the Telxon board has approved or recommended a Superior Proposal
from a person (other than Symbol) or resolved to do so; or
-- Telxon breaches in any material respect any of its agreements set
forth in the non-solicitation covenant of the merger agreement.
o by Telxon, prior to adoption of the merger agreement by Telxon
stockholders, if the Telxon board has determined by majority vote that an
Acquisition Proposal constitutes a Superior Proposal and has determined
to approve such Superior Proposal, provided, however, that:
-- Telxon has given Symbol five business days' notice of its intention to
terminate the merger agreement, specifying all material terms and
conditions of, and identifying the party making, the Superior
Proposal;
-- in the five business day period, Telxon gives Symbol the opportunity
to modify the terms and conditions of the merger agreement as would
enable Telxon and Symbol to proceed with the transactions
contemplated by the merger agreement;
-- the Telxon board has determined in good faith, after giving effect to
all concessions and modifications which may be offered by Symbol, on
the basis of the advice of its financial advisors and outside legal
counsel, that such proposal is a Superior Proposal;
-- Telxon has complied in all material respects with the non-solicitation
covenant of the merger agreement;
41
<PAGE>
-- the Superior Proposal is pending at the time of such termination; and
-- Telxon pays Symbol the required termination fee.
o by Symbol, if any person or group has acquired at least:
-- 20% of the assets of Telxon and its subsidiaries, taken as a whole;
-- 15% of the outstanding shares of Telxon common stock in a transaction
or series of transactions approved by the Telxon board; or
-- 25% of the outstanding shares of Telxon common stock.
EFFECT OF TERMINATION. The merger agreement provides that, in the event of
termination of the merger by either Telxon or Symbol, the merger agreement will
become void, and there will be no liability under the merger agreement on the
part of Symbol or Telxon except to the extent such termination results from a
willful breach, other than with respect to any termination fee which may be
payable and the agreement to share fees and expenses associated with the filing
of this document with the SEC and the printing and mailing of this document to
stockholders, and the confidentiality agreement between Telxon and Symbol will
remain in effect.
TERMINATION FEE PAYABLE BY TELXON. In the merger agreement, Symbol and
Telxon agreed that Telxon will pay to Symbol the sum of $25 million if any of
the following termination events occur:
o Symbol terminates the merger agreement because:
-- the Telxon board has failed to recommend or withdrawn, modified or
amended in any respect adverse to Symbol or Merger Sub its approval or
recommendation of the merger agreement, the merger or any of the other
transactions contemplated by the merger agreement or resolved to do
so;
-- the Telxon board has approved or recommended a Superior Proposal or
resolved to do so; or
-- Telxon has breached in any material respect the non-solicitation
covenant.
o Telxon terminates the merger agreement to approve a Superior Proposal in
accordance with the merger agreement.
o Symbol terminates the merger agreement because any person or group has
acquired at least:
-- 20% of the assets of Telxon and its subsidiaries, taken as a whole;
-- 15% of the outstanding shares of Telxon common stock in a transaction
or series of transactions approved by the Telxon board; or
-- 25% of the outstanding shares of Telxon common stock.
Telxon will also pay to Symbol the sum of $25 million if the following
events occur:
o the merger agreement is terminated
-- due to the failure to receive the requisite vote of Telxon's
stockholders and either
(1) an Acquisition Proposal shall be pending on the date of the
special meeting or shall have been publicly announced in the 20
business day period preceding the special meeting or
(2) average closing price of Symbol shares for the 10 trading day
period immediately preceding the special meeting exceeds $44 per
share; or
-- due to a breach of Telxon's representations, warranties, agreements or
covenants which would reasonably be expected to result in a closing
condition not being satisfied; and
o within twelve months of the termination of the merger agreement, Telxon
enters into an agreement with respect to an alternative acquisition
transaction or an alternative acquisition transaction is consummated.
42
<PAGE>
TERMINATION FEE PAYABLE BY SYMBOL. Symbol will pay to Telxon the sum of
$25 million if the following events occur:
o the merger is not completed by March 31, 2001 due to the failure to
satisfy the conditions relating to (1) the HSR Act, (2) this document
being declared effective by the SEC, (3) the NYSE listing of the Symbol
shares to be issued in the merger or (4) the absence of breaches of
Symbol's representations, warranties, agreements and covenants; or
o the merger agreement is terminated due to a breach of Symbol's
representations, warranties, agreements or covenants which would
reasonably be expected to result in a closing condition not being
satisfied.
AMENDMENT; WAIVER
The merger agreement may be amended by action taken by or on behalf of the
parties' respective Boards at any time before or after any requisite approval
by Telxon stockholders of the merger. After approval of the merger by the
Telxon stockholders, no amendment may be made without further stockholder
approval which, by law, requires further approval by such stockholders.
The merger agreement provides that any party to the merger agreement may:
(1) extend the time for the performance of any of the obligations or other acts
of the other parties to the merger agreement, (2) waive any inaccuracies in the
representations and warranties contained in the merger agreement or in any
document delivered pursuant to the merger agreement, and (3) waive compliance
with any of the agreements and conditions contained in the merger agreement,
subject to the requirements of applicable law. The failure of any party to the
merger agreement to assert any of its rights under the merger agreement or
otherwise will not constitute a waiver of such rights.
43
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Information of Symbol
and Telxon presented below is derived from the historical consolidated
financial statements of each of Symbol and Telxon. The Unaudited Pro Forma
Condensed Combined Financial Information is prepared using the purchase method
of accounting, with Symbol treated as the acquiror and as if the transactions
had been completed as of January 1, 1999 for statement of operations purposes
and on June 30, 2000 for balance sheet purposes.
For a summary of the proposed business combination, see "The Merger"
beginning on page 33 of this proxy statement/prospectus.
The Unaudited Pro Forma Condensed Combined Financial Information is based
upon the historical financial statements of Symbol and Telxon adjusted to give
effect to the business combination. The pro forma assumptions and adjustments
are described in the accompanying notes presented on the following pages. The
assumptions and related pro forma adjustments have been developed from (1) the
audited consolidated financial statements of Symbol contained in Symbol's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and from
the unaudited financial statements of Symbol contained in Symbol's Quarterly
Report on Form 10-Q for the period ended June 30, 2000, which are incorporated
by reference in this proxy statement/prospectus, and (2) the audited financial
statements of Telxon contained in Telxon's Annual Report on Form 10-K for the
fiscal year ended March 31, 2000 and from the unaudited financial statements of
Telxon contained in Telxon's Quarterly Report on From 10-Q for the period ended
June 30, 2000, which are incorporated by reference in this proxy
statement/prospectus. In addition, the audited financial statements contained
in Telxon's Annual Report on Form 10-K for the fiscal year ended March 31, 1999
and the unaudited financial statements of Telxon contained in Telxon's
Quarterly Reports on Form 10-Q for the periods ended June 30, 1999, September
30, 1999, and December 31, 1999, have been used to conform the financial
reporting periods of Telxon to those of Symbol.
For the purpose of the Unaudited Pro Forma Condensed Combined Financial
Information presented below, the purchase price has been calculated based upon
the share price of $43.11 for each Symbol common share. This price represents
the weighted average closing market price of Symbol's stock as of July 26,
2000, the date the proposed merger was announced, and for the two trading days
prior to and five trading days subsequent to July 26, 2000.
The unaudited pro forma results of operations reflect adjustments, which
are based upon preliminary estimates, to reflect the allocation of purchase
consideration to the acquired assets and liabilities of Telxon. The final
allocation of the purchase consideration will be determined after the
completion of the merger and will be based on appraisals and a comprehensive
final evaluation of the fair value of Telxon's tangible assets acquired,
liabilities assumed, identifiable intangible assets and goodwill at the time of
the merger. The final determination of tangible and intangible assets may
result in depreciation and amortization expense that is different than the
preliminary estimates of these amounts. To the extent that a portion of the
purchase price is allocated to in-process research and development as is
anticipated, a charge will be recognized for the period in which the merger
occurs. That charge may be material to Symbol's results of operations.
The Unaudited Pro Forma Condensed Combined Financial Information is
provided for illustrative purposes only and does not purport to represent what
the actual consolidated results of operations or the consolidated financial
position of Symbol would have been had the merger occurred on the date assumed,
nor is it necessarily indicative of future consolidated results of operations
or financial position.
The Unaudited Pro Forma Condensed Combined Financial Information does not
include the realization of cost savings from operating efficiencies, synergies
or other restructurings resulting from the merger.
The Unaudited Pro Forma Condensed Combined Financial Information should be
read in conjunction with the separate historical consolidated financial
statements and accompanying notes of Symbol and Telxon that are incorporated by
reference in this proxy statement/prospectus.
44
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS OF
SYMBOL
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMBINED
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
SYMBOL(a) TELXON(b) ADJUSTMENTS RESULTS
-------------- -------------- -------------------- ------------------
<S> <C> <C> <C> <C>
NET REVENUE .................................. $1,139,290 $ 355,036 $ (9,716)(c) $1,484,610
COST OF REVENUE .............................. 636,084 285,441 (6,881)(c) 914,644
AMORTIZATION OF SOFTWARE DEVELOPMENT
COSTS ....................................... 18,472 5,405 -- 23,877
---------- ---------- ----------- ----------
GROSS PROFIT ................................. 484,734 64,190 (2,835)(d) 546,089
OPERATING EXPENSES:
Engineering ................................. 81,944 32,429 -- 114,373
Selling, general and administrative ......... 220,753 146,208 -- 366,961
Amortization of excess of cost over fair
value of net assets acquired .............. 5,092 943 9,523 (e) 15,558
---------- ---------- ----------- ----------
307,789 179,580 9,523 (d) 496,892
EARNINGS (LOSS) FROM OPERATIONS .............. 176,945 (115,390) (12,358) 49,197
OTHER (EXPENSE)/INCOME:
Interest expense ............................ (5,821) (12,673) -- (18,494)
Gain on sale of subsidiary stock ............ -- 32,167 -- 32,167
Other non-operating expense ................. -- (1,076) -- (1,076)
---------- ---------- ----------- ----------
(5,821) 18,418 -- 12,597
EARNINGS (LOSS) BEFORE INCOME TAXES .......... 171,124 (96,972) (12,358) 61,794
PROVISION FOR INCOME TAXES ................... 54,760 4,839 (38,589) (f) 21,010
---------- ---------- ----------- ----------
NET EARNINGS (LOSS) .......................... $ 116,364 $ (101,811) $ 26,231 $ 40,784
========== ========== =========== ==========
EARNINGS PER SHARE:
Basic ....................................... $0.88 $0.29
Diluted ..................................... $0.82 $0.27
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic ....................................... 132,488 142,488 (g)
Diluted ..................................... 141,572 151,872 (g)
</TABLE>
See accompanying notes
45
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS OF
SYMBOL
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMBINED
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
SYMBOL(a) TELXON(b) ADJUSTMENTS RESULTS
------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
NET REVENUE .................................... $661,409 $170,995 $ (7,459)(c) $824,945
COST OF REVENUE ................................ 375,928 140,373 (4,459)(c) 511,842
AMORTIZATION OF SOFTWARE DEVELOPMENT
COSTS ......................................... 11,328 2,414 -- 13,742
-------- -------- -------- --------
GROSS PROFIT ................................... 274,153 28,208 (3,000)(d) 299,361
OPERATING EXPENSES:
Engineering ................................... 45,070 13,674 -- 58,744
Selling, general and administrative ........... 122,819 80,748 -- 203,567
Amortization of excess of cost over fair
value of net assets acquired ................ 2,799 1,923 4,762 (e) 9,484
-------- -------- -------- --------
170,688 96,345 4,762 (d) 271,795
EARNINGS (LOSS) FROM OPERATIONS ................ 103,465 (68,137) (7,762) 27,566
OTHER (EXPENSE)/INCOME:
Interest expense .............................. (3,593) (4,794) -- (8,387)
Gain on sale of marketable securities ......... -- 396,161 -- 396,161
Other non-operating income .................... -- 149 -- 149
-------- -------- -------- --------
(3,593) 391,516 -- 387,923
EARNINGS BEFORE INCOME TAXES ................... 99,872 323,379 (7,762) 415,489
PROVISION FOR INCOME TAXES ..................... 31,959 64,946 44,361 (f) 141,266
-------- -------- -------- --------
NET EARNINGS BEFORE EXTRAORDINARY ITEM ......... $ 67,913 $258,433 $(52,123) $274,223
======== ======== ======== ========
EARNINGS PER SHARE BEFORE EXTRAORDINARY
ITEM:
Basic ......................................... $0.50 $1.88
Diluted ....................................... $0.46 $1.75
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic ......................................... 135,857 145,857(g)
Diluted ....................................... 146,591 156,891(g)
</TABLE>
See accompanying notes
46
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
OF SYMBOL
AS OF JUNE 30, 2000
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
SYMBOL TELXON(b) ADJUSTMENTS PRO FORMA
------------ ------------ --------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash, including temporary investments ...... $ 39,553 $ 5,620 $ -- $ 45,173
Accounts Receivable, less allowance for
doubtful accounts ........................ 298,164 76,100 (4,401)(c) 369,863
Inventories ................................ 284,741 91,820 -- 376,561
Prepaid and refundable income taxes ........ 18,078 -- -- 18,078
Deferred income taxes ...................... 50,953 25,642 -- 76,595
Other current assets ....................... 72,666 10,808 -- 83,474
---------- -------- -------- ----------
TOTAL CURRENT ASSETS ..................... 764,155 209,990 (4,401) 969,744
PROPERTY, PLANT AND EQUIPMENT, NET .......... 225,168 59,205 -- 284,373
INTANGIBLE AND OTHER ASSETS, NET ............ 263,998 29,070 142,844 (h,i) 435,912
INVESTMENT IN MARKETABLE SECURITIES ......... 7,680 264,807 -- 272,487
---------- -------- -------- ----------
$1,261,001 $563,072 $138,443 $1,962,516
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable and accrued expenses....... $ 167,309 $ 77,439 $ 15,599 (c,i) $ 260,347
Current portion of long-term debt .......... 18,189 -- -- 18,189
Income taxes payable ....................... -- 4,498 -- 4,498
Deferred revenue and other liabilities ..... 22,063 11,489 -- 33,552
---------- -------- -------- ----------
TOTAL CURRENT LIABILITIES ................ 207,561 93,426 15,599 316,586
LONG-TERM DEBT, LESS CURRENT MATURITIES...... 150,855 -- -- 150,855
CONVERTIBLE SUBORDINATED NOTES AND
DEBENTURES ................................. -- 106,913 -- 106,913
OTHER LIABILITIES AND DEFERRED REVENUES ..... 72,336 89,900 -- 162,236
---------- -------- -------- ----------
TOTAL LIABILITIES .......................... 430,752 290,239 15,599 736,590
STOCKHOLDERS' EQUITY ........................ 830,249 272,833 122,844 1,225,926
---------- -------- -------- ----------
$1,261,001 $563,072 $138,443 $1,962,516
========== ======== ======== ==========
</TABLE>
See accompanying notes
47
<PAGE>
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(a) Adjusted to reflect 3 for 2 stock split effective April 5, 2000.
(b) Certain reclassifications were made to conform the presentation of
Telxon to that of Symbol.
(c) Prior to the merger, Symbol acted as a supplier of certain products
and as a licensor to Telxon. At that time, those sales and licenses
were treated as arm's-length transactions between unrelated parties.
As a combined entity, these transactions are classified as
intercompany transactions and must be eliminated when preparing the
pro forma combined financial statements. Therefore, sales of those
items remaining in inventory and not sold through to a third party
as well as license revenue have been eliminated. For balance sheet
purposes, the related account receivable and account payable have
also been eliminated as of the balance sheet date.
(d) Does not include the realization of cost savings from operating
efficiencies, synergies or other restructurings resulting from the
merger.
(e) Represents the applicable period of amortization expense calculated
using an average 15 year amortization period. This average 15 year
period is Symbol's preliminary best estimate of the overall
amortization period until such time as the analysis and independent
appraisal which is sufficient to allocate the purchase price and
amortization period to the applicable intangibles has been
contemplated. Annual amortization expense would be reduced by
approximately $1.0 million for every $15.0 million of purchase price
allocated to in-process purchased research and development.
(f) Represents the estimated tax effect of the pro forma adjustments at
an estimated effective tax rate of 34%.
(g) Represents Symbol's weighted average number of common shares
outstanding for the period and 10.0 million shares to be issued as a
result of the merger (using an exchange ratio of 0.5), based on an
estimated 17.5 million Telxon common shares outstanding and assuming
the exercise of 2.5 million Telxon stock options which are vested or
will become vested prior to or as a result of the merger.
The number of additional Symbol common shares assumed to be issued
(0.3 million) in connection with the merger, as a result of the
exchange of the remaining Telxon stock options for Symbol stock
options, was calculated based on the treasury method. In
addition, Telxon's convertible subordinated notes and debentures
were excluded because the market price of Telxon shares is
currently below the conversion price.
(h) Estimated excess of cost over historical book value of net assets
acquired from the preliminary allocation of the purchase price
before any integration or restructuring adjustments. A final
allocation and reclassification to in-process research and
development expense and purchased software as is anticipated is
dependent upon analysis which has not progressed to a stage where
there is sufficient information to make such an allocation.
(i) Adjusted to reflect incurrence of an estimated $20.0 million of
non-recurring merger-related costs. These costs include fees for
financial advisors, legal advisors, accountants, printing costs,
registration and transfer fees and other nominal charges. This
amount does not include costs which will be incurred to integrate
and restructure the operations of Symbol and Telxon.
48
<PAGE>
DESCRIPTION OF SYMBOL CAPITAL STOCK
The following description of certain terms of the capital stock of Symbol
does not purport to be complete and is qualified in its entirety by reference
to the Symbol certificate of incorporation. For more information as to how you
can obtain the Symbol certificate of incorporation, see "Where You Can Find
More Information."
SYMBOL COMMON STOCK
The Symbol certificate of incorporation authorizes Symbol to issue up to
300,000,000 Symbol shares, par value $0.01 per share. Each Symbol share is
entitled to one vote, in person or by proxy, at any and all meetings of the
Symbol stockholders on all propositions before such meetings and on all
elections of directors of Symbol. The Symbol certificate of incorporation does
not provide for cumulative voting in the election of directors. Subject to any
preferential rights of any outstanding series of Symbol preferred stock created
by the Symbol board from time to time, the holders of Symbol common stock are
entitled to dividends only if, when and as the dividends are declared by the
Symbol board and as may be permitted by law, and, upon liquidation, will be
entitled to receive pro rata all assets of Symbol available for distribution to
such holders. As of [ ], 2000, [ ] Symbol shares were issued and
outstanding, held by approximately [ ] holders of record. For a description
of voting requirements and change of control restrictions, see "Comparison of
Certain Rights of Stockholders of Symbol and Telxon."
SYMBOL PREFERRED STOCK
Symbol is also authorized to issue 10,000,000 shares of preferred stock
from time to time in one or more series and with such designation for each such
series as determined by the Symbol board. The Symbol board may, without further
action by the Symbol stockholders, issue a series of Symbol preferred stock and
state and fix the relative rights, preferences and limitations of those shares,
including the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), redemption
price or prices and liquidation preferences. Symbol does not have any preferred
stock outstanding.
TRANSFER AGENT AND REGISTRAR
Bank of New York is the transfer agent and registrar for the Symbol common
stock.
49
<PAGE>
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
OF SYMBOL AND TELXON
Upon completion of the merger, the stockholders of Telxon will become
stockholders of Symbol, and the Symbol certificate of incorporation and the
Symbol by-laws will govern the rights of former Telxon stockholders. Both
Symbol and Telxon are incorporated under Delaware law and are subject to the
Delaware General Corporation Law.
The following is a summary of material differences between the rights of
holders of Symbol common stock and the rights of holders of Telxon common
stock. These differences arise from differences between the Symbol certificate
of incorporation and the Symbol by-laws, on the one hand, and the Telxon
certificate of incorporation and the Telxon by-laws, on the other hand. See
"Description of Symbol Capital Stock." This discussion is not, and does not
purport to be, complete or to identify all differences that may, under given
situations, be material to stockholders. The following summaries are qualified
in their entirety by reference to the Symbol certificate of incorporation and
the Symbol by-laws, which are filed as exhibits to Symbol's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and to the Telxon
certificate of incorporation and the Telxon by-laws, which are filed as
exhibits to Telxon's Annual Report on Form 10-K, as amended, for the fiscal
year ended March 31, 2000. To obtain these documents, see "Where You Can Find
More Information."
<TABLE>
<CAPTION>
TELXON STOCKHOLDER RIGHTS SYMBOL STOCKHOLDER RIGHTS
--------------------------------------------- ------------------------------------------
<S> <C> <C>
Authorized Capital Stock: The authorized capital stock of Telxon The authorized capital stock of Symbol
consists of 50 million shares of common consists of 300 million shares of common
stock and 500,000 shares of preferred stock and 10 million shares of preferred
stock. stock.
Number of Directors: The Telxon certificate of incorporation The Symbol by-laws provide that the
provides that the Telxon board shall Symbol board shall fix the number of
consist of five directors or such number as directors by majority vote of the entire
the Telxon board shall fix by majority vote board, but the number of directors cannot
of the members of the board then in office, be less than one or exceed 15. The Symbol
but the number cannot be less than three. board currently consists of 8 directors.
The Telxon board currently consists of 8
directors.
Classification of Board of The Telxon board is divided into three Symbol does not have a classified board.
Directors: classes, with each class serving a staggered
three-year term.
Quorum for Meeting of The Telxon by-laws provide that a The Symbol by-laws provide that the
Directors: majority of the entire Telxon board shall majority of the total number of directors
constitute a quorum but in no event can will constitute a quorum.
the quorum be less than three directors.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
TELXON STOCKHOLDER RIGHTS SYMBOL STOCKHOLDER RIGHTS
----------------------------------------------- -----------------------------------------------
<S> <C> <C>
Election of Directors: The Telxon certificate of incorporation The Symbol by-laws provide that directors
provides that directors may be elected by are elected by a plurality vote of the
cumulative voting. Each shareholder holders of Symbol shares which are
entitled to vote generally in the election of entitled to vote in the election of directors.
directors is entitled to cast as a vote for
the election of directors the number of
shares of Telxon owned multiplied by the
number of directors to be elected, with the
shareholder able to distribute the votes for
a single director or any number of
directors to be elected.
Removal of Directors: The Telxon certificate of incorporation The Symbol by-laws provide that directors
provides that directors may only be may be removed, with or without cause, at
removed for cause, and only by the a special meeting of stockholders called for
affirmative vote of the holders of at least such purpose by a vote of the holders of a
80% of the voting power of Telxon shares majority of the outstanding shares entitled
entitled to elect such director, voting to vote in the election of directors.
together as a single class.
Limitations on Stockholder The Telxon certificate of incorporation The Symbol by-laws provide that Symbol
Action by Written provides that Telxon stockholders may stockholders may take action at annual or
Consent: take action at annual or special meetings special meetings of stockholders, or by
of stockholders, but may not take action written consent of the minimum number of
by written consent. votes necessary to take such action at a
meeting at which all shares entitled to vote
were present and voted.
Amendment of By-Laws: The Telxon by-laws may be supplemented, The Symbol certificate of incorporation
amended or repealed either by the vote of and by-laws provide that the by-laws may
a majority of the stockholders represented be altered, amended or repealed and new
and entitled to vote at any meeting of the by-laws may be adopted by action of the
stockholders at which a quorum is present Symbol board or the affirmative vote of
or by the Telxon board. holders of a majority of the outstanding
shares entitled to vote on that subject
matter.
Voting Stock: The outstanding voting securities of Telxon The outstanding voting securities of
are the Telxon common stock. Symbol are the Symbol common stock.
Stockholder Rights Plan: Each Telxon share has attached to it the Symbol does not have a rights plan in
right to purchase preferred shares issued place.
pursuant to the Telxon rights plan. Telxon
has taken all action necessary to render
the rights issued pursuant to the Telxon
rights plan inapplicable to the merger.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
TELXON STOCKHOLDER RIGHTS SYMBOL STOCKHOLDER RIGHTS
--------------------------------------------- -----------------------------------------------
<S> <C> <C>
Special Meetings of The Telxon certificate of incorporation and The Symbol by-laws provide that the chief
Stockholders: by-laws provide that a special meeting of executive officer of Symbol may call a
stockholders may be called by the special meeting for any purpose. In
chairman of the board, chief executive addition, the chairman, president or
officer, president or the Telxon board, and secretary of Symbol shall call a special
shall be called by any of the foregoing if meeting upon the written request of a
requested by the holders of a majority of majority of the directors or the holders of
the outstanding shares entitled to vote. a majority of the outstanding shares
entitled to vote in the election of directors.
Filling Vacancies on the The Telxon certificate of incorporation The Symbol by-laws provide that any
Board of Directors: provides that any vacancy on Telxon's vacancies on Symbol's board may be filled by
board may be filled by a majority of the a majority of the directors then in office.
remaining board members, even though less
than a quorum, except that vacancies
resulting from the removal of a director
for cause by Telxon's stockholders may be
filled by the stockholders at the same
meeting.
Limitation on business The Telxon certificate of incorporation The Symbol by-laws provide that business
transacted at special provides that business transacted at a transacted at a special meeting of Symbol's
meetings: special meeting of Telxon's stockholders is stockholders must be related to the
limited to the purposes specified in the purposes specified in the notice of meeting.
notice of meeting.
</TABLE>
52
<PAGE>
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Symbol and subsidiaries
Annual Report on Form 10-K for the year ended December 31, 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 Telxon as of March 31, 2000, and
for the year ended March 31, 2000, incorporated by reference herein, have been
audited by Arthur Andersen LLP, independent public accountants. The consolidated
financial statements and financial statement schedule of Telxon and subsidiaries
as of March 31, 1999, and for each of the two years in the period then ended,
incorporated by reference herein, have been audited by PricewaterhouseCoopers
LLP, independent public accountants. Such financial statements have been
incorporated by reference herein in reliance upon the reports with respect
thereto of Arthur Andersen LLP and PricewaterhouseCoopers LLP, incorporated by
reference herein, and upon the authority of said firms as experts in giving said
reports.
LEGAL AND TAX MATTERS
The validity of the Symbol shares to be issued in connection with the
merger is being passed upon for Symbol by Leonard H. Goldner, Senior Vice
President, General Counsel and Secretary of Symbol. As of July 31, 2000, Mr.
Goldner owned in the aggregate 318,063 Symbol shares. In addition, as of July
31, 2000, Mr. Goldner owned options to purchase an aggregate of 456,874 Symbol
shares (including options to purchase 91,250 shares held by trust, of which Mr.
Goldner is a co-trustee and a beneficiary). As of July 31, 2000, Mr. Goldner's
wife owned 6,150 Symbol shares and is co-trustee and a beneficiary of a trust,
which owned options to purchase 168,749 Symbol shares. Mr. Goldner disclaims
beneficial ownership of any shares held by his wife or this trust.
Certain of the tax consequences of the merger will be passed upon at the
effective time, as a condition to the merger, by Simpson Thacher & Bartlett,
counsel to Symbol, and by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Telxon. See "The Merger Agreement--Conditions."
SUBMISSION OF STOCKHOLDER PROPOSALS
If the merger and the merger agreement are approved and adopted by Telxon
stockholders and the merger is completed, we do not expect to hold a 2000
annual meeting of stockholders. If the merger agreement and the merger are not
approved and adopted by Telxon stockholders or the merger is not completed for
any other reason, your board of directors requests that any stockholder
proposals intended for presentation at the 2000 annual meeting be submitted to
the Assistant Secretary of Telxon, in writing no later than ten days after the
first public announcement of the date of such meeting for consideration for
inclusion in Telxon's proxy materials for such meeting.
In addition, under Telxon's by-laws, stockholders must comply with
specified procedures to nominate directors or introduce an item of business at
the 2000 annual meeting. Nominations or an item of business to be introduced at
an annual meeting must be submitted in writing. To be in proper written form, a
stockholder's notice must contain the specific information required by Telxon's
by-laws. A copy of the by-laws which describes the advance notice procedures
can be obtained from the Assistant Secretary of Telxon.
53
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are identified by
the use of forward-looking words or phrases including, but not limited to,
"intended," "expects," "expected," "anticipates," and "anticipated." These
forward-looking statements are based on current expectations of Symbol or
Telxon, as the case may be. All statements other than statements of historical
facts included in this proxy statement/prospectus, including those regarding
the financial position, results of operations, cash flows, business strategy,
projected costs, growth opportunities for existing products, benefits from new
technology, strategic and other benefits of the merger, cost savings and plans
and objectives of management for future operations of Symbol or Telxon, as the
case may be, are forward-looking statements. Although Symbol or Telxon believes
that the expectations of Symbol or Telxon, as the case may be, reflected in
such forward-looking statements are reasonable, there can be no assurance that
such expectations will prove to have been correct. Because forward-looking
statements involve risks and uncertainties, the actual results of Symbol and
Telxon, as the case may be, could differ materially. Important factors that
could cause actual results to differ materially from the expectations of Symbol
or Telxon, as the case may be ("Cautionary Statements"), are disclosed under
"Risk Factors Relating to the Merger," "Reasons for the Merger," and elsewhere
in this proxy statement/prospectus and in Symbol's and Telxon's SEC filings
listed on page 55. These forward-looking statements represent the judgment of
Symbol or Telxon, as the case may be, as of the date of this proxy
statement/prospectus. All subsequent written and oral forward-looking
statements attributable to Symbol or Telxon or persons acting on behalf of
Symbol or Telxon are expressly qualified in their entirety by the Cautionary
Statements. Symbol and Telxon disclaim, however, any intent or obligation to
update their respective forward-looking statements.
54
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Symbol and Telxon file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information we file at
the SEC's Public Reference Rooms in Washington, D.C., 450 Fifth Street, N.W.,
Washington D.C. 20549 Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from commercial document retrieval services and at the Internet
world wide web site maintained by the SEC at www.sec.gov.
Symbol filed a registration statement on Form S-4 to register with the SEC
the Symbol common stock to be issued to Telxon stockholders in the merger. This
proxy statement/prospectus is a part of the Symbol registration statement and
constitutes both a prospectus of Symbol and a proxy statement of Telxon for its
special meeting.
As allowed by SEC rules, this proxy statement/prospectus does not contain
all the information you can find in the Symbol registration statement or the
exhibits to the Symbol registration statement.
The SEC allows us to "incorporate by reference" information into this
proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately 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 we have previously filed with the SEC. These documents contain important
information about our companies and their financial condition.
<TABLE>
<CAPTION>
SYMBOL SEC FILINGS (FILE NO. 1-9802) PERIOD
--------------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and June 30, 2000
Proxy Statement Filed on April 6, 2000
The description of Symbol's common stock contained
in its Registration Statement on Form 8-A dated
October 11, 1979, including any amendments or
reports filed for the purpose of updating such
description.
</TABLE>
<TABLE>
<CAPTION>
TELXON SEC FILINGS (FILE NO. 000-11402) PERIOD
----------------------------------------------------- -----------------------------------------
<S> <C>
Annual Report on Form 10-K, as amended Year ended March 31, 2000
Quarterly Report on Form 10-Q for the Quarter ended Filed on August 14, 2000
June 30, 2000
Current Reports on Form 8-K Filed on July 27, 2000 and June 30, 2000
Proxy Statement Filed on August 26, 1999
The description of Telxon's common stock contained
in its Registration Statement on Form 8-A dated
December 19, 1983, including any amendments or
reports filed for the purpose of updating such
description.
The description of the Rights contained in its
Registration Statement on Form 8-A dated
August 25, 1987, including any amendments or
reports filed for the purpose of updating such
description.
</TABLE>
Symbol and Telxon 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 Telxon special
55
<PAGE>
meeting. 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.
Symbol has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Symbol, and Telxon has supplied
all such information relating to Telxon.
If you are a stockholder, we may already have sent you some of the
documents incorporated by reference, but you can obtain any of them through us,
the SEC or the SEC's Internet world wide web site as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this proxy statement/prospectus. Stockholders may obtain documents incorporated
by reference in this proxy statement/prospectus by requesting them in writing
or by telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Symbol Technologies, Inc. Telxon Corporation
One Symbol Plaza 1000 Summit Drive
Holtsville, NY 11742,1300 Cincinnati, Ohio 45150
Tel: 800-722-6234 Tel: 800-800-8001
Attn.: Investor Relations Attn.: Investor Relations
website: www.Symbol.com website: www.Telxon.com
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE DO SO BY [ ],
2000 TO RECEIVE THEM BEFORE THE TELXON SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the transactions. We
have not authorized anyone to provide you with information that is different
from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated [ ]. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any
date other than that date, and neither the mailing of this proxy
statement/prospectus to stockholders nor the issuance of Symbol common stock in
the merger shall create any implication to the contrary.
56
<PAGE>
APPENDIX A
--------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
SYMBOL TECHNOLOGIES, INC.,
TX ACQUISITION CORPORATION
and
TELXON CORPORATION
Dated as of July 25, 2000
--------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE I
THE MERGER .................................................................... A-1
SECTION 1.1 The Merger ....................................................... A-1
SECTION 1.2 Effective Time ................................................... A-1
SECTION 1.3 Effects of the Merger ............................................ A-1
SECTION 1.4 Certificate of Incorporation; By-Laws ............................ A-1
SECTION 1.5 Directors and Officers ........................................... A-1
SECTION 1.6 Conversion of Securities ......................................... A-1
SECTION 1.7 Treatment of Employee Options and Other Employee Equity Rights ... A-2
SECTION 1.8 Fractional Interests ............................................. A-4
SECTION 1.9 Surrender of Shares of Company Common Stock; Stock Transfer Books A-4
SECTION 1.10 Closing and Closing Date ......................................... A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................................. A-5
SECTION 2.1 Organization and Qualification ................................... A-5
SECTION 2.2 Certificate of Incorporation and By-Laws ......................... A-6
SECTION 2.3 Capitalization; Subsidiaries ..................................... A-6
SECTION 2.4 Authority Relative to This Agreement ............................. A-7
SECTION 2.5 No Conflict; Required Filings and Consents ....................... A-8
SECTION 2.6 Compliance ....................................................... A-8
SECTION 2.7 SEC Filings; Financial Statements ................................ A-8
SECTION 2.8 Absence of Certain Changes or Events ............................. A-9
SECTION 2.9 Absence of Litigation ............................................ A-10
SECTION 2.10 Employee Benefit Plans ........................................... A-10
SECTION 2.11 Tax Matters ...................................................... A-11
SECTION 2.12 Environmental Matters ............................................ A-11
SECTION 2.13 Form S-4; Proxy Statement ........................................ A-12
SECTION 2.14 Opinion of Financial Advisor ..................................... A-12
SECTION 2.15 Brokers .......................................................... A-12
SECTION 2.16 Affiliate Transactions ........................................... A-12
SECTION 2.17 Vote Required .................................................... A-12
SECTION 2.18 DGCL Section 203; State Takeover Statutes ........................ A-13
SECTION 2.19 Material Contracts ............................................... A-13
SECTION 2.20 Absence of Breaches or Defaults .................................. A-14
SECTION 2.21 Intellectual Property ............................................ A-14
SECTION 2.22 Reorganization Qualification ..................................... A-14
SECTION 2.23 Rights Agreement ................................................. A-15
SECTION 2.24 Cisco Shares ..................................................... A-15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB .............................. A-15
SECTION 3.1 Corporate Organization ........................................... A-15
SECTION 3.2 Capitalization ................................................... A-15
SECTION 3.3 Authority Relative to This Agreement ............................. A-16
SECTION 3.4 No Conflict; Required Filings and Consents ....................... A-16
SECTION 3.5 Compliance ....................................................... A-17
SECTION 3.6 SEC Filings; Financial Statements ................................ A-17
SECTION 3.7 Absence of Certain Changes or Events ............................. A-18
SECTION 3.8 Form S-4; Proxy Statement ........................................ A-18
SECTION 3.9 Brokers .......................................................... A-18
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SECTION 3.10 Absence of Litigation .................................................... A-18
SECTION 3.11 Reorganization Qualification ............................................. A-18
SECTION 3.12 Knowledge ................................................................ A-19
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER ................................................ A-19
SECTION 4.1 Conduct of Business of the Company Pending the Merger .................... A-19
SECTION 4.2 Conduct of Business of Parent Pending the Merger ......................... A-21
ARTICLE V
ADDITIONAL AGREEMENTS ................................................................. A-21
SECTION 5.1 Preparation of Form S-4 and the Proxy Statement; Stockholder Meeting ..... A-21
SECTION 5.2 Accountants' Letters ..................................................... A-22
SECTION 5.3 Access to Information; Confidentiality ................................... A-22
SECTION 5.4 No Solicitation of Transactions .......................................... A-23
SECTION 5.5 Employee Benefits Matters ................................................ A-24
SECTION 5.6 Directors' and Officers' Indemnification; Insurance ...................... A-24
SECTION 5.7 Notification of Certain Matters .......................................... A-25
SECTION 5.8 Further Action; Reasonable Best Efforts .................................. A-25
SECTION 5.9 Public Announcements ..................................................... A-26
SECTION 5.10 Stock Exchange Listing ................................................... A-26
SECTION 5.11 Affiliates ............................................................... A-26
SECTION 5.12 Amendments to the Rights Agreement ....................................... A-26
SECTION 5.13 Cisco Shares ............................................................. A-26
SECTION 5.14 Tax Matters .............................................................. A-26
SECTION 5.15 Operating Expenses ....................................................... A-26
ARTICLE VI
CONDITIONS OF MERGER .................................................................. A-26
SECTION 6.1 Conditions to Obligation of Each Party to Effect the Merger .............. A-26
SECTION 6.2 Conditions to Obligations of the Company to Effect the Merger ............ A-27
SECTION 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger ......... A-27
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER ..................................................... A-28
SECTION 7.1 Termination .............................................................. A-28
SECTION 7.2 Effect of Termination .................................................... A-29
SECTION 7.3 Fees and Expenses ........................................................ A-30
SECTION 7.4 Amendment ................................................................ A-30
SECTION 7.5 Waiver ................................................................... A-31
ARTICLE VIII
General Provisions .................................................................... A-31
SECTION 8.1 Non-Survival of Representations, Warranties and Agreements ............... A-31
SECTION 8.2 Notices .................................................................. A-31
SECTION 8.3 Certain Definitions ...................................................... A-31
SECTION 8.4 Severability ............................................................. A-32
SECTION 8.5 Entire Agreement; Assignment ............................................. A-33
SECTION 8.6 Parties in Interest ...................................................... A-33
SECTION 8.7 Governing Law ............................................................ A-33
SECTION 8.8 Headings ................................................................. A-33
SECTION 8.9 Counterparts ............................................................. A-33
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 25, 2000 (the "Agreement"),
among SYMBOL TECHNOLOGIES, INC., a Delaware corporation ("Parent"), TX
ACQUISITION CORPORATION, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and TELXON CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Sub and the Company have declared this
Agreement to be advisable, and the Boards of Directors of Parent, Sub and the
Company have each approved the merger of Sub with and into the Company and the
Company becoming a wholly owned direct subsidiary of Parent (the "Merger") in
accordance with the General Corporation Law of the State of Delaware ("DGCL")
upon the terms and subject to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2), Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
SECTION 1.2 Effective Time. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VI, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
in such form as required by and executed in accordance with the relevant
provisions of the DGCL (the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (or such later time
as is specified in the Certificate of Merger and agreed upon by the parties
hereto) being the "Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.4 Certificate of Incorporation; By-Laws. (a) At the Effective
Time and without any further action on the part of the Company and Sub, the
Restated Certificate of Incorporation of the Company as in effect immediately
prior to the Effective Time shall be the Restated Certificate of Incorporation
of the Surviving Corporation until thereafter and further amended as provided
therein and under the DGCL.
(b) At the Effective Time and without any further action on the part of
the Company and Sub, the By-Laws of Sub shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Surviving Corporation and as
provided by law.
SECTION 1.5 Directors and Officers. The directors of Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are duly elected or appointed (as the case may be) and qualified.
SECTION 1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the
holders of any of the following securities:
A-1
<PAGE>
(a) Subject to Section 1.8, each share of Common Stock, par value $0.01
per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock to be canceled in accordance with Section 1.6(b) hereof) shall be
converted into the right to receive .5 (the "Exchange Ratio") of a fully paid
and nonassessable share of Common Stock, par value $0.01 per share (the "Parent
Common Stock"), of Parent (the "Merger Consideration"); provided, that, in the
event that, between the date of this Agreement and the Closing Date (as defined
in Section 1.10), the Parent Common Stock shall have been affected or changed
into (i) a different number of shares as a result of a share split, reverse
share split or share dividend or distribution with a record date within such
period, then, in each such case, the Merger Consideration shall be adjusted
such that it shall equal the number of shares of Parent Common Stock to which a
holder of one share of Company Common Stock would have been entitled to hold
immediately following the occurrence of such event had the Effective Time
occurred immediately prior to the happening of such event or, in the case of a
stock dividend or other distribution, immediately prior to the record date for
determination of stockholders entitled thereto; or (ii) a different class of
shares as a result of a spin-off, recapitalization, reclassification or other
similar transaction with a record date within such period, then in each case,
the Merger Consideration shall be adjusted such that it shall equal the number
of shares of Parent Common Stock and/or other securities or property receivable
upon such spin-off, recapitalization, reclassification or other transaction, as
the case may be, by a holder of the number of shares of Parent Common Stock to
which a holder of one share of Company Common Stock would have been entitled to
hold had the Effective Time occurred immediately prior to the happening of such
event; and, in any case, appropriate adjustment (as determined in good faith by
the Board of Directors of Parent in a manner reasonably satisfactory to the
Company) shall be made for the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Company
Common Stock to the end that the provisions set forth herein shall thereafter
be applicable, as nearly as reasonably practicable, in relation to any shares
of stock or other securities or property thereafter deliverable upon the
Effective Time. As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled 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 the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 1.9, without interest.
(b) Each share of Company Common Stock that is (i) held in the treasury of
the Company or (ii) owned by Parent or Sub, in each case immediately prior to
the Effective Time, shall be cancelled and retired without any conversion
thereof and no payment or distribution shall be made with respect thereto.
(c) Each share of common stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common stock
of the Surviving Corporation and shall thereafter constitute all of the issued
and outstanding capital stock of the Surviving Corporation.
SECTION 1.7 Treatment of Employee Options and Other Employee Equity
Rights. (a) Prior to the Effective Time, the Board of Directors of the Company
(or, if appropriate, any committee thereof) shall adopt appropriate resolutions
and take all other actions necessary to provide, subject to the following
sentence, for the cancellation, effective at the Effective Time, of all the
outstanding stock options, stock appreciation rights, phantom shares or other
rights related to or denominated with reference to the securities of the
Company (the "Stock Rights") heretofore granted under any stock option,
performance unit or similar plan, program, agreement or arrangement related to
or denominated with reference to the securities of the Company (the "Stock
Plans") in consideration of the substitution and assumption set forth herein.
At the Effective Time, each of the Stock Rights which is an outstanding stock
option (whether vested or unvested) immediately prior to the Effective Time
shall be assumed by Parent and converted automatically into an option to
purchase shares of Parent Common Stock ("New Stock Rights") in an amount and at
an exercise price determined as provided below:
(i) The number of shares of Parent Common Stock to be subject to the New
Stock Right shall be equal to the product of the number of shares of
Company Common Stock remaining subject (as of immediately prior to the
Effective Time) to the original Stock Right and the Exchange Ratio,
provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded up or down to the nearest whole share;
and
A-2
<PAGE>
(ii) The exercise price per share of Parent Common Stock under the New
Stock Right shall be equal to the exercise price per share of the Company
Common Stock under the original Stock Right divided by the Exchange Ratio,
provided that such exercise price shall be rounded down to the nearest
cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. In the event that the adjustment were determined by Parent to not
be consistent with such Section 424, Parent shall take such action as it shall
reasonably determine necessary to comply with such Section 424, if such
compliance can be accomplished without undue costs to the Company or Parent.
After the Effective Time, each New Stock Right shall be exercisable and shall
vest upon the same terms and conditions as were applicable to the related Stock
Right immediately prior to the date hereof except that (i) all references to
"the Company" shall be deemed to be references to "Parent", (ii) the New Stock
Rights shall become fully vested and exercisable if, after the Effective Time,
the employment of the holder of such New Stock Right is terminated by the
Company without Cause (as defined below) or is terminated by such holder with
Good Reason (as defined below) and (iii) all Stock Rights granted under any
employment agreement listed in Section 2.5(a) of the Company Disclosure
Schedule shall vest and become exercisable to the extent set forth under such
employment agreement. "Cause" with respect to any employee shall mean (A) the
employee's continued failure to substantially perform such employee's duties
(other than as a result of total or partial incapacity due to physical or
mental illness) for a thirty-day period following written notice by the Company
to such employee of such failure, (B) any material act or omission involving
dishonesty in the performance of such employee's duties, (C) the indictment of
such employee of a felony under the laws of the United States or any state
thereof, (D) willful malfeasance or willful misconduct in connection with such
employee's duties or any act or omission which is materially injurious to the
financial condition or business reputation of the Company or any of its
subsidiaries or (E) such employee's material breach of the provisions of any
employment agreement with the Company which is not cured within thirty days
following written notice thereof by the Company. "Good Reason" with respect to
any employee shall mean: (X) a reduction in such employee's base salary or
target bonus, (Y) a transfer of such employee's primary workplace by more than
fifty miles or (Z) with respect to the employees identified on Schedule 1.7(a)
only, an adverse diminution in any material respect in the employee's duties or
responsibilities as of the date hereof (other than solely by virtue of the
Company ceasing to be a public company) and the continuance of such diminution
for a period of thirty days after such employee has given the Company written
notice of such diminution.
(b) Effective immediately prior to the Effective Time, the holders of
restricted shares of Company Common Stock shall be entitled to receive a number
of restricted shares of Parent Common Stock equal to (i) the number of
restricted shares of Company Common Stock so held, multiplied by (ii) the
Exchange Ratio. After the Effective Time, such restricted shares of Parent
Common Stock shall vest upon the same terms and conditions as were applicable
to the related restricted shares of Company Common Stock immediately prior to
the date hereof except that (i) all references to "the Company" shall be deemed
to be references to "Parent", (ii) such shares shall become fully vested if,
after the Effective Time, the employment of the holder of such shares is
terminated by the Company without Cause or is terminated by such holder with
Good Reason and (iii) all such shares granted under any employment agreement
listed in Section 2.5(a) of the Company Disclosure Schedule shall vest and
become exercisable to the extent set forth under such employment agreement.
(c) Parent shall reserve for issuance a sufficient number of shares of
Parent Common Stock for delivery in accordance with this Section 1.7, including
upon the exercise of the New Stock Rights. Parent shall file with the SEC a
registration statement on Form S-8 (or other appropriate form) or a
post-effective amendment to a previously filed registration statement as
promptly as practicable after the Effective Time for purposes of registering
all shares of Parent Common Stock issuable after the Effective Time upon
exercise of the New Stock Rights, and shall have such registration statement or
post-effective amendment become effective and comply, to the extent applicable,
with state securities or blue sky laws with respect thereto at the Effective
Time.
(d) As provided herein, but except as provided in Section 1.7(e), the
Stock Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time and the
Company shall ensure that following the Effective Time no holder of a Stock
Right or any participant in any Stock Plans shall have any right thereunder to
acquire capital stock of the Company, Sub, the Surviving Corporation or any of
their
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respective subsidiaries. Except as provided in Section 1.7(e), the Company will
take all necessary steps to ensure that, as of the Effective Time, none of Sub,
the Company, the Surviving Corporation or any of their respective subsidiaries
is or will be bound by any Stock Rights (other than the New Stock Rights),
other options, warrants, rights or agreements which would entitle any person,
other than Sub or its affiliates, to own any capital stock of the Company, Sub,
the Surviving Corporation or any of their respective subsidiaries or to receive
any payment in respect thereof.
(e) The Board of Directors of PenRight! Corporation has determined in its
discretion, in accordance with the PenRight! Corporation 1997 Stock Option
Plan, that upon a change in control occurring upon consummation of the
transactions contemplated by this Agreement, all outstanding stock options
heretofore granted under the PenRight! Corporation 1997 Stock Option Plan or
any other stock option, performance unit or similar plan of PenRight!
Corporation shall remain unchanged and outstanding thereunder. The Board of
Directors of the Company shall cause the Board of Directors of PenRight!
Corporation to take all such actions that are necessary to effectuate the
foregoing.
SECTION 1.8 Fractional Interests. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and such fractional interests will not entitle the owner thereof to any
rights of a stockholder of Parent. In lieu of any such fractional interests,
each holder of shares of Company Common Stock exchanged pursuant to Section
1.6(a) who would otherwise have been entitled to receive a fraction of a share
of Parent Common Stock (after taking into account all shares of Company Common
Stock then held of record by such holder) shall receive cash (without interest)
in an amount equal to the product of such fractional part of a share of Parent
Common Stock multiplied by the closing price of a share of Parent Common Stock
on the New York Stock Exchange (the "NYSE") as reported by The Wall Street
Journal (or if not reported thereby, any other authoritative source) on the
Closing Date (as defined in Section 1.10), rounded down to the nearest cent.
SECTION 1.9 Surrender of Shares of Company Common Stock; Stock Transfer
Books. (a) Prior to the Closing Date, Sub shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
shares of Company Common Stock in connection with the Merger (the "Exchange
Agent") to receive the shares of Parent Common Stock (and any cash payable in
lieu of any fractional shares of Parent Common Stock) to which holders of
shares of Company Common Stock shall become entitled pursuant to Sections
1.6(a) and 1.8. At or promptly after the Effective Time but in no event later
than the Closing Date, Parent or Sub will deposit with the Exchange Agent
sufficient shares of Parent Common Stock to make all exchanges pursuant to
Section 1.9(b). As soon as practicable after the determination of the amount of
cash, if any, to be paid in lieu of fractional shares, the Exchange Agent shall
notify Parent, and Parent shall promptly deposit such amount with the Exchange
Agent.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the
Effective Time represented shares of Company Common Stock (the "Certificates"),
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor,
(i) 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 1.6(a) and (ii) cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 1.8, after giving
effect to any required tax withholdings, and the Certificate so surrendered
shall forthwith be cancelled. If the exchange of certificates representing
shares of Parent Common Stock is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a
condition of exchange that the Certificate so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such exchange shall have paid any transfer and other taxes required
by reason of the exchange of certificates representing shares of Parent Common
Stock to a person other than the registered holder of the Certificate
surrendered or shall have established to the reasonable satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
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(c) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to it any shares of Parent Common Stock (and any cash payable in lieu
of any fractional shares of Parent Common Stock) which had been made available
to the Exchange Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat or other similar
laws) only as general creditors thereof with respect to the shares of Parent
Common Stock (and any cash payable in lieu of any fractional shares of Parent
Common Stock) payable upon due surrender of their Certificates. Notwithstanding
the foregoing, none of the Surviving Corporation, Parent or the Exchange Agent
shall be liable to any holder of a Certificate for shares of Parent Common
Stock (and any cash payable in lieu of any fractional shares of Parent Common
Stock) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company shall
be closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after
the Effective Time, the holders of Certificates evidencing ownership of shares
of Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Company Common
Stock except as otherwise provided for herein or by applicable law.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock shall be paid to
the holder of any unsurrendered Certificate with respect to the whole shares of
Parent Common Stock it is entitled to receive and no cash payment in lieu of
fractional interests shall be paid pursuant to Section 1.8 until the holder of
such Certificate shall surrender such Certificate in accordance with the
provisions of this Agreement. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such whole shares of Parent
Common Stock shall be issued, any dividends or distributions with respect to
such shares of Parent Common Stock which have a record date after the Effective
Time and shall have become payable between the Effective Time and the time of
such surrender. In no event shall the person entitled to receive such dividends
or distributions be entitled to receive interest thereon.
(f) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or
assets of either Sub or the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of Sub and
the Company or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in such names and on such behalves or otherwise,
all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry
out the purposes of this Agreement.
SECTION 1.10 Closing and Closing Date. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 7.1, the closing (the
"Closing") of this Agreement shall take place (a) at 10:00 a.m. (New York time)
on the second business day after all of the conditions to the respective
obligations of the parties set forth in Article VI hereof shall have been
satisfied or waived or (b) at such other time and date as Parent and the
Company shall agree (such date and time on and at which the Closing occurs
being referred to herein as the "Closing Date"). The Closing shall take place
at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York,
New York 10017 or such other location as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub that:
SECTION 2.1 Organization and Qualification. Each of the Company and each
of its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to have such power and authority
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would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (as defined below). Each of the Company and each of its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed or in good standing which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
When used in this Article II or otherwise in connection with the Company or any
of its subsidiaries, the term "Material Adverse Effect" means any change or
effect that would be materially adverse to the business, assets (including
intangible assets), liabilities (including contingent liabilities), financial
condition or results of operations of the Company and its subsidiaries taken as
a whole or that would materially impair the ability of the Company to perform
its obligations hereunder; provided, however, that a Material Adverse Effect
with respect to the Company shall not include any change or effect resulting
from (i) the United States economy in general and not relating specifically to
the business of the Company and its subsidiaries taken as a whole, (ii) revenue
declines attributable to long-standing customers of the Company becoming
customers of Parent after the date hereof or (iii) any events described in
Section 2.1(a) of the Company Disclosure Schedule.
SECTION 2.2 Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Parent complete and correct copies of the certificate
of incorporation and by-laws of each of the Company and its material
subsidiaries. Such certificates of incorporation and by-laws are in full force
and effect and no other organizational documents are applicable to or binding
upon the Company and its material subsidiaries. The Company has heretofore
furnished to Parent complete and correct copies of the minutes of all meetings
or other actions of the Board of Directors (and all committees thereof) of each
of the Company and its material subsidiaries held or taken since November 1,
1998 (other than any matters reflected in any such minutes which are not
adverse in any material respect to the business, assets (including intangible
assets), liabilities (including contingent liabilities), financial condition or
results of operations of the Company and its subsidiaries). The redacted
provisions of any such minutes of the meetings of the Board of Directors of the
Company relate soley to potential business combination transactions involving
the Company and do not in any material respect relate to the business, assets
(including intangible assets), liabilities (including contingent liabilities),
financial condition or results of operations of the Company and its
subsidiaries (other than to the extent such business combination transactions
relate thereto).
SECTION 2.3 Capitalization; Subsidiaries. (a) The authorized capital stock
of the Company consists of 50,500,000 shares, consisting of (a) 500,000 shares
of preferred stock, par value $1.00 per share ("preferred stock"), and (b)
50,000,000 shares of Company Common Stock. As of July 24, 2000, (i) 17,520,272
shares of Company Common Stock were issued and outstanding (including 111,200
shares of restricted Company Common Stock), all of which shares were duly
authorized, validly issued, fully paid and nonassessable and were issued free
of preemptive (or similar) rights, (ii) no shares of Company Common Stock were
held in the treasury of the Company, (iii) an aggregate of 3,484,632 shares of
Company Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding Stock Rights (of
which 1,909,666 shares were in respect of vested or exercisable options), and
(iv) $82,500,000 aggregate principal amount of 5 3/4% Convertible Subordinated
Debentures Due 2003 and $24,413,000 aggregate principal amount of 7 1/2%
Convertible Subordinated Debentures Due 2012 were outstanding (together, the
"Convertible Debentures"). All of the shares of Company Common Stock which may
be issued pursuant to the Stock Rights of the Company will be, when issued in
exchange for the applicable exercise price thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive (or similar)
rights. No shares of preferred stock of the Company are outstanding or held in
the treasury of the Company. Except (i) as set forth above, (ii) as a result of
the exercise of Stock Rights outstanding as of July 24, 2000 and referred to
above, (iii) issuances of up to 40,000 shares of Company Common Stock pursuant
to the Company's Employee Stock Purchase Plan and (iv) as a result of the
conversion of the Convertible Debentures into up to 3,912,635 shares of Company
Common Stock, there are outstanding (a) no shares of capital stock or other
voting securities of the Company, (b) no securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (c) no options, warrants or other rights to acquire from the Company,
and no obligation of the Company to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company and (d) no equity equivalents, interests in the
ownership or earnings of the Company or other similar rights (the shares,
securities and other rights referred to
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in clauses (a), (b), (c) and (d), collectively, "Company Securities"). Except
for the Stock Rights and the Convertible Debentures referred to above and
except as set forth in Section 2.3(a) of the Company Disclosure Schedule, (x)
there are no outstanding obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities or any voting
or equity securities or interests of any subsidiary of the Company, (y) there
is no voting trust or other agreement or understanding to which the Company or
any of its subsidiaries is a party or is bound with respect to the voting of
the capital stock or other voting securities of the Company of any of its
subsidiaries and (z) there are no other options, calls, warrants or other
rights, agreements, arrangements or commitments of any character relating to
the issued or unissued capital stock of the Company or any of its subsidiaries
to which the Company or any of its subsidiaries is a party. The Company has
heretofore furnished to Parent a complete and correct list, as of July 24,
2000, of the names of each holder of Stock Rights, the number of Stock Rights
held by each such holder, the exercise price and vesting terms for each such
Stock Right (which vesting terms, subject to Section 1.7(a) hereof, shall not
be affected soley by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby) and any amendments or
modifications with respect to any such Stock Right effected since March 31,
1999 (including any changes in the exercise price, changes in or acceleration
of the vesting terms and any regranting of Stock Rights).
(b) Except as set forth on Section 2.3(b) of the Company Disclosure
Schedule, each of the outstanding shares of capital stock of each of the
Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive (or similar) rights, and all such
shares are owned by the Company or another wholly owned subsidiary of the
Company free and clear of all security interests, liens, claims, pledges,
agreements, limitations in voting rights, charges or other encumbrances of any
nature whatsoever. There are outstanding (a) no securities of the Company or
any of its subsidiaries convertible into or exchangeable for shares of capital
stock or voting securities of any subsidiary of the Company, (b) no options,
warrants or other rights to acquire from the Company or any of its
subsidiaries, and no obligation of the Company or any of its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of any subsidiary of the
Company and (c) no equity equivalents, interests in the ownership or earnings
of any subsidiary of the Company or other similar rights. Except as set forth
on Section 2.3(b) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of any
subsidiary or to provide funds to or make any investment in excess of
$1,000,000 (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity. The Company has the ability to effect any
action requiring the approval of the stockholders of any subsidiary of the
Company and to designate all of the members of the board of directors of each
subsidiary of the Company. Section 2.3(b) of the Company Disclosure Schedule
sets forth a complete and correct list of all of the subsidiaries of the
Company; such list sets forth the amount of capital stock or other equity or
voting securities or interests (i) authorized, (ii) outstanding and (iii) owned
by the Company, directly or indirectly, in such subsidiaries. Section 2.3(b) of
the Company Disclosure Schedule sets forth a complete and correct list of all
entities (other than subsidiaries of the Company) in which the Company owns,
directly or indirectly, any equity interest with a fair market value or book
value in excess of $1,000,000; such list sets forth the amount of capital stock
or other equity or voting securities or interests (i) authorized, (ii)
outstanding and (iii) owned by the Company, directly or indirectly, in such
entities.
SECTION 2.4 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the adoption of this
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock and the filing of appropriate merger documents as required by the
DGCL). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
Parent and Sub, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms (subject
to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered
on a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing).
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SECTION 2.5 No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 2.5(a) of the Company Disclosure Schedule, the execution,
delivery and performance of this Agreement by the Company do not and will not:
(i) conflict with or violate the Certificate of Incorporation or By-Laws of the
Company or the equivalent organizational documents of any of its subsidiaries;
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree of any governmental authority applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties are bound or
affected (assuming that all consents, approvals and authorizations contemplated
by clauses (i), (ii) and (iii) of subsection (b) below have been obtained and
all filings described in such clauses have been made); or (iii) result in any
breach or violation of or constitute a default (or an event which with notice
or lapse of time or both could become a default) or result in the loss of a
material benefit under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
(including, without limitation, the Contracts (as defined below)) to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth in Section 2.5(b) of the Company Disclosure
Schedule, the execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will not
require the Company or any of its subsidiaries to obtain or make any consent,
approval, authorization or permit of, action by, filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except for
(i) applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Council Regulation (EEC)
No. 4064/89 (the "Regulation"), similar foreign laws regulating competition,
the rules and regulations of The Nasdaq National Market ("Nasdaq"), the NYSE,
the Communications Act of 1934, as amended, any rules, regulations, practices
and policies promulgated by the Federal Communications Commission (the "FCC")
and state securities, takeover and Blue Sky laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL
and (iii) such consents, approvals, authorizations, permits, actions, filings
or notifications the failure of which to make or obtain which would not,
individually or in the aggregate, reasonably be expected to (x) prevent or
materially delay consummation of the Merger or (y) have a Material Adverse
Effect.
SECTION 2.6 Compliance. Except as set forth in Section 2.6 of the Company
Disclosure Schedule, the Company and each of its subsidiaries are in compliance
with, and are not in default or violation of, (i) the Certificate of
Incorporation and By-Laws of the Company or the equivalent organizational
documents of such subsidiary, (ii) all laws (including, without limitation,
Environmental Laws), rules, regulations, orders, judgments and decrees of any
governmental authority applicable to them or by which any of their respective
properties are bound or affected and (iii) all notes, bonds, mortgages,
indentures, contracts, agreements, leases, licenses, permits, franchises and
other instruments or obligations (other than the Contracts (as defined below)
which are governed by Section 2.20) to which any of them are a party or by
which any of them or any of their respective properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such failures of
compliance, defaults and violations which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
disclosed with reasonable specificity prior to the date hereof in the Company
SEC Reports and except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (x) the Company and
its subsidiaries have all permits, licenses, authorizations, consents,
approvals and franchises from governmental agencies required to conduct their
businesses as now being conducted and (y) neither the Company nor any of its
subsidiaries has received notice of any revocation or modification of any such
permit, license, authorization, consent or approval.
SECTION 2.7 SEC Filings; Financial Statements. (a) Except as set forth in
Section 2.7 of the Company Disclosure Schedule, the Company and, to the extent
applicable, each of its then or current subsidiaries, has filed all forms,
reports, statements and documents required to be filed with the Securities and
Exchange Commission (the "SEC") since January 1, 1999 (collectively, the
"Company SEC Reports"), each of which has complied in all
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material respects with the applicable requirements of the Securities Act and
the rules and regulations promulgated thereunder, or the Exchange Act and the
rules and regulations promulgated thereunder, each as in effect on the date so
filed. The Company has heretofore delivered or (in the case of any such
document not yet filed with the SEC) promptly will deliver to Parent, in the
form filed with the SEC (including any amendments thereto), true and complete
copies of the Company SEC Reports. Except as set forth in Section 2.7 of the
Company Disclosure Schedule, none of such Company SEC Reports (including but
not limited to any financial statements or schedules included or incorporated
by reference therein) contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except as set forth in Section 2.7 of the Company Disclosure Schedule and
except to the extent revised or superseded by a subsequent filing with the SEC
(a copy of which has been provided to Parent prior to the date hereof), none of
the Company SEC Reports filed by the Company since January 1, 1999, contains
any untrue statement of a material fact or omits to state a material fact
required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Except as set forth in Section 2.7 of the Company Disclosure Schedule,
each of the audited and unaudited consolidated financial statements of the
Company and its subsidiaries (including any related notes thereto) included in
the Company SEC Reports, complies or, if not yet filed, will comply when filed
as to form in all material respects with all applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto,
and has been or, if not yet filed, will when filed have been prepared in
accordance with generally accepted accounting principles (except, in the case
of unaudited consolidated quarterly statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly presents or, if not yet
filed, will when filed fairly present in all material respects the consolidated
financial position of the Company and its subsidiaries at the respective dates
thereof and the consolidated results of its and their operations and changes in
cash flows for the periods indicated (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments). Except as set
forth in Section 2.7 of the Company Disclosure Schedule, the books and records
of the Company and its subsidiaries have been for the periods covered by the
Company SEC Reports, and are being, maintained in all material respects in
accordance with applicable legal and accounting requirements.
(c) The Company has heretofore furnished Parent with the Company's
consolidated results of operations for the three month period ended June 30,
2000. Such financial information has been prepared in good faith and in a
manner consistent with previous quarterly financial statements and, to the
knowledge of the Company, fairly present in all material respects the
consolidated results of operations of the Company and its subsidiaries for the
periods indicated.
(d) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its subsidiaries at March 31, 2000, including the
notes thereto, included in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 2000 (the "2000 10K") and except as and to the
extent set forth on Section 2.7(d) of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise), except for
liabilities or obligations incurred in the ordinary course of business since
March 31, 2000 which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(e) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications made prior to the date hereof to
agreements, documents or other instruments which previously had been filed by
the Company with the SEC pursuant to the Securities Act and the rules and
regulations promulgated thereunder or the Exchange Act and the rules and
regulations promulgated thereunder, which amendments or modifications have not
yet been filed with the SEC.
(f) As of the date hereof, except as set forth in Section 2.7(f) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries
has any outstanding indebtedness for borrowed money other than the Convertible
Debentures.
SECTION 2.8 Absence of Certain Changes or Events. Since March 31, 2000,
except as contemplated by this Agreement, disclosed with reasonable specificity
in the Company SEC Reports filed prior to the date of this
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Agreement or set forth in Sections 2.8, 2.10 or 2.11 of the Company Disclosure
Schedule, the Company and its subsidiaries have conducted their businesses only
in the ordinary course and in a manner consistent with past practice and since
such date there has not been (i) any conditions, events or occurrences which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to any assets of the Company or any of its
subsidiaries which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, or (iii) any other action which,
if it had been taken after the date hereof, would have required the consent of
Parent under Section 4.1 hereof.
SECTION 2.9 Absence of Litigation. Except as disclosed with reasonable
specificity in the Company SEC Reports filed and publicly available prior to
the date of this Agreement or Section 2.9 of the Company Disclosure Schedule,
there are no suits, claims, actions, proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries, or any properties or rights of the Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that (i) if adversely
determined, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect or (ii) seek to enjoin or prohibit the
consummation of the transactions contemplated hereby. Neither the Company nor
any of its subsidiaries nor any of their respective properties is or are
subject to any order, writ, judgment, injunction, decree, determination or
award which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or would enjoin or prohibit the
consummation of the transactions contemplated hereby.
SECTION 2.10 Employee Benefit Plans. (a) Section 2.10(a) of the Company
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (including without limitation
multiemployer plans within the meaning of ERISA Section 3(37)), stock purchase,
stock option, severance, employment, change-of-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA, whether formal or informal, oral or written,
under which any employee or former employee of the Company or any of its
subsidiaries has any present or future right to benefits or under which the
Company or any of its subsidiaries has any present or future liability. All
such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Plans".
(b) With respect to each Plan, the Company has either filed such Plan as
an exhibit to the Company SEC Reports or delivered to Parent a current,
accurate and complete copy (or, to the extent no such copy exists, an accurate
description) thereof and, to the extent applicable, (i) any related trust
agreement, annuity contract or other funding instrument; (ii) the most recent
determination letter; (iii) any summary plan description and other written
communications by the Company or any of its subsidiaries to its employees
(which is material to the Company or such subsidiary) concerning the extent of
the benefits provided under a Plan; and (iv) for the three most recent years:
(I) the Form 5500 and attached schedules; (II) audited financial statements;
and (III) actuarial valuation reports.
(c) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (i) each Plan has been established
and administered in all material respects in accordance with its terms, and in
all material respects in compliance with the applicable provisions of ERISA,
the Code and other applicable laws, rules and regulations and if intended to be
qualified within the meaning of section 401(a) of the Code is so qualified, and
no Plan is currently under audit by the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty Corporation; (ii) with
respect to any Plan, no actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or threatened; (iii) neither the
Company nor any other party has engaged in a prohibited transaction, as such
term is defined under section 4975 of the Code or section 406 of ERISA, which
would subject the Company, the Surviving Corporation, any of their
subsidiaries, Sub or Parent to any material taxes, penalties or other material
liabilities under section 4975 of the Code or sections 409 or 502(i) of ERISA;
and (iv) no Plan provides for an increase in benefits on or after the Closing
Date.
(d) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, no Plan is, or at any time was,
subject to Title IV of ERISA, and neither the Company, nor any
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member of its "Controlled Group" (defined as any organization which is a member
of a controlled group of organizations within the meaning of sections 414(b),
(c), (m) or (o) of the Code), has incurred any liability under Title IV of
ERISA and no condition exists that presents a material risk of incurring any
such liability. Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, neither the Company,
nor any member of its Controlled Group, has any incurred any liability, and no
condition exists that presents a risk of incurring such liability, in
connection with any multiemployer plan (within the meaning of section
4001(a)(3) of ERISA).
(e) Except as set forth on Section 2.10(a) of the Company Disclosure
Schedule, no Plan exists which could result in the payment to any employee of
the Company or any of its subsidiaries of any money or other property or rights
or accelerate or provide any other rights or benefits to any such employee as a
result of the transactions contemplated by this Agreement, whether or not
subject to Section 280G of the Code, or whether or not any further or
subsequent event or action is required therefor.
SECTION 2.11 Tax Matters. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, the
Company and each of its subsidiaries, and any consolidated, combined, unitary
or aggregate group for Tax purposes of which the Company or any of its
subsidiaries is a member has timely filed all material Tax Returns required to
be filed by it in the manner provided by law, has timely paid all material
Taxes (including interest and penalties) (whether or not shown to be due on
such Tax Returns) and has provided adequate reserves as required by GAAP in its
financial statements for any Taxes that have not been paid, whether or not
shown as being due on any returns. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, no
deficiencies for any United States federal income Taxes have been proposed,
asserted or assessed in writing against the Company or any of its subsidiaries
that are not adequately reserved for as required by GAAP. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (i) no audit of any United States federal income Tax Return of
the Company or any of its subsidiaries is being conducted by a Tax authority;
(ii) no extension of the statute of limitations on the assessment of any United
States federal income Taxes has been granted by the Company or any of its
subsidiaries and is currently in effect; (iii) neither the Company nor any of
its subsidiaries (A) has been a member of an affiliated group filing a
consolidated Federal income Tax Return (other than a group the common parent of
which was the Company) or (B) has any liability for the Taxes of any person
(other than the Company and its subsidiaries), including liability arising from
the application of Treasury Regulations Section 1.1502-6 or any analogous
provision of state, local or foreign law, or as a transferee or successor, by
contract or otherwise; (iv) no consent under Section 341(f) of the Code has
been filed with respect to the Company or any of its subsidiaries; and (v)
neither the Company or any of its subsidiaries will be required (A) as a result
of a change in accounting method for a Tax period beginning on or before the
Effective Time, to include any adjustment under Section 481(c) of the Code (or
any similar provision of state, local or foreign law) in taxable income for any
Tax period beginning on or after the Effective Time, or (B) to include any item
or amount accrued in a Tax period beginning on or before the Effective Time in
taxable income for any Tax period beginning on or after the Effective Time. As
used herein, "Taxes" shall mean (A) any taxes of any kind, including but not
limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value
added, property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign and (B) any liability of the
Company or any subsidiary for the payment of any amount of the type described
in clause (A) as a result of being a member of an affiliated or combined group.
As used herein, "Tax Return" shall mean any return, report or statement
required to be filed with any governmental authority with respect to Taxes.
SECTION 2.12 Environmental Matters. Except as set forth in Section 2.12 of
the Company Disclosure Schedule and except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect: (i) each
of the Properties and Facilities (as such terms are defined in Section 8.3) has
been maintained by the Company in compliance with all Environmental Laws (as
defined in Section 8.3), (ii) there are no Hazardous Materials which have been
or are being released or disposed of by the Company or any of its subsidiaries,
or in the case of asbestos only, is present, on any property, (iii) to the
knowledge of the Company, there are no Hazardous Materials which have been or
are being released by persons other than the Company or
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any of its subsidiaries and which have encroached through the soil or
groundwater onto or under the Properties and Facilities, (iv) there are no
existing uncured written notices of noncompliance, notices of violation,
administrative actions, or lawsuits against the Company or any of its
subsidiaries arising under Environmental Laws or relating to the use, handling,
storage, treatment, recycling, generation, or release of Hazardous Materials,
nor has the Company received any uncured written notification of any allegation
of any responsibility for any disposal, release, or threatened release at any
location of any Hazardous Materials, (v) there are no consent decrees, consent
orders, judgments, judicial or administrative orders, or liens by any
governmental authority relating to any Environmental Law which have not already
been fully satisfied and which name the Company or any of its subsidiaries,
(vi) to the knowledge of the Company, no Properties or Facilities of the
Company or any subsidiary of the Company are listed on the federal National
Priorities List, the federal Comprehensive Environmental Response Compensation
Liability Information System list, or any similar state listing of sites known
to be contaminated with Hazardous Materials, and (vii) there are no budgeted
expenses or capital costs that will be required in the next two years to
maintain compliance with Environmental Laws.
SECTION 2.13 Form S-4; Proxy Statement. None of the information supplied
by the Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in connection
with the Merger, or any of the amendments or supplements thereto (collectively,
the "Form S-4") will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented and 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, and (ii) the proxy statement for use
relating to the adoption by the stockholders of the Company of this Agreement
or any of the amendments or supplements thereto (collectively, the "Proxy
Statement"), will, at the date it is first mailed to the Company's stockholders
and at the time of the meeting of the Company's stockholders held to vote on
the adoption of this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no representation is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.
SECTION 2.14 Opinion of Financial Advisor. The Company has received the
opinion of Prudential Securities Incorporated (the "Company Financial
Advisor"), dated the date hereof, to the effect that the Exchange Ratio is fair
to such stockholders from a financial point of view. An executed copy of such
opinion will be delivered to Parent promptly after it becomes available.
SECTION 2.15 Brokers. Except as set forth in Section 2.15 of the Company
Disclosure Schedule, no broker, finder or investment banker (other than the
Company Financial Advisor) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and the Company Financial Advisor pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereby.
SECTION 2.16 Affiliate Transactions. Except as set forth in Section 2.16
of the Company Disclosure Schedule or as disclosed with reasonable specificity
in the Company SEC Reports filed prior to the date of this Agreement, there are
no material contracts, commitments, agreements, arrangements or other
transactions between the Company or any of its subsidiaries, on the one hand,
and any (i) present or former officer or director of the Company or any of its
subsidiaries or any of their immediate family members (including their
spouses), (ii) record or beneficial owner of five percent or more of the voting
securities of the Company or (iii) affiliate of any such officer, director,
family member or beneficial owner, on the other hand.
SECTION 2.17 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of the Company's
capital stock necessary to adopt this Agreement. The Board of Directors of the
Company (the "Company Board") (at a meeting duly called and held) has (i)
approved and declared advisable this Agreement,
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(ii) determined that the transactions contemplated hereby are advisable and in
the best interests of the holders of Company Common Stock, (iii) resolved to
recommend adoption of this Agreement to such holders and (iv) directed that
adoption of this Agreement be submitted to the Company's stockholders. The
Company hereby agrees to the inclusion in the Form S-4 and the Proxy Statement
of the recommendation of the Company Board described in this Section 2.17.
SECTION 2.18 DGCL Section 203; State Takeover Statutes. Prior to the date
hereof, the Board of Directors of the Company has approved this Agreement and
the Merger and the other transactions contemplated hereby and such approval is
sufficient to render inapplicable to this Agreement, the Merger and any of such
other transactions contemplated hereby, the restrictions on "business
combinations" set forth in Section 203 of the DGCL. To the Company's knowledge,
no other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or any of the transactions
contemplated by this Agreement and no provision of the Certificate of
Incorporation or By-Laws of the Company or similar governing instruments of any
of the Company's subsidiaries would, directly or indirectly, restrict or impair
the ability of Parent to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of the Company and its subsidiaries that
may be acquired or controlled by Parent.
SECTION 2.19 Material Contracts. Section 2.19 of the Company Disclosure
Schedule contains a complete and accurate list of all contracts (written or
oral), plans, undertakings, commitments or agreements to which the Company or
any of its subsidiaries is a party or by which any of them is bound as of the
date of this Agreement of the following categories ("Contracts") (other than
those listed as exhibits to the Company SEC Reports):
(a) to the extent not listed in Section 2.10(a) of the Company Disclosure
Schedule, employment contracts, including, without limitation, contracts to
employ executive officers and other contracts with officers, directors or
stockholders of the Company, and all severance, change in control or
similar arrangements with any officers, employees or agents of the Company
that will result in any obligation (absolute or contingent) of the Company
or any of its subsidiaries to make any payment to any officers, employees
or agents of the Company following either the consummation of the
transactions contemplated hereby, termination of employment, or both;
(b) (i) other than purchase orders issued in the ordinary course of
business, Contracts for the purchase of inventory/supplies involving future
annual expenditures or liabilities of the Company and its subsidiaries in
excess of $1,000,000 which are not cancelable (without penalty, cost or
other liability in excess of $1,000,000) within one (1) year and (ii) other
Contracts made in the ordinary course of business involving future annual
expenditures or liabilities of the Company and its subsidiaries in excess
of $1,000,000 which are not cancelable (without penalty, cost or other
liability in excess of $1,000,000) within ninety (90) days;
(c) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money in
excess of $1,000,000, whether as borrower, lender or guarantor;
(d) Contracts (other than Leases) containing covenants limiting the
freedom of the Company or any of its subsidiaries or, after the Merger,
Parent or any of its subsidiaries, to engage in any line of business or
compete with any person or operate at any location;
(e) joint venture or partnership agreements or joint development or
similar agreements pursuant to which any third party is entitled to develop
any products on behalf of the Company or its subsidiaries;
(f) any Contract where the customer under such Contract is a United
States federal government and the aggregate amount payable by the customer
exceeds $2,000,000;
(g) any Contract pending for the acquisition, directly or indirectly (by
merger or otherwise) of assets with fair market value or book value in
excess of $500,000 (other than inventory) or capital stock of another
person; and
(h) any other Contract (other than real property leases) containing
"change of control" provisions which would be triggered upon the Merger.
True and complete copies of the written Contracts identified on Section
2.19 of the Company Disclosure Schedule have been filed with the SEC as
exhibits to the Company SEC Reports or delivered to Parent,
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including, without limitation, all material schedules, exhibits and annexes to
such Contracts. There are no contracts, plans, undertakings, commitments or
agreements which are material to the Company other than those listed in Section
2.10(a), 2.16 or 2.19 of the Company Disclosure Schedule or those filed as
exhibits to the Company SEC Reports.
SECTION 2.20 Absence of Breaches or Defaults. Except as set forth in
Section 2.20 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries nor, to the Company's knowledge, any other party to any
Contract is in default under, or in breach or violation of, any Contract and,
to the knowledge of the Company, no event has occurred which, with the giving
of notice or passage of time or both would constitute a default under any
Contract, except for such defaults, breaches and violations which, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, other than Contracts
which have terminated or expired in accordance with their terms, each of the
Contracts is valid, binding and enforceable in accordance with its terms
against the Company and, to the Company's knowledge, the other party (subject
to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered
on a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing) and is in full force and effect. No event (except for the
execution, delivery and performance of this Agreement) has occurred which
either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money of the Company or any of its
subsidiaries to accelerate, or which does accelerate, the maturity of any
indebtedness affecting the Company or any of its subsidiaries, except as set
forth in Section 2.5(a) or 2.20 of the Company Disclosure Schedule.
SECTION 2.21 Intellectual Property. (a) Section 2.21(a) of the Company
Disclosure Schedule sets forth all material Intellectual Property (as defined
below) that is owned or used by the Company or any of its subsidiaries and is
filed or registered with, or issued by, a governmental authority and all
material IP Licenses (as defined below). Except as set forth in Section 2.21(b)
of the Company Disclosure Schedule or except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
(i) the Company and its subsidiaries own or have the right to use all
Intellectual Property material to their businesses as currently conducted, (ii)
such Intellectual Property is valid, unexpired, enforceable and has not been
abandoned; (iii) each Intellectual Property license to which the Company or any
of its subsidiaries is a party ("IP License") is valid and enforceable, and the
Company and its subsidiaries are not in breach or default thereunder; (iv) the
Company and its subsidiaries are not infringing or otherwise impairing the
Intellectual Property of any third party, and no third party is infringing or
otherwise impairing their Intellectual Property; (v) there is no pending or, to
the knowledge of the Company, threatened action or order relating to any
Intellectual Property owned or used by the Company and its subsidiaries; and
(vi) the Company and its subsidiaries have taken reasonable steps to protect,
maintain and safeguard their Intellectual Property. For purposes hereof,
"Intellectual Property" means all U.S. and foreign intellectual property,
including without limitation (i) inventions, discoveries, processes, formulae,
designs, methods, procedures, concepts, developments, technology, and all
related improvements and know-how; (ii) copyrights and copyrightable works,
including computer applications, programs, hardware, software, systems,
databases and related items; (iii) trademarks, service marks, trade names,
brand names, corporate names, logos and trade dress, the goodwill of any
business symbolized thereby, and all common-law rights relating thereto; and
(iv) trade secrets, data and other confidential information.
(b) Neither the Company nor any of its subsidiaries has licensed
Intellectual Property owned by them (or licensed to them by a third party) to
any person in a manner that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect, and the transactions
contemplated by this Agreement will not constitute a breach, or otherwise
reduce or impair the rights of the Company or any of its subsidiaries, under
such IP Licenses except such breaches, reductions or impairments which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(c) The ownership of Intellectual Property and the right to secure such
rights currently enjoyed by the Company and its subsidiaries will not be
affected by the transactions contemplated by this Agreement in any manner that
would reasonably be expected to have a Material Adverse Effect.
SECTION 2.22 Reorganization Qualification. Neither Company nor, to its
knowledge, any of its affiliates, has taken or agreed to take any action, or
knows of any circumstances, that (without regard to any action taken or agreed
to be taken by Parent or any of its affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
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SECTION 2.23 Rights Agreement. The Rights Agreement, dated as of August
25, 1987, as amended and restated as of July 31, 1996 (the "Rights Agreement"),
between the Company and KeyBank National Association, as Rights Agent, has been
amended so as to provide that: (i) neither Parent or Sub will become an
"Acquiring Person" and (ii) no "Acquisition Date", "Triggering Event" or
"Distribution Date" (as such terms are defined in the Rights Agreement) will
occur, in either case, as a result of the approval, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
and the Rights (as defined in the Rights Agreement) will expire immediately
prior to the Effective Time. Since July 31, 1996, the Rights Agreement has not
been amended or otherwise modified in any respect (other than the substitution
of the rights agent thereunder on June 11, 1997).
SECTION 2.24 Cisco Shares. The Company owns beneficially and of record
4,166,083 shares (the "Cisco Shares") of common stock of Cisco Systems, Inc.
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in voting or transfer rights, charges or other encumbrances or
restrictions of any nature whatsoever, other than any restrictions under
applicable securities laws and the restrictions described on Section 2.24 of
the Company Disclosure Schedule. Except for the transactions described on
Section 2.24 of the Company Disclosure Schedule (the "Existing Hedging
Transactions"), the Cisco Shares are not subject to any hedging agreement or
other arrangement to change the Company's economic interest therein. Neither
the Company nor any of its subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations promulgated thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and warrant to the
Company that:
SECTION 3.1 Corporate Organization. (a) Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to own, operate or lease its properties and to
carry on its business as it is now being conducted, except where the failure to
have such power and authority would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect (as defined
below). Each of Parent and Sub is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature
of its activities makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed or in good standing which
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. When used in this Article III or otherwise in
connection with Parent or any of its subsidiaries (including Sub), the term
"Parent Material Adverse Effect" means any change or effect that would be
materially adverse to the business, assets (including intangible assets),
liabilities (including contingent liabilities), financial condition or results
of operations of Parent and its subsidiaries taken as a whole or that would
materially impair the ability of Parent to perform its obligations hereunder;
provided, however, that a Material Adverse Effect with respect to the Parent
shall not include any change or effect resulting from (i) the United States
economy in general and not relating specifically to the business of Parent and
its subsidiaries taken as a whole or (ii) revenue declines attributable to
long-standing customers of Parent becoming customers of the Company after the
date hereof.
(b) Parent has heretofore furnished to or made available to the Company a
complete and correct copy of its certificate of incorporation and by-laws as
currently in effect. Such certificate of incorporation and by-laws are in full
force and effect and no other organizational documents are applicable to or
binding upon Parent.
(c) Sub has heretofore furnished to or made available to the Company a
complete and correct copy of the certificate of incorporation of Sub and the
by-laws of Sub as currently in effect. Such certificate of incorporation and
bylaws are in full force and effect and no other organizational documents are
applicable to or binding upon Sub.
SECTION 3.2 Capitalization. (a) The authorized capital stock of Parent
consists of 310,000,000 shares, consisting of 300,000,000 shares of Parent
Common Stock and 10,000,000 shares of preferred stock, par value $1.00 per
share. As of June 30, 2000, (i) 137,245,433 shares of Parent Common Stock were
issued and
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outstanding, all of which were duly authorized, validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights, (ii)
18,124,453 shares of Parent Common Stock were held in the treasury of Parent,
(iii) no shares of Parent Common Stock which are restricted stock were issued
and outstanding and (iv) an aggregate of 24,486,026 shares of Parent Common
Stock were reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding stock options to purchase shares of
Parent Common Stock issued pursuant to the employee benefit plans of Parent or
warrants to purchase shares of Parent Common Stock issued to directors ("Parent
Options"). No shares of preferred stock of Parent are outstanding or held in
the treasury of Parent. Except (a) as set forth above or (ii) as a result of
the exercise of the Parent Options outstanding as of June 30, 2000, there are
outstanding as of the date hereof (a) no shares of capital stock or other
voting securities of Parent, (b) no securities of Parent convertible into or
exchangeable for shares of capital stock or voting securities of Parent, (c) no
options, warrants, or other rights to acquire from Parent, and no obligation of
Parent to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Parent and (d)
no equity equivalents, interests in the ownership or earnings of Parent or
other similar rights (the shares, securities and other rights referred to in
clauses (a), (b), (c) and (d), collectively, "Parent Securities"). All of the
shares of Parent Common Stock issuable as consideration in the Merger at the
Effective Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. Except as set forth in Section 3.2(a) of the Parent Disclosure Schedule
delivered by Parent to the Company prior to the execution of this Agreement
(the "Parent Disclosure Schedule"), as of the date hereof there are no
outstanding obligations of Parent or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Parent Securities. Except as set forth in
Section 3.2(a) of the Parent Disclosure Schedule, as of the date hereof (x)
there are no outstanding obligations of Parent or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Parent Securities, (y) there is no
voting trust or other agreement or understanding to which Parent or any of its
subsidiaries is a party or is bound with respect to the voting of the capital
stock or other voting securities of Parent and (z) there are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of Parent to which
Parent or any of its subsidiaries is a party.
(b) The authorized capital stock of Sub consists of 100 shares of common
stock, par value $0.01 per share, 100 shares of which are duly authorized,
validly issued and outstanding, fully paid and nonassessable and owned by
Parent free and clear of all liens, claims and encumbrances. Sub was formed
solely for the purpose of engaging in a business combination transaction with
the Company and has engaged in no other business activities and has conducted
its operations only as contemplated hereby.
SECTION 3.3 Authority Relative to This Agreement. Each of Parent and Sub
has all necessary corporate power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Parent and Sub and the consummation by each of Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
filing of appropriate merger documents as required by the DGCL). This Agreement
has been duly executed and delivered by Parent and Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each such corporation enforceable against such
corporation in accordance with its terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered on a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing).
SECTION 3.4 No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 3.4(a) of the Parent Disclosure Schedule, the execution,
delivery and performance of this Agreement by Parent and Sub do not and will
not: (i) conflict with or violate the respective certificates of incorporation
or by-laws of Parent or Sub; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order, judgment or
decree of any governmental authority applicable to Parent or Sub or by which
either of them or any of their respective properties are bound or affected; or
(iii) result in any breach or violation of or constitute a default (or an event
which with notice or lapse of time or both could
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become a default) or result in the loss of a material benefit under, or give
rise to any right of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the property or
assets of Parent or Sub pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or Sub is a party or by which Parent or Sub or any
of their respective properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not, individually or in the aggregate,
reasonably be expected to prevent or materially delay the consummation of the
Merger or to have a Parent Material Adverse Effect.
(b) Except as set forth in Section 3.4(b) of the Parent Disclosure
Schedule, the execution, delivery and performance of this Agreement by Parent
and Sub do not and will not require Parent or any of its subsidiaries to obtain
or make any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements of the Securities Act and the
rules and regulations promulgated thereunder, the Exchange Act and the rules
and regulations promulgated thereunder, the HSR Act, the Regulation, similar
foreign laws regulating competition, the rules and regulations of Nasdaq, the
NYSE, the Communications Act of 1934, as amended, any rules, regulations,
practices and policies promulgated by the FCC and state securities, takeover
and Blue Sky laws, (ii) the filing and recordation of appropriate merger or
other documents as required by the DGCL, and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain would not, individually or in the aggregate, reasonably be
expected to prevent the consummation of the Merger or to have a Parent Material
Adverse Effect.
SECTION 3.5 Compliance. Except as set forth in Section 3.5 of the Parent
Disclosure Schedule, Parent and each of its subsidiaries are in compliance
with, and are not in default or violation of, (i) the Certificate of
Incorporation and By-Laws of Parent or the equivalent organizational documents
of such subsidiary, (ii) all laws (including, without limitation, Environmental
Laws), rules, regulations, orders, judgments and decrees of any governmental
authority applicable to them or by which any of their respective properties are
bound or affected and (iii) all notes, bonds, mortgages, indentures, contracts,
agreements, leases, licenses, permits, franchises and other instruments or
obligations to which any of them are a party or by which any of them or any of
their respective properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such failures of compliance, defaults and
violations which would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Except as disclosed with
reasonable specificity prior to the date hereof in the Parent SEC Reports and
except as would not, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect, (x) Parent and its subsidiaries have
all permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct their businesses as now being
conducted and (y) neither Parent nor any of its subsidiaries has received
notice of any revocation or modification of any such permit, license,
authorization, consent or approval.
SECTION 3.6 SEC Filings; Financial Statements. (a) Parent and, to the
extent applicable, each of its then or current subsidiaries, has filed all
forms, reports, statements and documents required to be filed with the SEC
since January 1, 1999 (collectively, the "Parent SEC Reports"), each of which
has complied in all material respects with the applicable requirements of the
Securities Act and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. None of such Parent SEC Reports (including but not
limited to any financial statements or schedules included or incorporated by
reference therein) contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except to the extent revised or superseded by a subsequent filing with the SEC,
none of the Parent SEC Reports filed by Parent since January 1, 1999 and prior
to the date hereof contains any untrue statement of a material fact or omits to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited consolidated financial statements of
Parent and its subsidiaries (including any related notes thereto) included in
Parent SEC Reports complies or, if not yet filed, will comply when filed as to
form in all material respects with all applicable accounting requirements and
with the published
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rules and regulations of the SEC with respect thereto, and has been or, if not
yet filed, will when filed have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and fairly presents or, if not yet filed, will when filed
fairly present in all material respects the consolidated financial position of
Parent and its subsidiaries at the respective date thereof and the consolidated
results of its operations and changes in cash flows for the periods indicated
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments).
(c) Parent has heretofore furnished the Company with Parent's consolidated
results of operations for the three month period ended June 30, 2000. Such
financial information has been prepared in good faith and in a manner
consistent with previous quarterly financial statements and, to the knowledge
of Parent, fairly present in all material respects the consolidated results of
operations of Parent and its subsidiaries for the periods indicated.
SECTION 3.7 Absence of Certain Changes or Events. Since December 31, 1999,
except as specifically contemplated by this Agreement, disclosed with
reasonable specificity in the Parent SEC Reports filed and publicly available
prior to the date of this Agreement or disclosed in Section 3.7 of the Parent
Disclosure Schedule, Parent and its subsidiaries have conducted their
businesses through the date hereof only in the ordinary course and in a manner
consistent with past practice and since December 31, 1999 there has not been
(i) any conditions, events or occurrences which, individually or in the
aggregate, would reasonably be expected to have a Parent Material Adverse
Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of Parent or any of its subsidiaries
which would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, or (iii) any other action which, if it had been taken
after the date hereof, would have required the consent of the Company under
Section 4.2 hereof.
SECTION 3.8 Form S-4; Proxy Statement. None of the information supplied by
Parent or Sub for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented and 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, and (ii) the Proxy Statement will, at the date it is first
mailed to the Company's stockholders and at the time of the meeting of the
Company's stockholders held to vote on adoption of this Agreement, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Form
S-4 will comply as to form in all material respects with the requirements of
the Securities Act and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Form S-4.
SECTION 3.9 Brokers. No broker, finder or investment banker (other than
Bear Stearns & Co. Inc., the fees and expenses of which shall be paid by
Parent) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
SECTION 3.10 Absence of Litigation. Except as disclosed in the Parent SEC
Reports filed and publicly available prior to the date of this Agreement or in
Section 3.10 of the Parent Disclosure Schedule, there are no suits, claims,
actions, proceedings or investigations pending or, to the knowledge of Parent,
threatened against Parent or any of its subsidiaries, or any properties or
rights of Parent or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, that (i) if adversely determined, individually or in the aggregate,
would reasonably be expected to have a Parent Material Adverse Effect or (ii)
seek to enjoin or prohibit as of the date hereof the consummation of the
transactions contemplated hereby. Neither Parent nor any of its subsidiaries
nor any of their respective properties is or are subject to any order, writ,
judgment, injunction, decree, determination or award having, or which, would
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or would enjoin or prohibit the consummation of the
transactions contemplated hereby.
SECTION 3.11 Reorganization Qualification. Neither Parent nor Sub, nor to
Parent's knowledge, any affiliate of Parent, has taken or agreed to take any
action, or knows of any circumstances, that (without regard to any action taken
or agreed to be taken by the Company or any of its affiliates) would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
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SECTION 3.12 Knowledge. Parent does not have actual knowledge, as of the
date hereof, of any material breach of the representations and warranties of
the Company set forth in this Agreement. As used in this Agreement, actual
knowledge with respect to Parent means the actual knowledge of the Chief
Executive Officer, the Chief Financial Officer and the General Counsel of
Parent.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business of the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date hereof to
the Effective Time, unless Parent shall otherwise agree in writing in advance,
the businesses of the Company and its subsidiaries shall be conducted only in
the ordinary course of business and in a manner consistent with past practice
and in compliance with applicable laws; and the Company and its subsidiaries
shall each use its reasonable best efforts to preserve substantially intact the
business organization of the Company and its subsidiaries, to keep available
the services of the present officers, employees and consultants of the Company
and its subsidiaries and to preserve the present relationships of the Company
and its subsidiaries with customers, suppliers, licensors, licensees,
advertisers, distributors and other persons with which the Company or any of
its subsidiaries has significant business relations. By way of amplification
and not limitation, neither the Company nor any of its subsidiaries shall,
between the date of this Agreement and the Effective Time, directly or
indirectly do, or agree, authorize or commit to do, any of the following
without the prior written consent of Parent:
(a) Amend its Certificate of Incorporation or By-Laws or equivalent
organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or authorize or
commit to the issuance, sale, pledge, disposition or encumbrance of, (A) any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of the Company or any of its
subsidiaries (except for the issuance of shares of Company Common Stock
issuable in accordance with the terms of Stock Rights outstanding as of the
date hereof and identified on the list referred to in the last sentence of
Section 2.3(a) or the Convertible Debentures or referred to in Item 4 of
Section 2.3(a) of the Company Disclosure Schedule) or (B) any property or
assets, whether tangible or intangible, of the Company or any of its
subsidiaries with a fair market value or book value in excess of $1,000,000 in
the aggregate, except for sales of goods and products in the ordinary course of
business and in a manner consistent with past practice;
(c) Declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its or
its subsidiaries' capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or any capital stock
of any of its subsidiaries;
(e) (i) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or (except for the purchase of raw materials, inventory and supplies in
the ordinary course of business and capital expenditures permitted by clause
(vii) below) any assets with a fair market value or book value of $1,000,000 in
the aggregate; (ii) sell, transfer, lease, mortgage, pledge, encumber or
otherwise dispose of or subject to any lien any of its assets with a fair
market value or book value of $1,000,000 in the aggregate (including capital
stock of subsidiaries), except for the sale of goods and products in the
ordinary course of business; (iii) incur any indebtedness for borrowed money
(other than (i) borrowings of up to $25,000,000 in the aggregate in the
ordinary course of business pursuant to the revolving credit facilities
identified in Section 2.19 of the Company Disclosure Schedule and (ii)
borrowings of up to $10,000,000 incurred to pay, immediately prior to the
Closing, fees and out-of-pocket expenses in connection with the transactions
contemplated hereby) or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital contributions
to, or investments in, any other person (other than a wholly-owned subsidiary
of the Company); (iv) except as permitted by subsection (f) below, enter into
any transaction, contract, commitment, arrangement or understanding with any
affiliate of the Company or any other persons or entities referred to in
Section 2.16; (v) except as otherwise permitted by this Section 4.1, enter into
any commitments or transactions involving
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consideration, transfer of assets or payments (or covers revenues pursuant to
marketing or distribution arrangements) in excess of $5,000,000 or otherwise
material, individually or in the aggregate, to the Company and its subsidiaries
taken as a whole; (vi) enter into any new material line of business; (vii)
authorize any single capital expenditure which is in excess of $2,000,000 or
capital expenditures which are, in the aggregate, in excess of $10,000,000 for
the Company and its subsidiaries taken as a whole; or (viii) enter into, amend
in any material respect, renew or terminate any contract or agreement involving
consideration or payments in excess of $1,000,000, any joint venture
arrangements or any other contract, agreement, commitment or arrangement with
respect to any of the matters set forth in this Section 4.1(e);
(f) Except to the extent required under applicable law or under existing
employee and director benefit plans, agreements or arrangements as in effect on
the date of this Agreement, increase or otherwise amend the compensation or
fringe benefits of any of its directors, officers or employees (except for
increases in salary or wages of employees who are not officers in the ordinary
course of business in accordance with past practice not to exceed $1.5 million
in the aggregate), or grant any retention, severance or termination pay not
currently required to be paid under existing severance plans or enter into, or
amend, renew or terminate, any employment, consulting or severance agreement or
arrangement with any present or former director, officer or other employee of
the Company or any of its subsidiaries, or establish, adopt, enter into or
amend, renew or terminate any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees, other than as required by the terms thereof or by
applicable law, or amend the terms of any outstanding options to purchase any
equity of the Company or any subsidiary (including accelerating the vesting or
lapse of repurchase rights or obligations);
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) Revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or notes or accounts
receivable;
(i) Take any action that (without regard to any action taken or agreed to
be taken by Parent or any of its affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code;
(j) Except as may be required by law, make or change any Tax election,
file any amended Tax Return, settle or compromise any federal, state, local or
foreign Tax liability, change any annual Tax accounting period, change any
method of Tax accounting, enter into any closing agreement relating to any Tax,
surrender any right to claim a Tax refund, or consent to any extension or
waiver of the limitations period applicable to any Tax claim or assessment;
(k) Settle or compromise any pending or threatened suit, action or claim
which is in an aggregate amount in excess of $500,000 (provided that such
settlement or compromise does not involve any material non-monetary obligations
on the part of the Company and its subsidiaries) or which relates to the
transactions contemplated hereby;
(l) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in excess
of $500,000, other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected
or reserved against in the financial statements of the Company or incurred in
the ordinary course of business and consistent with past practice;
(m) Fail to use reasonable best efforts to maintain in full force and
effect the existing insurance policies covering the Company and its
subsidiaries and their respective properties, assets and businesses;
(n) Enter into any agreement or contract so as to include, or amend any
agreement or contract so as to include, any of the following provisions, or
amend any of the following provisions to the extent contained in any agreement
or contract: (i) any provision limiting the freedom of the Company or any of
its subsidiaries or affiliates to engage in any line of business or compete
with any person or operate at any location or (ii) any "change of control"
provision which would be triggered upon the Merger, any sale of the Company or
any of its subsidiaries or similar transaction; or
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(o) Repurchase any shares of Company Common Stock pursuant to the
Company's stock repurchase program; or
(p) Take, authorize or offer to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.1(a) through 4.1(o) or
any action which would reasonably be expected to result in any of the
conditions set forth in Article VI not being satisfied.
SECTION 4.2 Conduct of Business of Parent Pending the Merger. (a) During
the period from the date of this Agreement to the Effective Time (except as
otherwise contemplated by the terms of this Agreement), Parent shall use its
reasonable best efforts to preserve intact its and its subsidiaries' current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time, in each case to the extent commercially
appropriate.
(b) Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, Parent shall not,
without the prior consent of the Company:
(i) Amend Parent's certificate of incorporation (except to change the
number of authorized shares of capital stock) or by-laws in a manner that
would be materially adverse to the holders of Parent Common Stock;
(ii) Other than in connection with acquisitions having a value of not
more than $750,000,000 in the aggregate, issue, deliver, sell, pledge,
dispose of or encumber, or authorize or commit to the issuance, sale,
pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of capital stock, or any other
ownership interest (including but not limited to stock appreciation
rights or phantom stock), of Parent or any of its subsidiaries (except
for the issuance of shares of Parent Common Stock or the grant of
employee stock options in accordance with the terms of Parent's employee
benefit plans in existence on the date hereof or approved by the
stockholders of Parent), if any such action would reasonably be expected
to prevent or materially delay the consummation of the transactions
contemplated hereby;
(iii) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof, if any such action would reasonably be expected to
delay materially the consummation of the transactions contemplated
hereby; or
(iv) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.2(b)(i) through
4.2(b)(iii) or any action which (except as otherwise provided herein)
would reasonably be likely to result in any of the conditions set forth
in Article VI not being satisfied.
(c) Parent shall not, and shall not permit any of its subsidiaries to,
intentionally take any action that (without regard to any action taken or
agreed to be taken by the Company or any of its affiliates) would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and the Proxy Statement; Stockholder
Meeting. (a) Promptly following the date of this Agreement, the Company shall,
with the assistance and approval of Parent, 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 will be included as a prospectus. Each of the
Company and Parent shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use its reasonable best efforts to cause the
Proxy Statement to be mailed to its 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
state securities law in connection with the issuance of Parent Common Stock in
connection with the Merger, and the Company shall furnish all information
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concerning the Company and the holders of the Company Common Stock and rights
to acquire Company Common Stock pursuant to the Stock Plans as may be
reasonably required in connection with any such action. Each of Parent, Sub and
the Company shall furnish all information concerning itself to the other as may
be reasonably requested in connection with any such action and the preparation,
filing and distribution of the Form S-4 and the preparation, filing and
distribution of the Proxy Statement. The Company, Parent and Sub each agree to
correct any information provided by it for use in the Form S-4 or the Proxy
Statement which shall have become false or misleading.
(b) The Company, acting through its Board of Directors, shall, subject to
and in accordance with its Certificate of Incorporation and By-Laws, promptly
and duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Form S-4 becomes effective a meeting of the
holders of Company Common Stock for the purpose of voting to adopt this
Agreement, and (i) recommend adoption of this Agreement, by the stockholders of
the Company and include in the Proxy Statement such recommendation and (ii)
take all reasonable and lawful action to solicit and obtain such approval. The
Board of Directors of the Company shall not withdraw, amend or modify in a
manner adverse to Parent its recommendation referred to in clause (i) of the
preceding sentence (or announce publicly its intention to do so), except that
such Board of Directors shall be permitted to withdraw, amend or modify its
recommendation (or publicly announce its intention to do so) if: (i) the
Company has complied in all material respects with Section 5.4; (ii) an
unsolicited Superior Proposal (as defined in Section 5.4) shall have been
proposed by any person other than Parent or Sub and such proposal is pending at
the time of such withdrawal, amendment or modification; and (iii) the Company
shall have notified Parent of such Superior Proposal at least five business
days in advance of its intention to effect such withdrawal, amendment or
modification (which five business day period shall be contemporaneous with that
provided for in Section 7.1(j)(i) if such notice includes a notice of
termination contemplated by such Section). Without limiting the generality of
the foregoing, subject to the Company's rights pursuant to Sections 5.4 and
7.1(j), the Company agrees that its obligations under this Section 5.1(b) shall
not be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal (as defined in Section
5.4).
SECTION 5.2 Accountants' Letters. (a) The Company shall use its reasonable
best efforts to cause to be delivered to Parent "comfort" letters of Arthur
Andersen LLP and PricewaterhouseCoopers LLP, the Company's present and former
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 substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4. In connection
with the Company's efforts to obtain such letter, if requested by Arthur
Andersen LLP or PricewaterhouseCoopers LLP, Parent shall provide a
representation letter to such accounting firm, complying with the Statement on
Auditing Standards No. 72 ("SAS 72") or with the Statement on Auditing
Standards No. 76, if then required.
(b) Parent shall use its reasonable best efforts to cause to be delivered
to the Company a "comfort" 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.
In connection with the Parent's efforts to obtain such letter, if requested by
Deloitte & Touche LLP, the Company shall provide a representation letter to
Deloitte & Touche LLP complying with SAS 72 or with the Statement on Auditing
Standards No. 76, if then required.
SECTION 5.3 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time or the earlier termination of this Agreement, each
of the Company and Parent shall, and shall cause its subsidiaries, officers,
directors, employees, auditors and other agents to, afford the officers,
employees, auditors and other agents of Parent or the Company, respectively,
during normal business hours reasonable access at all reasonable times to its
officers, employees, auditors, legal counsel, properties, offices, plants and
other facilities and to all books and records, and shall furnish Parent or the
Company, respectively, with all financial, operating and other data and
information as Parent or the Company, respectively, through its officers,
employees or agents may from time to time reasonably request. In addition,
subsequent to the date of this Agreement, Parent and/or any of its subsidiaries
may initiate communications with any officer or key employee of the Company for
the purpose of
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addressing the prospective retention of such officer or employee following the
Closing, provided that (i) Parent believes, in good faith, that there is a
compelling, legitimate business need to initiate such communication prior to
the Closing Date, (ii) such communications shall be conducted in coordination
with the Company's chief executive officer and (iii) Parent shall not solicit
to hire such officer or key employee through such communications.
(b) Each of the Company and Parent will hold and will cause its directors,
officers, employees, agents, advisors (including, without limitation, counsel
and auditors) and controlling persons to hold any such information or data
which is nonpublic in confidence on the same terms and conditions as the
confidentiality provisions set forth in the Confidentiality Agreement dated
June 16, 2000, as amended from time to time, between the Company and Parent
(the "Confidentiality Agreement").
(c) No investigation pursuant to this Section 5.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 5.4 No Solicitation of Transactions. The Company agrees that
neither it nor any of its subsidiaries nor any of the officers and directors of
it or its subsidiaries shall, and that it shall direct and cause its and its
subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not
to, directly or indirectly, initiate, solicit, encourage or otherwise
facilitate (including by way of furnishing information) any inquiries or the
making of any proposal or offer with respect to (i) a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving it or any of its
subsidiaries, or (ii) any purchase or sale of all or any significant portion of
the assets or 15% or more of the voting securities of it or any of its
subsidiaries (other than the Merger) (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). The Company further
agrees that neither it nor any of its subsidiaries nor any of the officers and
directors of it or its subsidiaries shall, and that it shall direct and cause
its and its subsidiaries' employees, agents and representatives (including any
investment banker attorney or accountant retained by it or any of its
subsidiaries) not to, directly or indirectly, have any discussion with or
provide any confidential information or data to any person (other than Parent
and Sub) relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding the foregoing, the Company or its Board of Directors
shall be permitted to (A) to the extent applicable, comply with Rule 14e-2(a)
promulgated under the Exchange Act with regard to an Acquisition Proposal, or
(B) engage in any discussions or negotiations with, or provide any information
to, any person in response to an unsolicited bona fide written Acquisition
Proposal by any such person, if and only to the extent that, in the case of the
actions referred to in clause (B), (i) the Company's stockholders meeting
relating to the adoption of this Agreement by the stockholders of the Company
shall not have occurred, (ii) the Board of Directors of the Company, by
majority vote, concludes in good faith, after consultation with its financial
advisors and legal advisors, that, as a result of such Acquisition Proposal,
such action is reasonably necessary for the Board of Directors to act in a
manner consistent with its fiduciary duties under applicable law, and (iii)
prior to providing any information or data to any person in connection with an
Acquisition Proposal by any such person, the Board of Directors of the Company
receives from such person an executed confidentiality agreement on terms no
less favorable to the Company than those contained in the Confidentiality
Agreement. In the event an Acquisition Proposal is made, the Board of Directors
of the Company shall promptly notify Parent of such proposal, together with the
name of such person and the material terms and conditions of any proposals or
offers. The Company agrees that it will keep Parent informed, on a current
basis, of the status and terms of any such proposals or offers and the status
of any such discussions or negotiations. The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal or similar transaction or arrangement. The Company
agrees that it will take the necessary steps to promptly inform the individuals
or entities referred to in the first sentence of this Section 5.4 of the
obligations undertaken in this Section 5.4. Nothing in this Section 5.4 shall
(x) permit the Company to terminate this Agreement (except as specifically
provided in Article VII hereof) or (y) affect any other obligation of the
Company under this Agreement. For purposes of this Agreement, "Superior
Proposal" shall mean a bona fide written Acquisition Proposal which the Board
of Directors of the Company concludes in good faith, after consultation with
its financial advisors and legal advisors, taking into account all legal,
financial, regulatory and
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other aspects of the proposal and the person making the proposal (including any
break-up fees, expense reimbursement provisions and conditions to
consummation), (i) would, if consummated, be more favorable to the Company's
stockholders, from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is reasonably capable of being
completed (provided that for purposes of this definition of "Superior
Proposal," the term Acquisition Proposal shall have the meaning assigned to
such term in this Section 5.4, except that the reference to "15% or more" in
the definition of "Acquisition Proposal" shall be deemed to be a reference to
"a majority" and "Acquisition Proposal" shall only be deemed to refer to a
transaction involving voting securities of the Company, and the reference to
"assets" (including the shares of any subsidiary of the Company) shall refer to
the assets of the Company and its subsidiaries, taken as a whole, and not the
assets of any of the subsidiaries alone).
SECTION 5.5 Employee Benefits Matters. (a) The Company shall or Parent
shall cause the Company and the Surviving Corporation to promptly pay or
provide when due all compensation and benefits earned through or prior to the
Effective Time as provided pursuant to the terms of any Plans in existence as
of the date hereof and set forth on Section 2.10(a) of the Company Disclosure
Schedule for all employees (and former employees) and directors (and former
directors) of the Company. Parent and the Company agree that the Company and
the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect and disclosed to Parent as of the date hereof. Nothing
herein shall require the continued employment of any person or prevent the
Company and/or the Surviving Corporation from taking any action or refraining
from taking any action which the Company could take or refrain from taking
prior to the Effective Time.
(b) As of the Effective Time, employees of the Company who continue
employment with the Surviving Corporation as of the Effective Time (the
"Affected Employees") shall be entitled to participate in the employee benefit
plans of Parent on substantially the same terms and conditions as similarly
situated employees of Parent. Parent shall provide, or shall cause the
Surviving Corporation to provide, Affected Employees with full credit for
purposes of eligibility to participate, eligibility for benefit forms and
subsidies (other than under any defined benefit pension plan), vesting, benefit
accrual (other than benefit accrual under any defined benefit pension plans)
and determination of the level of benefits under such plans for such Affected
Employees' service with the Company (except to the extent necessary to avoid
duplication of benefits and except under any post-retirement medical or life
insurance arrangements sponsored by Parent, the Surviving Corporation, or their
affiliates). In addition, Parent shall, or shall cause the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefit
plans in which such employees may be eligible to participate after the
Effective Time, other than limitations or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of
the Effective Time under any welfare plan maintained for the Affected Employees
immediately prior to the Effective Time, and (ii) provide each Affected
Employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Effective Time for the year in which the Effective
Time occurs.
(c) To the extent requested by Parent, the Company will use commercially
reasonable efforts to cooperate to limit gross-up, parachute and severance
payments in order that the Company (prior to the Merger), the Surviving
Corporation and Parent do not incur material costs so long as (i) the financial
impact on the relevant individuals is not material in light of the savings
realized by the Company and (ii) the relevant individuals consent to such
limitation to the extent the Company reasonably determines such consent is
required; provided that, nothing in this Section 5.5(c) shall require the
Company to violate any of its contractural obligations or any applicable law;
provided, further that, the Company shall use commercially reasonable efforts
to obtain any such consent.
SECTION 5.6 Directors' and Officers' Indemnification; Insurance. (a) For
six years from the Effective Time, to the full extent permitted under the DGCL,
Parent shall cause the Surviving Corporation to indemnify, defend and hold
harmless any person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, a director, officer,
employee or agent (an "Indemnified Person") of the Company or any of its
subsidiaries against all losses, claims, damages, liabilities, costs and
expenses (including
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attorneys' fees and expenses), judgments, fines, losses and amounts paid in
settlement in connection with any actual or threatened action, suit, claim,
proceeding or investigation (each a "Claim") to the extent that any such Claim
is based on, or arises out of: (i) the fact that such Indemnified Person is or
was a director, officer, employee or agent of the Company or any of its
subsidiaries or is or was serving at the request of the Company or any of its
subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; or (ii) this Agreement
or any of the transactions contemplated hereby, in each case to the extent that
any such Claim pertains to any matter or fact arising, existing or occurring
prior to or at the Effective Time, regardless of whether such Claim is asserted
or claimed prior to, or at or after the Effective Time. Without limiting the
generality of the preceding sentence, in the event any Indemnified Person
becomes involved in any Claim, after the Effective Time, Parent shall cause the
Surviving Corporation to periodically advance to such Indemnified person its
legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the providing by such
Indemnified Person of an undertaking to reimburse all amounts so advanced in
the case of a final nonappealable determination by a court of competent
jurisdiction that such Indemnified Person is not entitled to be indemnified
therefor.
(b) The Certificate of Incorporation and the By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification and exculpation from liability than are set forth in Article VI
of the Certificate of Incorporation of the Company, which provisions shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of the persons referred to therein.
(c) For three years from the Effective Time, Parent shall cause the
Surviving Corporation to maintain in effect the current directors' and
officers' liability insurance policy covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy to
the extent that it provides coverage for events occurring prior to the
Effective Time (a copy of which has been heretofore delivered to Parent), so
long as the annual premium therefor would not be in excess of 125% of the most
recent 12-month premium paid prior to the date of this Agreement (the
"Company's Current Premium"). If such premiums for such insurance would at any
time exceed 125% of the Company's Current Premium, then the Surviving
Corporation shall cause to be maintained policies of insurance which in the
Surviving Corporation's good faith determination, provide the maximum coverage
available at an annual premium equal to 125% of the Company's Current Premium.
The Company represents to Parent that the Company's Current Premium is
$481,400.
SECTION 5.7 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate and (ii) any failure of the Company,
Parent or Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 5.8 Further Action; Reasonable Best Efforts. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable after the
date hereof, including but not limited to (i) cooperation in the preparation
and filing of the Form S-4, the Proxy Statement, and required filings under the
HSR Act and any amendments to any thereof and (ii) using its reasonable best
efforts to make all required regulatory filings and applications and to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company
and its subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger. In
furtherance and not in limitation of the foregoing, each party hereto agrees to
make, to the extent it has not already done so, an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and in any event
within ten business days of the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this
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Agreement shall use their reasonable best efforts to take all such necessary
action. In the event that a suit or objection is instituted by any person or
governmental authority challenging this Agreement and the transactions
contemplated hereby as violative of applicable competition and antitrust laws,
each of Parent and the Company shall use their reasonable best efforts to
resist or resolve such suit or objection. Notwithstanding the foregoing, in
connection with any such objection or suit instituted by such person or
governmental authority (including, but not limited to, the Federal Trade
Commission or the Antitrust Division of the Department of Justice), neither
Parent nor Sub shall be required to provide any undertakings or agree to any
condition that could reasonably be expected to (a) result in a substantial
detriment to Parent's or the Company's business, financial condition, results
of operations or prospects or (b) materially diminish the strategic or
financial benefits of the transactions contemplated hereby.
SECTION 5.9 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with its securities exchange.
SECTION 5.10 Stock Exchange Listing. Parent shall use its reasonable best
efforts to have approved for listing on the NYSE prior to the Effective Time,
subject to official notice of issuance, the Parent Common Stock to be issued
pursuant to the Merger.
SECTION 5.11 Affiliates. 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 adoption by the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its best 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 as Exhibit A hereto.
SECTION 5.12 Amendments to the Rights Agreement. Except as expressly
contemplated by Section 2.24 of this Agreement, the Company agrees that it will
not amend, modify or waive any provision of the Rights Agreement and shall not
take any action to redeem the Rights or render the Rights inapplicable to any
transaction.
SECTION 5.13 Cisco Shares. The Company will not sell, pledge, assign,
distribute, exchange, hypothecate or otherwise transfer, or enter into any
hedging agreement or other arrangement (in addition to the Existing Hedging
Transactions) to change its economic interest in respect of, any of the Cisco
Shares. The Company will not amend, terminate or otherwise modify the Existing
Hedging Transactions in any respect.
SECTION 5.14 Tax Matters. To the extent requested by Parent, the Company
will use commercially reasonable efforts to cooperate to minimize the tax
consequences of the Cisco Shares, the Stock Rights and net operating losses;
provided that, nothing in this Section 5.14 shall require the Company to
violate any of its contractural obligations or any applicable law.
SECTION 5.15 Operating Expenses. The Company shall cause its operating
expenses to not exceed the amounts set forth in Section 5.15(a) of the Company
Disclosure Schedule. The Company shall not waive or amend, nor take any actions
materially inconsistent with, the terms of the letter attached as Section
5.15(b) of the Company Disclosure Schedule.
ARTICLE VI
CONDITIONS OF MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction (or, to the extent permitted by applicable law,
waiver) at or prior to the Closing Date of the following conditions:
(a) This Agreement shall have been adopted by the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock.
(b) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any court or
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governmental authority of competent jurisdiction which prohibits, restrains,
enjoins or restricts the consummation of the Merger; provided, however, that
the parties shall use their reasonable best efforts to cause any such decree,
ruling, injunction or other order to be vacated or lifted.
(c) Any waiting period applicable to the Merger under the HSR Act and any
applicable foreign antitrust or competition laws shall have terminated or
expired.
(d) The Form S-4 and any required post-effective amendment thereto shall
have become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order, and any material "blue sky"
and other state securities laws applicable to the registration of the Parent
Common Stock to be exchanged for Company Common Stock in the Merger shall have
been complied with.
(e) The shares of Parent Common Stock issuable to the holders of Company
Common Stock pursuant to this Agreement shall have been approved for listing on
the NYSE, subject to official notice of issuance.
SECTION 6.2 Conditions to Obligations of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction (or, to the extent permitted by applicable law, waiver) at or
prior to the Closing Date of the following additional conditions:
(a) Parent and Sub shall have performed or complied with in all material
respects their agreements and covenants contained in this Agreement required to
be performed or complied with at or prior to the Closing Date and the
representations and warranties of Parent and Sub contained in this Agreement
qualified as to materiality shall be true in all respects, and those not so
qualified shall be true in all material respects, in each case when made and on
and as of the Closing Date with the same force and effect as if made on and as
of such date (except to the extent in any case that such representations and
warranties speak as of another date), except as expressly contemplated or
otherwise expressly permitted by this Agreement. The Company shall have
received a certificate signed on behalf of Parent by the chief executive
officer or chief financial officer of Parent to such effect.
(b) At any time on or after the date of this Agreement there shall not
have occurred any material adverse change in the business, assets (including
intangible assets), liabilities (including contingent liabilities), financial
condition or results of operations of Parent and its subsidiaries taken as a
whole, except for changes resulting from (i) the United States economy in
general and not relating specifically to the business of Parent and its
subsidiaries taken as a whole or (ii) revenue declines attributable to
long-standing customers of Parent becoming customers of the Company after the
date hereof.
(c) The opinion, based on appropriate representations of the Company and
Parent, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Company, to
the effect that (i) the Merger will be treated for Federal income Tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and (ii)
Parent, Sub and the Company will each be a party to the reorganization within
the meaning of Section 368(b) of the Code, dated the Closing Date, shall have
been delivered.
SECTION 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the satisfaction (or, to the extent permitted by applicable law, waiver) at
or prior to the Closing Date of the following additional conditions:
(a) Except as expressly contemplated or otherwise expressly permitted by
this Agreement, (i) the Company shall have performed or complied with in all
material respects its agreements and covenants contained in this Agreement
required to be performed or complied with at or prior to the Closing Date, (ii)
the representations and warranties of the Company contained in this Agreement
qualified as to materiality shall be true in all respects, and those not so
qualified shall be true in all material respects, in each case when made and on
and as of the Closing Date with the same force and effect as if made on and as
of such date (except to the extent in any case that such representations and
warranties speak as of another date and except to the extent that the aggregate
effect of all inaccuracies in the Specified Representations (as defined below),
which Parent has notified in writing to the Company that Parent has reasonably
determined is adverse in any material respect to the business, assets
(including intangible assets), liabilities (including contingent liabilities),
financial condition or results of operations of the Company or the realization
of the benefits of the transactions contemplated hereby as set forth in the
press release attached as Exhibit B hereto, would not reasonably be expected to
result in costs,
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losses, liabilities, payments, damages or expenses to the Company or Parent in
excess of $25 million), and (iii) the aggregate effect of all inaccuracies in
the representations and warranties of the Company contained in this Agreement
(without giving effect to any qualifications as to materiality) would not
reasonably be expected to have a Material Adverse Effect. Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer or chief financial officer of the Company to such effect. "Specified
Representations" mean the representations and warranties set forth in (i) the
first two sentences of Section 2.2, (ii) the last sentence of Section 2.3(b),
(iii) Section 2.7(e), (iv) Sections 2.10(a), 2.10(b) and 2.10(c), (v) Section
2.19 and (vi) the first sentence of Section 2.21.
(b) At any time on or after the date of this Agreement there shall not
have occurred any material adverse change in the business, assets (including
intangible assets), liabilities (including contingent liabilities), financial
condition or results of operations of the Company and its subsidiaries taken as
a whole, except for changes resulting from (i) the United States economy in
general and not relating specifically to the business of the Company and its
subsidiaries taken as a whole, (ii) revenue declines attributable to
long-standing customers of the Company becoming customers of Parent after the
date hereof or (iii) any events described in Section 2.1(a) of the Company
Disclosure Schedule.
(c) The opinion, based on appropriate representations of the Company and
Parent, of Simpson Thacher & Bartlett, counsel to Parent, to the effect that
(i) the Merger will be treated for Federal income Tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and (ii)
Parent, Sub and the Company will each be a party to the reorganization within
the meaning of Section 368(b) of the Code, dated the Closing Date, shall have
been delivered.
(d) There shall not be pending by any governmental authority or any other
third party any suit, action or proceeding (other than suits, actions or
proceedings by shareholders of the Company in their capacity as shareholders),
(i) challenging or seeking to enjoin or prohibit the consummation of the Merger
or seeking to obtain from Parent or any of its subsidiaries any material
damages in connection with the transactions contemplated hereby, (ii) seeking
to enjoin or prohibit the ownership or operation by the Company, Parent or any
of their respective subsidiaries of any material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries, to
dispose of or hold separate any significant portion of the business or assets
of the Company, Parent or any of their respective subsidiaries, as a result of
the Merger or any of the other transactions contemplated by this Agreement, or
(iii) seeking to enjoin or prohibit Parent or any of its subsidiaries from
controlling in any material respect the business or operations of the Company
or its subsidiaries. Notwithstanding the foregoing, it shall not be a condition
to Closing if there shall be pending any suit, action or proceeding by any
third party (other than a governmental authority) seeking any of the relief
specified in clauses (i), (ii) or (iii) above, if such suit, action or
proceeding shall allege violations of federal, state or foreign antitrust or
competition laws, unless Parent's Board concludes, taking into account the
advice of outside counsel, that such third party has a reasonable probability
of obtaining such relief.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Closing Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company (except as otherwise stated herein):
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have been
consummated on or before March 31, 2001 (other than due to the failure of the
party seeking to terminate this Agreement to perform its obligations under this
Agreement required to be performed at or prior to the Effective Time);
(c) By Parent or the Company, if any required approval of the stockholders
of the Company for this Agreement shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof;
(d) [Intentionally Omitted];
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(e) By Parent or the Company if any court or other governmental body of
competent jurisdiction shall have issued a final order, decree or ruling or
taken any other final action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become final and nonappealable (provided that the terminating party shall have
used reasonable best efforts to resist or resolve any such action);
(f) By the Company if prior to the Closing Date (i) there shall have been
a breach of any representation or warranty on the part of Parent or Sub
contained in this Agreement which would reasonably be expected to result in a
closing condition not being satisfied, or (ii) there shall have been a breach
of any covenant or agreement on the part of Parent or Sub contained in this
Agreement which would reasonably be expected to result in a closing condition
not being satisfied, which breach, in either case, shall not have been cured
prior to 30 days following notice thereof;
(g) By Parent if prior to the Closing Date (i) there shall have been a
breach of any representation or warranty on the part of the Company contained
in this Agreement which would reasonably be expected to result in a closing
condition not being satisfied, or (ii) there shall have been a breach of any
covenant or agreement on the part of the Company contained in this Agreement
which would reasonably be expected to result in a closing condition not being
satisfied, which breach, in either case, shall not have been cured prior to 30
days following notice thereof;
(h) [Intentionally Omitted];
(i) By Parent,(i) if the Board of Directors of the Company shall have (a)
failed to recommend or withdrawn, modified or amended in any respect adverse to
Parent or Sub its approval or recommendation of this Agreement, the Merger or
any of the other transactions contemplated herein or resolved to do so, or (b)
approved or recommended a Superior Proposal from a person (other than Parent)
or resolved to do so, or (ii) the Company breaches in any material respect any
of its agreements set forth in Section 5.4;
(j) By the Company (but only prior to adoption by the stockholders of the
Company of this Agreement), if the Board of Directors of the Company, by
majority vote, shall have determined that an Acquisition Proposal constitutes a
Superior Proposal pursuant to, and in accordance with, Section 5.4 hereof and
shall have determined to approve such Superior Proposal; provided, however,
that (i) the Company shall have provided to Parent five business days' notice
of its intention to terminate this Agreement pursuant to this Section
7.1(j)(which notice shall specify all material terms and conditions of, and
identify the party making, the Superior Proposal), (ii) the Company has
complied in all material respects with Section 5.4, (iii) the Superior Proposal
is pending at the time of such termination, (iv) the Board of Directors shall
have determined in good faith, after giving effect to all concessions and
modifications which may be offered by Parent pursuant to clause (v) below, on
the basis of the advice of its financial advisors and outside legal counsel,
that such proposal is a Superior Proposal, (v) within the five business-day
period referred to in clause (i) above, the Company shall afford Parent the
opportunity to modify the terms and conditions of this Agreement as would
enable the Company and Parent to proceed with the transactions contemplated
hereby and (vi) it shall be a condition precedent to the termination of this
Agreement by the Company pursuant to this Section 7.1(j) that the Company shall
have made the payment of the fee and expenses required by Section 7.3; or
(k) By Parent, if any person or group (as defined in Section 13(d)(3)of
the Exchange Act)(other than Parent, Sub or any of their affiliates) shall have
become (x) the beneficial owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of (i) at least 15% of the outstanding shares of Company Common
Stock in a transaction or series of transactions approved by the board of
directors of the Company (or with respect to which the Rights have been
rendered inapplicable) or (ii) at least 25% of the outstanding shares of
Company Common Stock or (y) shall have acquired 20% or more of the assets of
the Company and its subsidiaries, taken as a whole.
SECTION 7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in Sections 5.3(b), 7.3 and Article VIII; provided, however, that nothing
herein shall relieve any party from liability for any willful breach hereof.
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SECTION 7.3 Fees and Expenses.
(a) If:
(i) This Agreement is terminated pursuant to Sections 7.1(i), (j) or
(k); or
(ii) (x)(A) Parent or the Company terminates this Agreement pursuant to
Section 7.1(c) and either (I) an Acquisition Proposal shall have been made
at any time after the date hereof and either (X) shall be pending on the
date of the Company's stockholders meeting held to vote upon the Merger or
(Y) shall have become publicly announced at any time during the 20 business
day period preceding such stockholders meeting (whether or not pending at
the time of such stockholders meeting) or (II) the Average Parent Share
Price (as defined below) exceeds $44 (subject to equitable adjustment in
the event of a share split, reverse share split or share dividend or
distribution involving the Parent Common Stock), or (B) Parent terminates
this Agreement pursuant to Section 7.1(g) and (y) in the case of (A) or
(B), within 12 months thereafter, the Company enters into an agreement with
respect to an Alternative Transaction or an Alternative Transaction is
consummated;
then the Company shall pay to Parent and Sub, (A) simultaneously with any
termination by the Company contemplated by Section 7.3(a)(j), (B) within one
business day following any termination by Parent contemplated by Section
7.3(a)(i) or (k), and (C) within one business day following the earlier to
occur of entering into such agreement or consummation described in clause (y)
of Section 7.3(a)(ii), a fee, in cash, of $25 million (the "Fee"), provided,
however, that the Company shall in no event be obligated to pay more than one
such fee with respect to all such occurrences and such termination. "Average
Parent Share Price" means the average closing price of the Parent Common Stock
on the NYSE (as reported on the Wall Street Journal or, if not reported
therein, another authoritative source mutually selected by Parent and the
Company) for the ten trading days immediately preceding the date of the
Company's stockholders meeting.
For purposes of this Section 7.3, "Alternative Transaction" means any of
the following events: (i) the acquisition of the Company by merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, dissolution or otherwise by any person other than Parent, Sub
or any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third
Party of 20% or more of the assets of the Company and its subsidiaries, taken
as a whole; or (iii) the acquisition by a Third Party of (A) at least 15% of
the outstanding shares of Company Common Stock in a transaction or series of
transactions approved by the board of directors of the Company (or with respect
to which the Rights have been rendered inapplicable) or (B) at least 25% of the
outstanding shares of Company Common Stock.
(b) The Company and Parent agree that if this Agreement shall be
terminated pursuant to (i) Section 7.1(b), because of the failure to satisfy
any of the conditions to the Merger set forth in Sections 6.1(c), 6.1(d),
6.1(e) or 6.2(a) (other than due to any inaccuracy or breach of the
representations set forth in clauses (i) and (ii) of Section 3.7) or (ii)
Section 7.1(f) (other than due to any inaccuracy or breach of the
representations set forth in clauses (i) and (ii) of Section 3.7), Parent shall
pay to the Company an amount in cash equal to $25 million; provided that, such
fee shall not be payable if (1) the Company shall not have complied in all
material respects with its obligations set forth in Section 5.4 or (2) the
Company shall have breached its representations or warranties or its agreements
or covenants hereunder such that the condition set forth in Section 6.3(a)
would not be satisfied as of the date of termination. The payment required to
be made pursuant to this Section 7.3(b) shall be made not later than one
business day after the date of such termination.
(c) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby, except that each of Parent and the Company shall bear and
pay one-half of the costs and expenses incurred in connection with the filing,
printing and mailing of the Form S-4 and the Proxy Statement.
SECTION 7.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
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SECTION 7.5 Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, subject to the requirements of applicable law. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby. 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 such rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Non-Survival of Representations, Warranties and
Agreements. Except as set forth in Section 7.2, the representations, warranties
and agreements in this Agreement shall terminate at the Effective Time or upon
the termination of this Agreement pursuant to Section 7.1, as the case may be.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Sub:
Symbol Technologies, Inc
One Symbol Plaza
Holtsville, NY 11742
Attention: Chief Executive Officer
Fax: (631) 738-4362
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: John Finley, Esq.
Fax: (212) 455-2502
if to the Company:
Telxon Corporation
1000 Summit Drive
Cincinnati, OH 45150
Attention: Chief Executive Officer
Fax: (330) 664-2888
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899
Attention: Steven Rothschild
Fax: (302) 651-3001
SECTION 8.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" shall have the meaning under Rule 12b-2 promulgated under
the Exchange Act;
(b) "beneficial owner" with respect to any shares of Company Common Stock
means a person who shall be deemed to be the beneficial owner of such shares of
Company Common Stock (i) which such person or any
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of its affiliates or associates beneficially owns, directly or indirectly, (ii)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A) the
right to acquire (whether such right is exercisable immediately or subject only
to 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 persons with whom such person or any of
its affiliates or person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(c) "control" (including the terms "controlled by" and "under common
control with") shall have the meaning under Rule 12b-2 promulgated under the
Exchange Act;
(d) "Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to releases,
discharges, emissions or disposals to air, water, land or groundwater of
Hazardous Materials; to the use handling or disposal of polychlorinated
byphenyls, asbestos or urea formaldehyde or any other Hazardous Material; to
the treatment, storage, disposal or management of Hazardous Materials; to
exposure to Hazardous Materials; and to the transportation, release or any
other use of Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C. 2601, et
seq. ("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq.,
the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control
Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq.
("HMTA") and the Emergency Planning and Community Right to Know Act, 42 U.S.C.
11001 et seq. ("EPCRA"), and other comparable state and local laws and all
rules and regulations promulgated pursuant thereto or published thereunder;
(e) "Facility" shall mean each store, office, plant or warehouse owned or
leased by the Company or any of its subsidiaries;
(f) "generally accepted accounting principles" or "GAAP" means the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession in the
United States, in each case applied on a basis consistent with the manner in
which the audited financial statements for the fiscal year of the Company ended
March 31, 1999 were prepared, in the case of the Company, and the fiscal year
ended December 31, 1999, in the case of Parent;
(g) "Hazardous Materials" shall mean each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other substance
which is defined, determined or identified as hazardous or toxic under
Environmental Laws or the release of which is regulated under Environmental
Laws. Without limiting the generality of the foregoing, the term includes:
"hazardous substances" as defined in CERCLA; "extremely hazardous substances"
as defined in EPCRA; "hazardous waste" as defined in RCRA; "hazardous
materials" as defined in HMTA; "chemical substance or mixture" as defined in
TSCA; crude oil, petroleum products or any fraction thereof; radioactive
materials including source, byproduct or special nuclear materials; asbestos or
asbestos-containing materials; chlorinated fluorocarbons ("CFCs"); and radon;
(h) "person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act);
(i) "Property" shall mean each improved or unimproved real property owned
or leased by the Company or any of its subsidiaries; and
(j) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the stock or other voting or economic equity interests.
SECTION 8.4 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
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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
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 to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 8.5 Entire Agreement; Assignment. This Agreement, together with
the Confidentiality Agreement, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise, except that Parent and Sub may
assign all or any of their respective rights and obligations hereunder to any
direct or indirect wholly owned subsidiary or subsidiaries of Parent, provided
that no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations. Any attempted
assignment which does not comply with the provisions of this Section 8.5 shall
be null and void ab initio.
SECTION 8.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in
the following sentence, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement. The
parties hereto expressly intend the provisions of Section 5.6 to confer a
benefit upon and be enforceable by, as third party beneficiaries of this
Agreement, the third persons referred to in, or intended to be benefitted by,
such provisions.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflicts of laws.
SECTION 8.8 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 8.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
SYMBOL TECHNOLOGIES, INC.
Attest:
/s/ Leonard H. Goldner By: /s/ Tomo Razmilovic
---------------------- -------------------
Title: President & Chief Executive Officer
TX ACQUISITION CORPORATION
Attest:
/s/ Leonard H. Goldner By: /s/ Tomo Razmilovic
---------------------- -------------------
Title: President & Chief Executive Officer
TELXON CORPORATION
Attest:
/s/ Woody M. McGee By: /s/ John W. Paxton, Sr.
------------------ ----------------------
Title: Chairman of the Board &
Chief Executive Officer
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APPENDIX B
[LETTERHEAD OF PRUDENTIAL SECURITIES INCORPORATED]
JULY 25, 2000
The Board of Directors
Telxon Corporation
1000 Summit Drive
Cincinnati, Ohio 45150
Members of the Board of Directors:
We understand that Symbol Technologies, Inc. ("Symbol"), TX Acquisition
Corporation, a wholly owned subsidiary of Symbol ("Merger Sub"), and Telxon
Corporation (the "Company") propose to enter into an Agreement and Plan of
Merger (the "Agreement") whereby Merger Sub shall merge with and into the
Company (the "Merger"). In the Merger, all of the Company's issued and
outstanding shares ("Shares") of common stock, par value $0.01 per share
("Company Common Stock") (other than Company Common Stock owned by Symbol or
Merger Sub), will be converted into the right to receive 0.50 (the "Exchange
Ratio") of a share of Symbol common stock, par value $0.01 per share ("Symbol
Common Stock"), subject to any adjustment pursuant to Section 1.6(a) of the
Agreement.
You have requested our opinion as to the fairness from a financial point
of view of the Exchange Ratio to the holders (other than Symbol or its
subsidiaries) of Company Common Stock.
In conducting our analysis and arriving at the opinion expressed herein,
we have reviewed such materials and considered such financial and other factors
as we deemed relevant under the circumstances, including:
(i) a draft, dated July 20, 2000, of the Agreement;
(ii) certain publicly-available historical financial and operating data
for the Company, including, but not limited to, (a) the Annual
Report to Stockholders and Annual Report on Form 10-K for the fiscal
years ended March 31, 2000, 1999 and 1998, (b) the Proxy Statement
for the Annual Meeting of Stockholders held on September 22, 1999
and (c) the Company's internal financial statements for the quarter
ended June 30, 2000;
(iii) certain internal financial statements and other financial and
operating data concerning the Company, prepared by management of the
Company;
(iv) historical stock market prices and trading volumes for Company
Common Stock;
(v) certain publicly-available historical financial and operating data
for Symbol, including, but not limited to, (a) the Annual Report to
Stockholders and Annual Report on Form 10-K for the fiscal years
ended December 31, 1999 and 1998, (b) the Quarterly Report on Form
10-Q for the quarter ended March 31, 2000, (c) the Proxy Statement
for the Annual Meeting of Stockholders held on May 8, 2000 and (d)
Symbol's internal financial statements for the quarter ended
June 30, 2000;
(vi) certain internal financial statements and other financial and
operating data concerning Symbol, prepared by management of Symbol;
(vii) historical stock market prices and trading volumes for Symbol
Common Stock;
(viii) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed
reasonably similar to that of the Company and Symbol;
(ix) the financial terms of certain recent transactions we deemed
relevant to our inquiry; and
(x) such other financial studies, analyses and investigations that we
deemed appropriate.
We have assumed, with your consent, that the draft of the Agreement that
we reviewed (and referred to above) will conform in all material respects to
that document when in final form.
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We have met with senior management of the Company and Symbol to discuss
(i) the prospects for their businesses, (ii) their estimates of such
businesses' future financial performance, (iii) the financial impact of the
Merger on the respective companies and (iv) such other matters that we deemed
relevant.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information that is publicly available or was provided to us by the Company and
we have not undertaken any independent verification of such information or any
independent valuation or appraisal of any of the assets or liabilities of the
Company or Symbol. With respect to certain financial forecasts provided to us
by senior management of the Company and Symbol, we have assumed that such
information represents each management's best currently available estimate as
to the future financial performance of the Company and Symbol, respectively.
Our opinion is predicated on the Merger qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Further, our opinion is necessarily based on economic, financial and market
conditions as they exist and can be evaluated as of the date hereof and we
assume no responsibility to update or revise our opinion based upon events or
circumstances occurring after the date hereof.
Our opinion does not address nor should it be construed to address the
relative merits of the Merger or alternative business strategies that may be
available to the Company. In addition, this opinion does not in any manner
address the prices at which Symbol Common Stock will trade following
consummation of the Merger.
As you know, we have been retained by the Company to render this opinion
and provide other financial advisory services in connection with the Merger and
will receive an advisory fee for such services, part of which fee is contingent
upon the consummation of the Merger. In the past, we have provided financial
advisory and financing services to the Company and have received fees for such
services. In the ordinary course of business we may actively trade the shares
of Company Common Stock and Symbol Common Stock for our own account and for the
accounts of customers and, accordingly, we may at any time hold a long or short
position in such securities. We also provide equity research coverage regarding
the Company.
This letter and the opinion expressed herein are for the use of the Board
of Directors of the Company. This opinion does not constitute a recommendation
to the stockholders of the Company as to how such stockholders should vote in
connection with the Merger or as to any other action such stockholders should
take regarding the Merger. This opinion may not be reproduced, summarized,
excerpted from or otherwise publicly referred to or disclosed in any manner,
without our prior written consent; except that the Company may include this
opinion in its entirety in any materials relating to the Merger sent to the
Company's stockholders and filed with the Securities and Exchange Commission.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair to the holders (other than Symbol
or its subsidiaries) of Company Common Stock from a financial point of view.
Very truly yours,
/s/ Prudential Securities Incorporated
--------------------------------------
Prudential Securities Incorporated
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation has the power to indemnify its officers, directors, employees and
agents (or persons serving in such positions in another entity at the request
of the corporation) against the expenses, including attorneys' fees, judgments,
fines or settlement amounts actually and reasonably incurred by them in
connection with the defense of any action by reason of being or having been
directors or officers, if such person shall have acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation (and, with respect to any criminal action, had no reasonable cause
to believe the person's conduct was unlawful), except that, if such action
shall be by or in the right of the corporation, no such indemnification shall
be provided as to any claim, issue or matter as to which such person shall have
been judged to have been liable to the corporation unless and to the extent
that the Court of Chancery of the State of Delaware, or another court in which
the suit was brought, shall determine upon application that, in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity.
The registrant's bylaws provide that it 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 (including but not limited to any action or suit by or in the
right of the registrant to procure a judgement in its favor) by reason of the
fact that he is or was a director or officer of the registrant, or is or was
serving at the request of the registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise in any capacity, against expenses (including attorneys' fees),
judgments fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding; provided, however,
that no indemnification shall be made to or on behalf of any person if such
indemnification would be prohibited under applicable law. The foregoing
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, agreement, vote of stockholders or
otherwise.
As permitted by Section 102 of the DGCL, the registrant's Certificate of
Incorporation provides that no director shall be personally liable to the
registrant or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for breaches of the director's
duty of loyalty to the registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the unlawful payment of dividends or
unlawful stock purchases or redemptions under Section 174 of the DGCL or (iv)
for any transaction from which the director derived an improper personal
benefit.
Section 145 of the DGCL also provides that a corporation has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation (or who was serving at
the request of the corporation in such position at another entity) against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the DGCL. All of the directors and officers of the registrant
are covered by insurance policies maintained and held in effect by the
registrant against liabilities for actions taken in such capacities, including
liabilities under the Securities Act of 1933, as amended, subject to certain
exclusions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits: See Exhibit Index.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
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(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change in such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, 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 that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 Act 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 and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes 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 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 the
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.
(d) The undersigned registrant hereby undertakes as follows: 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
issuer 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.
(e) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (d) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the 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 offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes 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 the
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(g) The undersigned registrant hereby undertakes 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 the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Holtsville, New York on August 18,
2000.
SYMBOL TECHNOLOGIES, INC.
By: /s/ Tomo Razmilovic
----------------------
Name: Tomo Razmilovic
Title: President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned does hereby constitute
and appoint Jerome Swartz, Tomo Razmilovic, Kenneth V. Jaeggi and Leonard H.
Goldner, or any of them acting alone, his true and lawful attorney-in-fact and
agent, with full power of substitution and revocation for him and in his name,
place and stead, in any and all capacities, to sign this Registration Statement
on Form S-4 of Symbol Technologies, Inc. and any and all amendments (including
post-effective amendments) to the Registration Statement and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done 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 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, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------- -------------------------------------- ----------------
<S> <C> <C>
/s/ Tomo Razmilovic President and Chief Executive August 18, 2000
----------------------- Officer (Principal Executive Officer)
Tomo Razmilovic and Director
/s/ Kenneth V. Jaeggi Senior Vice President-Finance and August 18, 2000
----------------------- Chief Financial Officer (Principal
Kenneth V. Jaeggi Financial Officer)
/s/ Robert W. Korkuc Vice President (Principal Accounting August 18, 2000
----------------------- Officer)
Robert W. Korkuc
/s/ Jerome Swartz Chairman of the Board and Director August 18, 2000
-----------------------
Jerome Swartz
/s/ Raymond R. Martino Director August 18, 2000
-----------------------
Raymond R. Martino
/s/ Harvey P. Mallement Director August 18, 2000
-----------------------
Harvey P. Mallement
/s/ George Bugliarello Director August 18, 2000
-----------------------
George Bugliarello
/s/ Charles B. Wang Director August 18, 2000
-----------------------
Charles B. Wang
/s/ Leo A. Guthart Director August 18, 2000
-----------------------
Leo A. Guthart
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of July 25, 2000, by and among
Symbol Technologies, Inc. (the "Company"), TX Acquisition Corporation and
Telxon Corporation (included as Appendix A to the prospectus incorporated
as part of this registration statement).
3.1 Certificate of Incorporation of the Company, as amended (incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 (the "1999 Form 10-K")).
3.3 By-laws of the Company (incorporated by reference to Exhibit 3.3 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1998
(the "1998 Form 10-K")).
4.1 Form of Certificate for Shares of the Common Stock of the Company
(incorporated by reference to Exhibit 4.1 to the 1998 Form 10-K).
5.1 Opinion of Leonard H. Goldner, Esq., Senior Vice President and General
Counsel of the Company, as to the legality of the shares being issued (to
be filed by amendment).
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding the federal
income tax consequences of the Merger (to be filed by amendment).
8.2 Opinion of Simpson Thacher & Bartlett regarding the federal income tax
consequences of the Merger (to be filed by amendment).
10.1 Form of 2008 Stock Purchase Warrant issued to certain directors
(incorporated by reference to Exhibit 10.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997).
10.2 1994 Directors' Stock Option Plan (incorporated by reference to Exhibit
4.1 to Registration Statement No. 33-78678 on Form S-8).
10.3 1997 Employee Stock Purchase Plan (incorporated by reference to Exhibit
4.2 to Registration Statement No. 333-26593 on Form S-8).
10.4 1997 Employee Stock Option Plan (incorporated by reference to Exhibit 16.5
to the 1998 Form 10-K).
10.5 1991 Employee Stock Option Plan (incorporated by reference to Exhibit 10.1
to the Company's Annual Report on Form 10-K for the year ended December
31, 1991).
10.6 1990 Non-Executive Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 (the "1995 Form 10-K")).
10.7 Employment Agreement by and between the Company and Jerome Swartz, dated
as of June 30, 1995 (incorporated by reference to Exhibit 10.4 to the 1995
Form 10-K).
10.8 Employment Agreement by and between the Company and Tomo Razmilovic, dated
as of October 16, 1995 (incorporated by reference to Exhibit 10.5 of the
1995 Form 10-K).
10.9 Employment Agreement by and between the Company and Leonard H. Goldner,
dated as of November 1, 1995 (incorporated by reference to Exhibit 10.7 of
the 1995 Form 10-K).
10.10 Employment Agreement by and between the Company and Raymond Martino,
dated as of February 15, 2000 (incorporated by reference to Exhibit 10.10
to the Company's Annual Report on the 1999 Form 10-K).
10.11 Executive Retirement Plan, as amended (incorporated by reference to
Exhibit 10.14 to 1989 Form 10-K).
10.12 Company Stock Ownership and Option Retention Program (incorporated by
reference to Exhibit 10.13 of the 1995 Form 10-K).
10.13 Summary of the Company's Executive Bonus Plan (incorporated by reference
to Exhibit 10.13 to the Company's Annual Report on the 1999 Form 10-K).
<PAGE>
10.14 Form of Note Agreements dated as of February 15, 1993 relating to the
Company's 7.76 percent Series A and Series B Senior Notes due February 15,
2003 (incorporated by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992).
10.15 Credit Agreement dated as of December 21, 1998 among the Company, the
lending institutions identified in the credit agreement and Bank of
America National Trust and Savings Association as agent and as letter of
credit issuing bank (incorporated by reference to Exhibit 10.19 to the
1998 Form 10-K).
10.16 Amendment dated September 30, 1999 to Credit Agreement among the Company,
the lending institutions identified in the credit agreement and Bank of
America National Trust and Savings Association as agent and as letter of
credit issuing bank (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on the 1999 Form 10-K).
22. Subsidiaries of the Company (incorporated by reference to Exhibit 22 to
the Company's Annual Report on the 1999 Form 10-K).
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith).
23.2 Consent of Arthur Andersen LLP (filed herewith).
23.3 Consent of Deloitte & Touche LLP (filed herewith).
23.4 Consent of Prudential Securities Incorporated (included as part of
Appendix B to the prospectus incorporated as part of this registration
statement).
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit
No. 8.1).
23.6 Consent of Simpson Thacher & Bartlett (included in Exhibit No. 8.2).
24.1 Power of Attorney (included in signature page).
99.1 Form of Proxy Card of Telxon (filed herewith).
